427: Finance Friday: Building a $200K/Year Portfolio on an “Average” Income

26:10But that's sort of that weird space we're in right now where you, you know, it's like, I know if I don't know that if if Jen and I just sit here and do nothing in four years, we'll have another million dollars to essentially invest. Right. You know, again, it's really like you're saying, it's really hard to let go of that, you know, security, security. Right. Well, I think, again, it all depends on where you want to go. And I think I don't think you guys have quite figured that out yet. Like what's next here? So I'm going to I'm going to start spitting out some. Here's some things that I'd be thinking about in your position based on my sentiments.

26:44They're going to be completely different than that. But personally, if I was sitting in your portfolio, I don't know if I'd change a thing. I think James will disagree and I want to hear his take on this. I'd optimize maybe a little bit on the expense side. But there's this phenomenon going on in the United States where interest rates have risen a lot. People have locked in their 30-year mortgages and they're locked in to their housing. Americans are not going to move. Why would you? You're going to trade your 3.5 % mortgage for a 6 % or 7 % mortgage. So you guys have made a decision in the past that has led to a really good outcome.

27:15And I agree with the diagnosis. I think you're going to have to sit on this portfolio and watch the millions trickle in over the next four or five years. I don't know, you know, who knows about appreciation and those types of things. But it's either you're either going to do that or you're going to refinance these properties and take on way more crazy debt and take higher risks with the next project. I think that, you know, from a high level diagnosis, I think you're kind of stuck. You can't. Yes, you can get creative. You can sell these properties. You can 1031 exchange them. But by the way, a 1031 exchange means that you have to get a new property with the same amount of debt on it unless you want to pay taxes on the reduction in what's called boot.

27:51And then you're going to have capital gains tax to pay. If you sell the property and just harvest the equity that's in them, you're going to pay an agent to sell the property for you. And you're going to pay a commission there and all the closing costs. Then you're going to pay the capital gains on there. And the pile of money that you're left with after that and your debt is going to be very nice. You still have some spending money, but it's not going to be quite as much. It won't feel like very much to you at the end of the day when you run that calculation. I don't know if you have done that math or talked to a CPA about those topics.

28:22No. It's not really an option we've ever considered. It took so much to build the portfolio over the last few years. So you're stuck with a pile of wealth and plenty of cash flow to cover your deeds. And I think plan A for me is sit on the portfolio and do nothing and manage it effectively. And then when you have the next pile of cash flow that's coming in, what do you do with that? Well, you either continue adding on to this portfolio in thoughtful and creative ways. I love the idea of assumable or subject to mortgages or those types of things. So you can keep buying properties like this with last year's debt if you find those opportunities.

29:05or I like the idea of going into lending. I know that's where James puts a lot of his extra cashes and hard money loans and those types of things. And you guys are very well positioned to do that kind of stuff. And that would help you get a 10 plus percent potential yield on that additional million that you're gonna generate over the next three or four years. And if worst case scenario is you now foreclose on a property that you know how to operate and manage pretty well. So that would be my bias coming in. I know James is gonna have a very strong differing opinion on that. I'm naturally a trader.

29:37So, you know, one thing I do believe people get stuck on right now is the low rates. And yes, cost of money. I mean, and there's a good example right now. I just sold a duplex in Queen Anne, Washington, great area. I had no cash in the deal. I was cash flowing$1 ,500 a month and I had a 4.25 % rate. But I just traded it for a property that actually, I go from$1 ,500 a month to break even. And my rate now is going to be 7.5%. And I would do that trade 10 times over right now. And let me tell you why. It's because at a certain point, these assets, they get into steady growth, right? When you guys purchased these properties, you got them at the right time, right?

30:222012 was when the market was flat. Your guys' income were up. You could obtain cheap financing and you bought them right. And buying them right gives you gunpowder to explode your portfolio out. And because the equity is really what can grow you rapidly. And, you know, right now you guys have an amazing portfolio. You're making a great cash on cash return on it. But your overall return on equity is around 6%, which is 6 % is still good growth, but it also is below inflation at that point. You know, and so for me, I'm always looking at what kind of equity and what can I trade into? And even if I'm getting a higher rate down the road, it's six and a half percent.

31:00If I'm getting a higher surplus, it doesn't matter if my cash on cash return is going from seven to eight with a higher rate, then I'm still advancing my position at that point. You know, things that I would look at, there's kind of two ways. You can either look at your portfolio like it's a goldmine, which it is, right? It's steady. It's safe. You're not going to be the Seahawks on the one yard line throwing the interception in the end zone. You're not going to be doing that, right? Run the ball. If you just run the ball in with your portfolio, everything is going to be fine. But with this quest of financial freedom, like you were saying, you want to get down to two days a week.

31:34John might want to stop working to give you that extra padding in your expenses because right now, yours' expenses rates run great. You're at 30 % to 35%. That's amazing. But once John leaves that job, that's going to go right back up to 50%. And that's going to be trailing with the average. right? And then you have to figure out how to increase that. One thing, what I would do is, you know, you have properties scattered everywhere. Well, they're all in one central city, but there's still different properties that come with different expenses. And right now, your portfolio is running an average of about 50 % expenses.

32:09And that's with you guys self-managing too, correct? That's correct. And so if you add in property management, you're going to be running like 60 % expenses on your portfolio, which is a little bit higher. And that's what happens when we start accumulating units and they're spread out everywhere. Because we did the same thing. I'm a Pacific Northwest investor. I started with single families. We rolled the small multi into large multi. If you took these buildings and you went and sold them right now, and the combined value is 8.7, right? If you took that and you bought a unit, if you bought that in Everett, you're going to get that for about 150 grand a door.

32:41You're going to be able to obtain like 70, to 80 units in Everett with that pricing at that point with today's market. In addition to when you're buying a big portfolio like that, even if you're trading into a 6.5 % rate, our average expenses or your expenses on bigger properties actually go down because you're more efficient. And so you can naturally add in 10 % to 15 % in cash flow just by reducing your expenses on that one trade. And that will offset all your debt costs at that point. And so just by making that one move of selling off the properties and putting them into one, your cash flow would go from annually, if you're projecting to get to 360 by the end of the year, you're going to be picking up an additional 54 ,000.

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37:22And their licensed team helps with questions, paperwork, and guidance every step of the way. With PolicyGenius, real users have gotten 20-year,$2 million policies for just$53 a month. Don't wait until next year. Give your family the gift of security today with PolicyGenius. Head to PolicyGenius.com. What would be the cap rate on this 70-unit apartment complex? And what would be the interest rate on the debt for that apartment complex? So with commercial debt right now, so we just, and this is a perfect time because we just closed on a 58 unit in Everett. So I can rattle the cap rates. Stabilized, we are at 7.9 cap stabilized when we're all said and done.

38:00So that's already going to increase your cash on your equity, return on equity right there. We were able to get financing locked at a five years, or it's a 10-year note fixed for five, and that's at a 6.1 rate right now. So yes, you'd be giving up your 3 % rates, but then your overall return in your spread is going to go up at that point, and your costs are going to go down. So naturally, you're going to pick up that extra 15 % to 20%, even with paying that higher rate at that time, and your life. If you guys like financial freedom, you have one site to manage. It is a lot simpler, a lot easier.

38:35And it's about that work-life balance, too. Like, okay, well, to run around and manage all these properties with all different areas, that's different demographics of tenants, it's just harder. And whereas if you have a bigger building, too, or if your properties are spread out everywhere, typically your property management cost is going to be 8 % to 10 % because it's more work for a property manager. If it's in one, you're getting 5 % to 6%. So all of your costs go down. Just like you guys have ran your living expenses. You've built it based on keeping your expenses low. By doing the one trade, it will match what you do personally as well.

39:08Your expenses will match what your life expenses are. And the 15 % will almost, that will pay for a third of John's salary just to stop working. Just by making this one trade would pay for 35 % to 40 % of John's salary right when he leaves the door without putting any more money in the deal. James, this is awesome. I have a quick question as well on this. What is the purchase cap on a TTM basis? So you said stabilize, it'll be 8%. That's your cash flow for those listening. So essentially your net operating income will be 8%. So if you have a million dollar property, you make 80 grand a year in rough cash flow before allocations for CapEx and those types of things and principal payments.

39:52But what are you purchasing it for? Because you said that's the after stabilization cap rate. Yeah. Yeah, so we were buying it at a 5.8 cap on existing right there. So logically, that doesn't make sense when you're buying with a 6.1 rate. You know, typically your cap rate needs to be above your interest rate. That's a general rule of thumb to keep. But it was a very cosmetic turn, too, which they definitely have done by looking at their portfolio. Because they bought some pretty old buildings. So those are harder renovation plants. And actually, what we have found is going from the small, harder renovation.

40:26What you described on your last purchase was a great buy. You got it well under market, but it needs a lot of work. You know that's a 6-12 month deal to get that thing fully stabilized and optimized. The great thing about buying bigger buildings is you're buying them a lot newer. The building we bought was built in the 70s. So all we have to do is swap out flooring, cabinets, doors, trim. But the overall bones and structures and the mechanicals are good. So it makes it very efficient at that time. When you're buying bigger, you don't have to take on the same amount of work either. So it's just basically you're getting more efficient at that point.

40:59But you have to get comfortable with trading that rate out. And going back to my example of why I did that deal, because people are like, have you lost your mind? You had a lower rate in your cash flow in$1 ,500. Now you're not cash flowing anything. I did that trade because the building I sold was maxed out. If you guys sell these and these are at the top dollar, you're going into steady equity growth at that point. You're going to be getting your 3 % to 4 % a year. Whereas if you can buy something where a bigger building where your cap rate's 5.9 and you can increase it to 7, you're increasing the value of that building, which is going to create that equity pop.

41:35And so I made this trade to a duplex in Bellevue because, yes, my cash flow position's worse, but that will get better when rates fall. But my equity position, once I'm stabilized, is increasing by$350 ,000. And so over a 12-month period where my$1 ,500 a month in cash flow is not going to get me there for the wealth. And then I can trade that$350 then later for more cash flow because I'm in building – you guys have done a great job building equity. And then it's about maximizing your equity to get you to that final space where you're like, I don't even need to manage my properties anymore. They all pay for each other because the equity just keeps buying it down, buying it down, and getting you more doors.

42:14I think that's awesome. What James just said is that's a business, right? You're going to go in and you're going to buy a property and you're going to turn 50, 60 units. You're going to take on a different type of debt to purchase that portfolio. To exercise this, you'd need to sell essentially all six of those buildings and 1031 exchange the equity into this new property and close that debt. This will be a project. And yeah, you'll absolutely get better returns on that. if you can drive rents up in a pretty meaningful way in the period following acquisition and property. Probably take you like a year.

42:54I don't know, is that right, James, you think, to move the property to its post-stabilized rental rates? Yeah, it takes about a year, depending on the size of building. Because what you're doing is you're doing a structure that when you're buying these a little bit more cosmetic, you're moving out like five people at a time, you're turning the units. So you still get to keep your debt service going. But yeah, it's about a year process when you're moving people. I think in that one, the 58, we'll be done with that in about seven months all the way through. But we also had a third of them moved out when we bought, so we could just tackle those immediately.

43:22So I think that's a potential option for you. That's a business activity, right? So that would take your existing portfolio, which probably feels to you fairly diversified, even though it's all in one place, and concentrating it into a single asset. I think there's a spectrum of optionality along there. You could, for example, purchase a property. Well, you have to keep probably about, again,$4.5 million in debt on the portfolio, which will dramatically change your debt service. So you want to run those through. I would run the numbers on the two things and say, hey, if the opportunity size is dramatically – for me, it would have to be dramatically better to go with James' option there than to just kind of go with the status quo because what you've got is working there.

44:08And it may well be. Um, but you know, several things, I think, uh, I, I, I completely love James's strategy. If you can find a deal, if you can add the value and you're willing to, uh, uh, assume that the project there, um, you, you will be able to drive a much better return than holding the existing portfolio. Um, but the existing portfolio is freedom in today's sense as well, without, without any modifications to it. So it's all about, um, what the, what that end goal is and, um, the comfort with, with that. I think that's probably our biggest hurdle is the comfort with the security of it. And that's with our portfolio, our current life, his W-2.

44:46He gets real stuck. I'm going to throw you under the bus here. Real stuck on the security of like, well, this is my salary and we have medical and we have kids. So we've got to, you know, but getting past that comfort level and kind of pushing it, I think we're both interested in. It's just kind of jumping over that hurdle. And so, you know, the comfort and the security is a good thing, but it's also one of the things that's detrimental to us and our future growth. And we do want future growth. So it's, yeah, I mean, the good news is that we can stay with what we're doing now and still be okay, or we can push to what James is saying and accelerate, which, you know me, that's my vote.

45:23So she's generally the, I'm usually the conservative one. I'm the handbrake and she's the one that's like, let her rip. We balance each other out. Another route I might take in your situation is I might say, what is that number that I'm super comfortable with. Like if, if I was just like, if I had a pretty safe$200 ,000 in passive cashflow every year, would you then John be willing to take the remaining, you know, 4 million bucks of your portfolio and go big on a, on a James bet here with that change things for you? I think in some regards, yeah, it probably would. And you know, and, and I, I, uh, the other thing I realized too, is I, I wonder if I'm getting caught in a little bit of, uh, market timing thinking as well with the portfolio because there's we still look at deals all the time for for properties and admittedly nothing has been ever as big as like a 50 unit or any anything deal that size so we haven't really considered those to james's point but um you know there's there's so much assumption that our belief i guess that you know there will be these opportunities later whether it's later this year or into 24 you know are we are we jumping too early you know if if I decide to get super aggressive, am I being overly aggressive and not reading the signs?

46:44But there's one thing about that. And I get trapped in the same thing because I'm a 2008 investor. So I have bad whiplash and I lock up sometimes. But if the opportunities are better in one year and pricing is less, your portfolio is less too. And it's an equal trade. It's about So what can you do today and can you increase that return? And that's when you want to make those big, and that's what you guys can do to make that big growth jump. But it is also not for everybody. I'm also kind of a high risk person that, you know, I'm chasing this equity growth. I actually don't care about cashflow at all right now.

47:21I'm just trying to get the biggest equity position. And then when I'm ready to kind of settle down, I'm going to sell it all, roll it into one thing. And then I'm going to take all this equity, buy a bigger building, and I'm going to have one building that's going to pay for everything. But you guys do have a great portfolio and there's room to improve too, right? Because you've maximized it, but your expenses are high in just implementing other strategies. Like right now, do you guys do utility billbacks? We don't. In the duplexes, they do their own garbage, but water sewer garbage is included in the four plexes and the 10.

47:53Okay. I would implement those if you guys want to start growing a little bit too on your existing Because, you know, maybe you get to the point where you're like, I don't want to make the trade right now. We don't want to fumble on the one yard line. But you really start breaking down your portfolio on how to perfect it. Right. And if by putting in utility billbacks, which are now standard up in Everett and Snohomish, King and Pierce County, that's going to automatically put about three to five percent back in your your your return right there. And then you can take that savings. And then what we were talking about was adding more units to your building.

48:26and just really going, okay, once we save up a certain amount of cash on this extra cash flow, then take that and invest in our profits into adding that building or adding that unit. And as long as you can generate the same cash on cash return that you expect, so what we were talking about before that we hopped on was you're going to add a unit for$250 ,000. It only makes sense if you're minimum, you have to make sure that you can generate$2 ,500 a month in rent if your minimum return is 10%. And so you just want your build-out cost to track with what your rent is. And then that will make the decision.

49:01If it doesn't, then you want to make your portfolio more efficient and get your portfolio to pay that overage at that point. Okay. Now, what's your strategy with the build-back? Do you do per person or do you do per unit? Or is it a mixture? We do per unit. And then units that we do have multiple tenants in one house, we actually do that. We make them sort that out. that it's in their lease that they're all obligated to pay the one bill, but they got to sort out their own separate billing. Okay. And I just charge a utility fee. Okay. Got it. So that's another, I don't know if that's an option in your state, but we hear we just, I estimate the utilities on an average basis and then just charge that on top of the rent.

49:39And so the payment includes rent plus utility fee. Excellent. Okay. Just make sure you're not cash flowing your utilities. That is not allowed. That's right. Got it. It is. You got to make sure the fee is slightly below actually. Yeah. So James is probably more like long-term appropriate. Mine, yes, I still cover a small amount of the utilities, but yeah, it's very simple. Well, and I think there's also kind of a little more responsibility and utility usage if you're on the hook for it. Exactly. Versus like, hey, we don't pay water. Everybody come over and do laundry. So we now have that in our lease that that's not allowed.

50:13Trying to get smarter over time. That's like the no archery sign at the beach. You know, somebody sometime put that into the – made that sign a requirement here, right? Somebody can't tell me. I really don't feel like that's necessary, but apparently it is. Let me try another one here because, again, I think – I don't think you guys have a math problem here, right? I think there's more of like an allocation and psychological issue to resolve in your situation because you're way past the point in terms of net worth of what you'd need to actually leave your job. John, I feel comfortable with that.

50:44So I want to go through a couple more exercises here. and try a few more portfolio allocation things on. I think if I handed you a pile of$2.5 million in cash right now, how would you allocate that, John, to feel super comfortable with leaving your job? I think you have a different allocation than I do. Go ahead. Luckily, you'll both be able to go through this exercise because you have more than$2.5 million each to allocate if you wanted. I would keep a substantial amount in cash reserves. Honestly, I'd probably put at least$300 to$500 in cash reserves. And then truly, I would go figure out investments for the others.

51:27um uh again i default to buying the the the duplexes and fourplexes because that's what i know but that that's how i would that's how i would allocate it and you know try and find opportunities there to to to buy undervalued assets and that would be my cash cushion would help ensure that we don't get tipped over and um like yeah pick up one or two properties start working on them and how would you allocate it honestly pretty pretty similarly i honestly thought he would keep more in cash reserves. Being aggressive. Yeah. Because again, security, security, security. But no, pretty on par with that.

52:06We've been together too long. Can I jump in real quick? So I started stocking all your properties on the internet as we were talking. And you guys have some hidden value on these. And so there's nothing wrong with the plan that I proposed. Is this the way I do it? I know a lot of people do it that way. It's aggressive. for, you know, there's nothing wrong with also being more conservative and keeping your financing locked in. And what I'm looking at, like even on one of your properties, like the one four unit that's on Walnut, you have a big parking lot there. And Washington has just eliminated single family zoning and they're allowing for mass up zoning.

52:44And you have a very good potential to add one to two ADUs or DADUs to your parking lots. Your rents would go down a little bit. And then the nice thing about doing that is you have to come up with the cash to build those. They're going to cost you about 300 grand to build one, each one of those. But then once you condo those off, you can leave your financing in place on your four unit, your cheap three and a half percent rate, and you can refinance just those two units at about six percent. And once rates fall, then you can bring it in. But it allows you to add more units in, get more rent income, and keep your financing in place.

53:18And then eventually, if you want down the road. You can sell those off later if you wanted to, but I'd probably just keep them as one big package. But it allows you to expand out your portfolio without having to reset your loan basis. Interesting. That's a good plan. That'll keep you busy, John. That sounds like a better value add than the W-2 for a year or two. And that's just in Everett proper that they've been allowing that more? That's in all three major cities. So Seattle, Everett, Tacoma are really pushing these ADU law in DADU expansion. In Seattle, you can condom off and sell them. In Seattle and Tacoma, you have to keep them as rentals, but that works for what you guys are trying to accomplish.

53:58And you have a great lot here. We could cut this thing up all day long. So that's a good thing to hold on to. But the thing that you have to think about is you got to come up with that money to build it without resetting your loan. So if I was you, I would network with some private investors, borrow the money, and then refi it. It's going to cost you a little bit more up front, but it allows you to keep that really good rate because that is a great three and a half percent on a third year fix is a is a good thing to have there's uh some of the similar properties like the fourplex on chestnut it also has a a big open area just in front of the the building as well um and then 4510 in marysville has a large lob that's currently a car park yeah we i mean we use it as as yeah it's parking and storage um so we hadn't uh we hadn't actually really thought at all about the change in regulation, the DADU law.

54:50We never really considered that. We always thought that was for single family, to be totally frank with you. I think that's a bingo, right? I mean, we just asked you guys, what would you do if we handed you$5 million in cash? And you said, I do exactly what I'm doing currently, but I want to grow my portfolio more on this. Like, there you go. Like, there's the answer. Now you have this opportunity to add value to your existing structures that you know really well. And you can pull off these projects either in tandem or one at a time. You have the cash right now to finance that project completely, one of the projects completely if you wanted to.

55:22And you'll replace that entire reserve in one year without even... You probably would not even notice your reserves dwindling while you tackled one of these projects would be my guess. Because the cash flows to finance each phase of the construction would likely be replaced by the rental income from your portfolio. If you're just looking at your balance over time, you probably wouldn't even notice it with your current situation. So I think that's a fantastic discovery by James. Great job, man. I had no idea. I would never have gotten there because I don't know that regulation in Washington. And you could also take a loan out against your 401k that you've done such a good job just temporarily to build it and then put it back in once you refinance back out because you guys have done a great job saving.

56:07And that's usually a lot of investors' biggest problems. But tap into those investments. It's just, you know, I would break out of the, hey, this bucket, this bucket, this bucket. How do you maximize the buckets? And maybe you got to mix them for a short amount of time. But it still gets you to kind of your end goal. I think you got some fun options here. Your portfolio is so close to optimized in today's shape that yes, I think that if you wanted to go big and build a business, James approach is going to get you richer faster than the one that I held out there. The current portfolio, though, if you do nothing is going to cashflow and cover all your needs.

56:44So game is one victory is complete. We're pretty close to it with your current situation. But I think that if you want a blend of both, then I think James's approach of just adding value by basically taking to the account that your properties have been rezoned recently without you really being aware of that. That seems like a pretty good place to go hunting for opportunity there. And I'm sure you can continue with your preferred choice of paint and floor in those new constructions that you're going with. James, what do you think the back of the napkin, since you know the area so well, the cost, you said cost 300 and ARV of one of those projects would be?

57:23So like if that was, so you can't sell them off right now, But the value on that building, so you're going to build it for$300. It's going to be worth about$399 to$420. Being next to multifamily, you're probably going to be worth$399. So you are going to pick up an equity position there. And then that unit should rent for about$2 ,100, I would think, for a brand new two-bedroom, two-and-a-half bath. That should be about a$2 ,000 to$2 ,200 rental. And you guys can probably verify that a little bit better than I can because you have more units there. So the issue you'll have is it's not going to quite hit your cash-on-cash return expectations because you're going to spend roughly$300 ,000.

58:08And you can probably build that for$250 ,000 there too if you do more rental grade. The$300 ,000 is more for resale, so you update it. So you'll be about$250 ,000 in and get about$2 ,200 ,000 out of it. But it does allow you to start building. If you don't want to trade out the buildings, you can start building infrastructure behind that. And that's very similar to what we were looking at when we looked at the property, the 10 unit up in Marysville. We're estimating the initial rent on it would be right around$2 ,200, maybe a little bit higher for the townhome on a build cost of right around$250 for that.

58:43And whether this is good or bad, it's served us well. our strategy has been very patient with regards to the, you know, not trying to get the, not having to get the maximum capital today to, you know, kind of essentially just lower risk and, and make sure that we're slow and steady rather than, you know, sprinting and realizing we've gone the wrong way. But I think we both are wanting to, I tell them all the time, we'd have to get comfortable with being uncomfortable, you know, comfort in the discomfort. And so pushing it past what we're comfortable with as far as the security aspect. I'm usually the one that's like, you know, we should go 12 steps that way.

59:22And he's like, I'll compromise with eight. And so we land somewhere in the middle. But, you know, we are in the scheme of things relatively, you know, in the beginning. And we do want to do this long haul. So it seems riskier to him to do it now that the kids are small. And I say, well, now is kind of the time to, you know, to push, I think, to push and grow at a faster rate. Well, John and Jennifer, thank you so much for coming on the show today. We hope this was helpful and we're so grateful for you coming on and sharing a unique and awesome challenge for us. And yeah, we wish you the best of luck.

59:55Please let us know what you end up deciding to do. Absolutely. It was hugely, hugely insightful. Thank you both. Thank you. Yeah, I'll have to attend your meetup, James, and go ask you some questions in person. Oh, yeah. Come hang out. Yeah, absolutely. All right, guys. Thank you so much. Thank you very much. Take care. All right, James, that was John and Jennifer. What'd you think today? Oh, those are my kind of people. It's cool to see investors grow their portfolio and not get too far out there because that's a huge mistake a lot of people do. And then I could relate with them a lot about getting kind of locked up, getting comfortable because we all do that.

1:00:27And it's about how do you push to that next thing or figure out whether you even want to do it in the first place. Yeah, absolutely. I thought that was really an interesting dynamic because I bias towards, and the reason I bias, by the way, towards the approach that I took is because I'm the CEO of this company at BiggerPockets, right? So most of my time in Menergy is spent on building this company. And I sometimes kind of get locked into that and forget like, oh, if I wasn't CEO here, absolutely, I'd be trying to take a more aggressive approach like what you just put together or like what you suggested with a 58 or 70 unit apartment complex and trying to grow to the next level there.

1:01:00So I loved the balance of opinions there. And I really think you hit a home run, but when you stalked the properties, and uncovered that they have room for, you know, dados to be added to them. So that was an awesome find. Yeah, might as well. I mean, if you don't want to sell, figure out how to maximize it. So the one thing I've always learned is you can always improve a deal. Do you have any parting thoughts or other things that, you know, you'd have for investors given what we discussed on today's show? No, I just think it's important that investors don't fall into that rate trap. At the end of the day, it comes down to what are you making, what's your return, and the debt is just a byproduct of that.

1:01:38And so don't get locked up because it can prevent growth. And for us, we're all trying to get to financial freedom. The more growth you have, the quicker you even get there. Awesome. So yeah, you generally recommend, for me, not doing what I'm currently doing. And I think that's something to think about. I have to go and review that with my business partner on my own portfolio and say, what should we be doing here? Because right now, I told John and Jennifer after the show, that's what we decided last year. We looked at it. We're like, we don't think prices are going to move much in Denver for the next year or two, maybe three.

1:02:08We're cash flowing just fine. We've got this low interest rate debt on here. If we sold the properties, we'd have to pay transaction costs and we have to pay capital gains. We refinanced a few. So the amount of cash we'd actually extract if we didn't 1031 exchange wouldn't be that high. And we thought, hey, we'll just hold on and enjoy the cash flow and slowly deleverage these things. But maybe we should be thinking bigger on that portfolio and moving it to the next level. Let's break down your portfolio next. All right. Let's do it. Awesome. Well, thanks so much, James. And maybe we should do that.

1:02:40We'll talk with Kalen and see if that's a good episode. I'm 100 % in. Let's get you on the On the Market podcast. And me and David, we can go through your portfolio together. Awesome. Well, James, let us know if you think that would be a good idea, guys. And maybe we can make that episode happen. So James, great catching up with you again today. Thanks for all the great wisdom and the great thought starters. And we hope to have you back on a few more of these Finance Fridays in the weeks to come. Anytime. All right. He is James Daynard. And I am Scott Trench from the BiggerPockets Money podcast.

1:03:09And we are saying be sweet, parakeet. Thank you, Mindy, for that one as well. BiggerPockets Money was created by Mindy Jensen and Scott Trench. Produced by Kaylin Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

1:03:45We'll see you next time.