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today.

1:01

Welcome to Passive Real Estate Investing,

1:04

the show where busy people like you learn how

1:06

to build substantial passive income while

1:08

creating wealth for the long term. And

1:11

now, here's your host, Marco Santorelli.

1:14

Hello, my friends. Welcome to another episode

1:16

of Ask Marco on the Passive Real

1:18

Estate Investing show. I hope you're all

1:20

doing great. I can't believe it.

1:23

October 31st is around the corner. Yes,

1:26

Halloween is around the corner. And

1:28

that means we are 10 months

1:30

into the year with

1:31

only two left. And 2023

1:34

will be another year behind us.

1:37

It's amazing how fast time goes by. And

1:39

it just

1:40

seems like

1:41

as the days go by and as the weeks go by

1:43

and as the years go by, time seems to go by

1:45

faster and faster. And we all know that's

1:47

not the case. Time

1:49

is fixed for all

1:51

of us. It goes by at the same rate and same pace.

1:53

It's just a perception of how fast time

1:55

actually goes by. But in either

1:58

case, I hope you are having a

1:59

great year and enjoying yourself and having

2:02

a fruitful, successful investment

2:05

portfolio under your belt. And

2:07

you continue to build on that and we're here

2:09

to help you in any way we can. So

2:12

just a quick snapshot about

2:14

the national stats, if you will, and I'll go

2:16

into more detail about this in a future

2:19

episode, actually just around the corner.

2:21

But when you look at how things have progressed

2:24

this year with rocketing mortgage

2:26

rates and a bit of a cooling in

2:28

most markets around the country, in some cases

2:31

more than a bit of a cooling. We're still up

2:33

year over year. If you look at current stats

2:35

right now, and again, I don't like talking

2:37

about real estate at a national

2:40

level because I don't want to generalize

2:43

real estate as being one national housing

2:45

market because that doesn't exist. All

2:47

real estate is local and even hyper

2:50

local. But it's a metric.

2:52

It's just like a thermometer. It's

2:54

an indices. You just look at things holistically,

2:58

but then you break it down into granular components.

3:01

And that's how you actually should be looking at real estate.

3:04

But again, just putting your finger on the pulse

3:06

of things, existing home sales

3:09

nationally speaking is up

3:11

a little bit. It's about three and a half to 4%

3:14

year over year at this point in time

3:16

being October, which is not bad. I

3:19

mean, it's not great, but it's certainly not bad.

3:22

Employment has been relatively strong. It's come down,

3:24

but it's still about 2.1% year

3:27

over year as far as employment growth. New

3:30

home supplies are still lagging even

3:32

though they're up over 7% year over year. What's

3:35

interesting is that we're still under 1 million

3:38

permits being pulled so far this year when

3:41

you know from listening to this podcast

3:43

that we need closer to about 1.5 million to 1.7

3:47

million permits per year to

3:50

provide enough housing inventory

3:53

to keep up with the demand for

3:55

housing. So that means

3:57

it's tight if you're a buyer. or

4:00

a homeowner looking for a place to

4:02

live. But if you're an investor,

4:05

the other side of the coin is the silver lining.

4:07

And that is that the limited supply

4:10

and the strong demand is actually pushing prices

4:12

and rents up for you. So it's good if you're

4:15

a landlord. So if you're on the equity train, and

4:17

you're in real estate, it's doing very

4:19

well for you. But at the same time, if you're

4:21

still looking for more inventory, it's

4:23

a bit of a challenge because you're having to kind of

4:25

fight that. Which leads to my next point,

4:28

the months of supply out there in terms of the resale

4:30

market is still historically

4:32

speaking and relatively speaking, very

4:34

low. It's only about three and a half months worth

4:37

of supply out there. Meaning

4:39

that if we didn't build one more new home

4:41

today, we would only have

4:43

about three months worth of inventory to

4:46

keep up with the demand that we have. So we

4:48

would be out of inventory in three months.

4:50

Not a good thing. But overall, many markets

4:53

around the country have

4:55

cooled off but are still overpriced.

4:58

And again, it's a relative term, but it is overpriced

5:00

from historical standards. So if

5:03

you look at markets and take a look at

5:05

their historical price trend and

5:07

how much they have appreciated or

5:09

depreciated, you're going to see that

5:12

about half of the markets out there

5:15

are overpriced to historical

5:17

standards. And they are

5:19

overpriced by roughly speaking 40%.

5:23

So does that mean it's a bad thing? No, markets

5:25

will catch up to that. Will prices come

5:27

down? Possibly. They will soften

5:29

in some places. But you just got to keep

5:32

an eye on things like this. And we can certainly help

5:34

you with this. So you just got to talk to my team about

5:36

it. And lastly, rents.

5:38

What are rents doing? Well, rents have been strong

5:41

for years and they keep going up. Right

5:43

now, we're at about 4% year over year in terms

5:47

of price growth in

5:50

the rental pool, single family home

5:52

rental values. So rents

5:55

are still increasing. Not as much as they used

5:57

to be. They used to be closer to 8% in terms of price. appreciation.

6:01

But right now, rents are appreciating

6:03

at about a 4% year over year. So that means they've

6:06

slowed down and cooled off from

6:08

earlier this year and from last year.

6:11

But it's still appreciating and it's

6:14

keeping up with inflation. Not quite, but

6:16

it's up there. So overall, that's

6:19

what real estate is doing at a national level in

6:21

terms of stats and whatnot. Now with

6:23

that, let me grab a few questions that

6:25

have come in from our loyal

6:27

listeners. I'm going to grab

6:30

maybe three, four, maybe five. And

6:32

I intended this episode to be an Ask Marco episode,

6:34

but it's going to be kind of a cross between five

6:37

minutes, seven minutes of market

6:39

stats, just a quick overview and then grabbing

6:42

some questions here. So let me begin with a very

6:44

basic one. And Richard

6:46

writes in and says, where do I begin?

6:50

And literally his email is short and sweet

6:52

and it was actually hilarious to read. So

6:55

for those of you listening, you might get a kick

6:57

out of his question, but he said, where do I begin? Maybe

6:59

start with canine housing and move to actual

7:01

human like housing. Is there a market for blanket

7:04

or box forts? Well, Richard,

7:06

everybody starts in the same place. And that is basically

7:09

on square one at the beginning.

7:11

And so having said that, I basically look

7:13

at four or five things for

7:16

anybody and everybody who's just getting started

7:18

and asking the question, well, where do I begin

7:20

or how do I begin? So here's what

7:23

I suggest in general terms,

7:25

because I don't know what your level of education

7:28

is and what resources you have access to right

7:30

now, but this is going to apply to everybody

7:33

at different points in their investing career

7:35

and to different degrees. So

7:38

the first thing I want to put on my

7:40

list is this education.

7:42

Why? Because, you know,

7:45

it's the old saying, the more you know, the more

7:47

you grow and the more you learn, the more you earn.

7:49

Well, it's very true because think about this statement.

7:52

And I leave with this all the time in my

7:54

presentations when I'm talking to

7:56

people on stage. I ask people

7:58

to finish the sentence ignorance. is blank.

8:01

Most people say ignorance is bliss. And

8:04

that may be true at times. But

8:06

the reality is, ignorance is expensive.

8:10

You don't know what you don't know. And

8:12

what you don't know is costing you time, money

8:14

and opportunity. So the more

8:17

you educate yourself and learn, the deeper

8:19

your knowledge level and intelligence in

8:21

the area of finance and investing, the

8:23

further you will go, the faster you will

8:25

get there, the more successful you will be.

8:28

So never stop learning because the more

8:30

you can invest

8:32

in your mind, what's between

8:35

your ears, the better you will do

8:38

in everything you do, especially

8:41

when it comes to money and investing.

8:44

So education is not expensive.

8:46

It's relatively cheap. You

8:48

can listen to podcasts for free. You can buy books

8:50

that range from zero dollars

8:53

to 10 or $20. And they're chock

8:55

full of information and great knowledge

8:58

and useful ideas that you

9:00

can put into place. There is a

9:02

lot of free content online. Many websites

9:04

publish content weekly, even daily

9:07

about money and finance

9:09

and investing and all that good stuff. So there's

9:11

no excuse for anybody not to educate themselves,

9:14

but that really is one of the most important things.

9:17

And it's really the starting point because if you don't have

9:19

the right knowledge or mindset, you're not

9:21

going to get very far. Why do you think

9:23

after about 500 episodes or so

9:25

on this show, I mean, it's over 400

9:28

somewhere in the 450 range. Why do

9:30

you think I've had guests on like Jim Quick,

9:33

you know, memory expert and various

9:35

other people to talk about your mindset

9:38

and your attitude and whatnot?

9:41

It's because there's so much to be said

9:43

about having the right mindset and

9:45

the right knowledge and the right attitude

9:47

in order to be a successful investor and achieve

9:50

success relatively quickly. Second

9:53

after education would be capital.

9:56

Obviously you need capital to invest

9:59

not in a necessarily always if you have partners

10:01

and they're bringing the cash or the capital to the table

10:04

then you become the sweat partner the sweat

10:06

equity partner the person who's doing the research

10:08

finding deals putting in the time and just Doing

10:11

all the legwork But if you are

10:14

solo then you will need capital capital

10:16

in the form of investable capital and

10:18

with real estate That means down payment

10:20

capital So if you're looking to invest

10:23

in a hundred thousand dollar home and you

10:25

need 20% down That's $20,000

10:28

add a few thousand dollars on top of that for closing

10:30

costs and maybe a few thousand dollars on top of that It's

10:32

just a buffer some operating

10:34

capital and some reserves So you

10:37

need twenty thousand twenty five thousand dollars maybe

10:39

fifty thousand if you have it great if you have

10:41

a lot of it great You're gonna fast-track

10:44

how fast you accumulate or build a real

10:47

estate portfolio If you

10:49

don't have enough of it Well, then

10:51

you got to figure out how can you make

10:53

more earn more and get

10:56

more income as quickly as possible Does

10:58

that mean working overtime if you're in sales does

11:01

it mean, you know closing more sales if

11:03

you are an entrepreneur does

11:05

it mean increasing your profit margins or improving

11:08

your marketing to generate more leads and therefore

11:10

more revenue and more profit if You

11:13

have a w2 job Does it mean

11:16

that you find yourself a side

11:18

hustle a small business to start to

11:21

build and grow or? Turn a hobby

11:23

into an actual business where you

11:25

can generate income. There could be all

11:27

kinds of opportunities there Maybe you're

11:29

a contractor of some kind you work on a 1099

11:32

basis and it just means bringing in

11:34

more gigs or more jobs But you

11:36

need to find a way to increase how

11:38

much income or inflow how much capital you have?

11:41

Because you're gonna need that to invest if you

11:43

don't have money to invest you're not gonna

11:46

get very far The third thing is gonna be credit.

11:48

So these are what I call the two C's there's

11:50

capital and credit if you've got the capital

11:53

Great, but if you're the one qualifying for financing

11:56

meaning mortgage financing or any kind of

11:58

leverage you're gonna need credit.

12:01

And this is where you should be working on improving

12:03

your credit score and your credit profile all

12:05

the time. You want the highest possible credit

12:07

scores so you get the best kind

12:10

of financing and the lowest types of rates. If

12:12

you don't have good credit or have credit at all,

12:15

that's essentially the same thing as having

12:17

bad credit. But you need good credit. If you don't have

12:19

good credit, you need to be working on that. And

12:21

of course, there's a lot of information out there on how

12:24

you can do that and how to build credit

12:26

and improve your existing credit. So

12:28

that's something you should be working on. Ideally,

12:31

your goal should be to have credit scores

12:34

that are over 720 or 740.

12:36

That's kind of the sweet spot where you get the best

12:39

rates and the strongest ability to

12:41

qualify. Of course, you don't want any bad

12:43

things on your credit report like bankruptcies

12:45

or 60 and 90 day late payments

12:48

on various credit cards or other mortgage payments because that

12:50

would be very damaging to your credit.

12:52

So, so far we've got education,

12:54

capital and credit. The fourth item I would say

12:56

as far as how to begin, where to begin

12:59

would be your team. You have to have the right

13:01

team. The people who are going to help you find

13:04

the deals, underwrite and research

13:06

those deals with you, finance those

13:08

deals, provide you legal advice,

13:10

tax advice. This is your team that

13:12

you build around you. We have all those people

13:15

available for you. So that could be a

13:17

very quick fast track just by working with my

13:19

team here. And there's no cost for that. So

13:22

Norata Capital and Norata Real Estate

13:24

Investments provides no fee

13:26

and no cost services to help you invest

13:29

and build your wealth and your cashflow. But

13:31

team is so important. Whether you do it with us, whether you

13:34

do it on your own or with a partner, you

13:36

have to have the right people to support

13:38

you and help you find the deals,

13:40

finance those deals, manage those deals, have

13:42

the right investment strategies and tax strategies

13:45

in place. All that stuff is not difficult.

13:47

It goes back to point number one, education.

13:50

Again, as you learn about this and the

13:53

more you know, the more you're going to be able to work your team

13:55

and be able to speak the same language and

13:58

accelerate your success.

13:59

And then the fifth thing, you know, to your question Richard

14:02

of, you know, where to begin, it's basically

14:04

taking action. Because once you've educated

14:06

yourself and you will continue to do that forever and

14:09

you have capital and credit and a team built

14:11

around you, now it's a matter of pulling the trigger

14:13

and taking action. Because you can be the

14:15

most educated person when it comes to finance

14:18

or investing. But until you actually

14:20

take the action needed

14:22

to do that first deal

14:24

or that next deal or that

14:26

next investment, whatever it may be, you're

14:29

not going to get any further ahead because you're going to stay

14:31

stuck where you are. So as

14:34

simple as that sounds, believe it or not,

14:36

we talk to a lot of people who

14:38

love to learn and love to talk about

14:41

investing, but never take action

14:44

and do something with it. So

14:46

Richard, to summarize, educate

14:48

yourself, build up your investable

14:50

capital, improve your credit score as

14:52

strong as you can make it, build the right

14:54

team and take action. I think with

14:57

that, you've covered 90% or

15:00

more of what you're going to need in

15:02

order to move forward and be successful. So

15:05

I hope that helps. And of

15:07

course, if you need a little more guidance, my team's

15:10

here to help you. All right, next question

15:12

from Kim. How do I decide

15:14

whether to evict somebody or not? Is

15:16

this you? Your business gets to a certain

15:19

size and the cracks start to emerge.

15:22

Things you used to do in a day are taking a week.

15:24

You have too many manual processes. You

15:27

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15:29

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16:28

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16:30

estate. That's netsuite.com

16:33

slash real estate to get your own KPI

16:36

checklist. Netsuite.com

16:39

slash real estate. Well, Kim, that's

16:41

a darn good question. And there

16:43

are so many, it depends questions

16:45

around that, that all

16:47

I can do is give you some general guidance. So,

16:50

but again, you know, nothing here is legal

16:52

or financial advice or specific

16:54

advice. This is just general

16:57

information and entertainment. Call it edutainment.

17:00

So how do you know whether or not to evict? Well,

17:02

there's a lot of considerations here, but

17:04

when you decide whether or not to evict a tenant,

17:07

it can be a serious and

17:09

a serious decision. And there's a

17:12

serious legal process because

17:14

it's a regulated process. So you should not consider

17:16

this lightly. You need to consider this carefully.

17:19

And I'm assuming you're managing

17:21

the property yourself right now. But even

17:23

if you have a property manager, of course, you

17:25

know, you might be the one making the final decision,

17:28

but your property management company

17:31

will be making these decisions for you. But if you're

17:33

self-managing, then obviously you're putting yourself, you

17:35

know, in the seat of making these decisions. So

17:38

the decision to evict should be based on

17:40

many valid reasons, and

17:42

you have to follow the laws and regulations

17:44

within your jurisdiction. So

17:47

here's some basic steps to consider when you're

17:49

making this decision. First and foremost,

17:51

you have to review your lease agreement. You

17:53

have to start by reviewing what

17:56

is in the lease that you have with your tenant,

17:59

because that's what you're going to be using. lease may specify

18:01

certain circumstances under which you can terminate

18:04

the tenancy and certain circumstances

18:06

where you can't. There may be delays or

18:09

maybe not at all. So, you

18:11

know, the notice that you're required to give

18:13

to a tenant is usually

18:16

spelled out in that lease agreement as

18:18

well as how you deal with lease violations.

18:21

Second, you need to understand the legal grounds for the

18:24

eviction in question because different

18:26

jurisdictions have very specific rules and regulations

18:29

regarding evictions. And common

18:31

legal grounds for this for evictions

18:34

include non-payment for rent. I mean,

18:36

that's probably the most common one, but

18:38

there's also lease violations such as damaging

18:40

the property or conducting illegal

18:43

activities on the property. And then, of course, last

18:45

but not least, you know, there's the expiration

18:47

of the lease term. You know, if it's a 12 month or 24

18:49

month lease and it expires at

18:51

that point, the tenant has to move out. It's not

18:54

necessarily an eviction per se, but

18:56

they do need to vacate the property. But if

18:59

they don't and the lease

19:01

has expired and you did not renew it and there's

19:03

no language in your lease to continue

19:06

on a month to month basis, then essentially

19:08

you do need to serve some

19:11

sort of paper or notice to

19:13

evict the property. But you

19:15

have to ensure that you have valid legal

19:17

reasons for the eviction. Thirdly, you

19:20

want to document your lease violations.

19:23

It's very crucial to document your lease violations

19:25

or issues you have with your tenant because

19:28

this documentation is going to come

19:30

up

19:31

later on and be important if there

19:33

is any litigation. But documentation

19:36

can include photos and videos, communication

19:39

records of any kind, including texts,

19:42

and of course any relevant correspondence on

19:44

paper or email. But these records

19:47

will be important if there's ever a legal

19:49

dispute, so keep that in mind. Also, you

19:51

want to communicate with your tenant, you know, before

19:53

proceeding with an eviction, consider open

19:56

communication with your tenant. There's nothing

19:58

better than actually having a... civil,

20:00

rational, adult-like conversation

20:04

that eliminates emotion in

20:07

order to get to a bottom line or a compromise

20:10

or an agreement. So try to resolve

20:12

any issues with your tenants

20:15

as amicably as you

20:17

can. And you

20:19

want to have everything in writing at

20:21

some point, even if it starts off as a verbal

20:24

communication, ultimately get what

20:27

you're talking about in writing.

20:30

And many times, I mean often, tenants

20:32

may not be aware that lease violations

20:34

are there. They might be unknowingly

20:38

doing something but willing to rectify

20:40

it. So this is why communication is so powerful.

20:43

It's almost always the starting point to

20:45

solving any kind of problem. But ultimately,

20:48

if you need to provide

20:50

a notice or communicate something in

20:53

writing because it's now a legal requirement

20:55

or it's something that you need to document,

20:57

you want to serve proper notice. Because

21:00

if communication doesn't lead to a resolution,

21:03

you should serve the tenant with a written eviction

21:05

notice that actually complies with the local

21:07

laws and regulations in your area. Don't

21:09

overlook this thing. So that notice should specify

21:11

the reason for the eviction and the period within

21:14

which the tenant needs to remedy that violation

21:16

or vacate the property. And then, of course,

21:18

you're going to have to wait for that notice period

21:20

to expire because the tenant should be given

21:23

a reasonable amount of time to respond and rectify

21:25

the situation. The length

21:27

of the notice period can vary depending on

21:29

the jurisdiction you live in, especially

21:32

in some states where things

21:34

are very strict in the sense

21:36

that they're favorable to the landlord,

21:38

you, but there are other states where they're very

21:41

favorable towards the tenant. You

21:44

just got to know what state you live in. But the length of that notice period

21:46

can vary depending on the jurisdiction and the reason

21:48

for the eviction. Of course, never

21:51

overlook the option

21:54

or need or necessity to consult

21:56

with your attorney or getting legal

21:58

advice from someone who is a lawyer. is knowledgeable

22:00

because if a tenant does not comply with

22:03

the notice that you've served or if

22:05

the situation remains unsolved, you

22:07

know, you've got to consult with someone like an attorney

22:09

or a legal expert that is

22:12

knowledgeable in the landlord tenant laws within

22:14

your state and even in your county. They

22:17

can guide you through the legal process and ensure

22:19

that you follow all the legal requirements that are needed,

22:21

but ultimately you may file for an eviction. So

22:23

if all else fails and the tenant does not vacate

22:26

the property or remedy the violation, you may

22:28

need to finally initiate a formal

22:30

eviction process through the court system in your jurisdiction,

22:33

which means you essentially put them on notice and

22:36

on the clock. So at that point, you have to follow

22:38

the court process and the courts will determine

22:40

whether the eviction is justified and

22:43

if so, they will issue an eviction order

22:46

and you should work with your law enforcement or

22:48

your sheriff's office to carry out the eviction according

22:50

to the court's order. Don't go around

22:52

this. You just want to follow the

22:54

letter of the law here. And

22:56

then lastly, consider the consequences. You've

22:59

got to keep in mind that an eviction can

23:01

be a lengthy and costly process. So

23:03

this is why I emphasize communication

23:06

being so important. And it may have

23:08

financial and legal implications for both you

23:10

and the tenant. So you've got to weigh the pros and cons

23:12

carefully because eviction is a serious

23:15

step and it's important to ensure that you follow the

23:17

legal procedures in your jurisdiction and

23:19

then treat the tenant fairly throughout the

23:21

process. In my opinion,

23:23

it's always best to avoid an

23:26

eviction if you can. And this is why having

23:28

good, clear communication with your tenant early

23:31

on and as often as possible can

23:34

solve and avoid so

23:36

many problems. So Kim,

23:38

I hope that gives you

23:41

some clarity,

23:43

but yes, definitely consider

23:45

the pros and cons and

23:47

decide from there. All right. I've

23:50

been going long. So one last question from Patsy

23:52

regarding capital calls. And actually,

23:55

this question came in about a month or so ago. So

23:58

I'm a little slow in getting into it. to this one, although

24:01

I get a lot of questions at times, they go in waves.

24:03

And I apologize if I don't get to your question right

24:06

away or sometimes at all. Sometimes I

24:08

would just reply via email. But

24:10

Patsy writes in, she says, Hi Marco, we have received

24:12

several cash calls on our multi-family

24:14

investments in the last

24:17

few months. How do we determine if we should

24:19

add more funds or just walk away and let the

24:21

bank take the properties? Well, if

24:23

you're in a multi-family investment, it's probably a syndication

24:26

and I don't think you can just walk away. So

24:28

unless I'm missing something here, I'm just going to

24:30

assume that you are part of a group investment,

24:33

essentially what's known as a syndication. So

24:35

Patsy continues here in her email

24:38

saying, most of the properties appear to be functioning

24:40

well, but the rapid interest rate rise has

24:42

caused concerns. The major problem has

24:44

been the high cost of interest rates and rate

24:47

caps. And the general partners,

24:49

there you go, the general partners believe the

24:51

potential for selling the properties will be improved

24:54

in the next two to three years as

24:56

they expect interest rates to decline by 2025

24:58

or 26. They

25:01

are asking for funds to get them through

25:03

the next two to two and a half

25:06

years, approximately 10% of the

25:08

original investment. Most of these investments were

25:10

made in 2021 and early 2022 as

25:14

limited partners in syndications.

25:17

Thankfully, we invested minimum amounts

25:19

of 25,000 in most of these offerings.

25:22

Any advice or thoughts would be appreciated.

25:24

Okay, so Patsy, good to hear from you, by the way.

25:26

I know we spoke a long time

25:29

ago. So you've invested in a multi-family

25:31

syndication. You're a limited partner along

25:33

with other investors. And because

25:36

of rising mortgage rates, sounds

25:38

like there's a cash crunch. And now

25:40

the general partners are requesting

25:43

all the investors, the limited partners,

25:46

to come up with approximately 10%

25:48

of the original investment as a cash

25:50

call. And unfortunately, this is just

25:53

the nature of the beast. It's all

25:55

spelled out in the agreement that you reviewed

25:58

and signed when you made this. investment.

26:01

A lot of syndications, especially with

26:03

real estate where there are variables in terms

26:05

of the costs and operating

26:07

the property or properties, especially

26:10

when there's debt financing involved, have

26:12

the right or reserve the right in that agreement

26:15

to request additional capital from the partners

26:18

if it's needed. Sometimes

26:20

that doesn't exist but in this case obviously

26:23

there's been some sort of issue where

26:25

there is a lack of liquidity and

26:28

maybe no or no cash flow or negative

26:30

cash flow because the debt

26:32

services increased because the mortgage rates have gone up

26:35

which would tell me that they either had

26:37

a variable rate mortgage

26:39

or they had a term

26:41

on that mortgage that reset the interest

26:44

rate increasing the monthly mortgage

26:46

payment because interest rates have gone

26:48

up and now the syndication or

26:50

this group investment has gone from

26:52

a positive cash flow situation to

26:54

a low or negative cash flow situation

26:57

and now they're in need of additional

26:59

capital to carry them through for the next couple of years.

27:02

I would agree with their

27:05

assessment that over the next two years

27:07

or so that we'll see mortgage rates come down. The

27:09

expectation there is pretty high and I believe

27:12

that to be the case too but until then,

27:14

until they're in a situation where the rate

27:16

has come down on the mortgage or they refinance into

27:19

a lower rate, you might be stuck in a situation.

27:22

Now you ask the question can you just walk away? I don't

27:24

think you can walk away from this. I mean if you do, I

27:26

don't know what the repercussions are. Again this

27:28

goes back to the agreement but you might be walking

27:30

away from your original investment and

27:32

risk losing the 25,000. If

27:35

you're prepared for that, well then you know

27:37

what your loss is going to be. It's not a large

27:39

sum of money but at the same time it's an investment

27:41

nonetheless. The other thing to be aware

27:44

of is there might be language

27:46

in that agreement that you just can't walk away.

27:49

I mean it might put you into

27:51

a legal situation where you walk away as

27:53

an investor and risk

27:55

losing your $25,000 investment and

27:58

or you might still

28:00

be on the hook, may be liable

28:02

for whatever that amount is

28:05

as a cash call. So just be careful because

28:07

you might put yourself into a legal situation,

28:09

a negative legal situation, where

28:12

you are still going to be responsible.

28:14

It's part of your duty and

28:16

responsibility as a partner in this investment to

28:18

provide whatever that cash call

28:20

is. Now if you're talking 10%, 10% of $25,000 as your original

28:25

investment is only $2,500. I mean

28:27

that's not that bad unless you have multiple

28:30

investments of $25,000 across

28:32

a whole bunch of different deals that

28:35

you know you got involved in. Well now you're

28:37

multiplying 2,500 times however many investments

28:41

you've made. So anyway take a look at your agreement

28:43

and maybe call up the general partners and have a conversation

28:46

with them about it just to see you know

28:48

the severity and the length of time and what you

28:50

can do. Maybe you can not provide

28:53

the capital but defer any

28:56

future distributions to

28:58

you as cash flow from this

29:01

investment, from the syndication as

29:03

if you had paid the 10%. What

29:05

I mean by that is this, if they will

29:08

agree to not having

29:10

you put any capital up, they

29:12

would just say okay well you still

29:14

owe it but we will pay that from future

29:17

distributions which may be a couple years down

29:20

the road. That's just a creative way

29:22

of trying to negotiate a cash call or

29:24

a capital call. They may not go for it but

29:27

it doesn't hurt to ask so that's just an idea for

29:29

you. Alright well I think that's it for today. We've gone

29:31

for 30 minutes or so here. I will

29:34

cover the other questions I have here on another

29:36

episode of Ask Marco. So that is it for

29:38

today. If you have any questions about investing,

29:40

real estate finance, me personally, whatever it may be

29:43

let me know. Just send it over to me from our

29:45

website at PassiveRealEstateInvesting.com or

29:47

just ask Marco at PassiveRealEstateInvesting.com.

29:50

Remember to subscribe to the show. We love

29:52

that you're here. I appreciate you all. Thank

29:55

you for listening and I will see you all on our next

29:57

episode.

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