The WAY to WOW Shows
Money in Motion - Episode 2
June 24, 2026
Automatically generated from YouTube captions; names and wording may contain errors.

[0:02] Who are [music] you? And where are you going? What do you want? [music]

[0:18] >> Hello and welcome to people making money. I'm your host Kevin Bemel and today we're continuing with our mini series our our seven episode mini series although we may we may extend it you know the JJK show here is is

[0:33] >> [laughter]

[0:33] >> it's a lot of fun. We're having fun. Hopefully you are too.

[0:36] >> We are.

[0:37] >> This is our mini series called money in motion which is really looking at what do we need to be doing in the chaos in order to be successful uh financially in terms of investing. So uh as those of you who are regular watchers of the show know, I'm Kevin Bemel and I'm I'm the host of not only this show but a whole bunch of podcasts and real quickly my co-presenters uh JR I'm sorry JC and John why don't you just give it real quickly remind viewers who

[1:13] you are and whence you come.

[1:17] >> Go ahead Rabino tell us who you are.

[1:19] >> it over to me. All right, we're playing some pickleball here.

[1:22] >> I like it.

[1:23] >> I thought we were going alphabetically. Okay.

[1:25] >> Yeah, episode episode one was the boys were back in town and episode two is they're back. So remember Pulp Fiction guys that's what I see when I see these two gentlemen with me.

[1:35] >> You're dating yourself man.

[1:37] >> I know I am. I'm John Rabino here. Great to be back with you all. I'm excited to talk about the next set of episodes and the next set of things we're going to chat about. It's so exciting. We've got a great set of episodes going forward. I own and operate Jay Ade D Investments. We're a passive real estate investment firm. We raise capital to invest on large scale commercial real estate and residential projects inside of DC, Maryland, Virginia, and the Southeast. I also do some coaching and education, and I am so happy to be with my fellow brothers today today and with our amazing network of folks that are going to watch these great videos.

[2:13] >> And for those of you who are wondering why his background is different than the other backgrounds, I know I'm sitting like a Passover seder now. It's because [laughter] when John puts up his virtual background, he lags and we don't want to have him laughing over his voice being out of sync. But the neat thing is if you look, you see those are some of the JID projects behind John, and I think I think I'm in there in at least one of those.

[2:41] >> Yes, you are.

[2:42] >> Yeah, okay.

[2:44] >> right here. Yes, sir.

[2:45] >> what I thought. Yeah, yep. So, you know, either we're both crazy or we're doing something right.

[2:52] >> That's right. [laughter]

[2:53] >> Either one works.

[2:55] >> Either one works, probably.

[2:56] >> Yeah, yeah. Well, we might be crazy and do things right at the same time. I don't know if anybody will buy that, but anyway. So, I am JC or John Clark Jr. and I am excited to be on the call as well. We're here to share some great ideas, give you some things that we've learned, and hopefully inspire you to reach out to each of us or one of us or all of us and and see how we can help you with your business and your investing. I I run a private equity firm as well as few other companies that we own, mortgage companies, title companies, and real estate related companies, even a construction firm. So, we we're heavily

[3:32] invested in the real estate world, have a personal experience, and work with people all over the nation, and learn from their experiences as well. Glad to be here to share.

[3:42] >> Excellent.

[3:43] >> Jack of all trades.

[3:45] >> [laughter]

[3:46] >> And master of all though, master of all.

[3:48] >> There you are.

[3:49] >> For those of you who are just joining us, this is actually the second episode of the mini-series, but we did an introductory episode as well. So, if you go back to my YouTube channel, which you see on the title crawl below, or you go to Spotify or Apple Podcast, you can check out those those previous episodes. But, what I want I want to bring up this was this is a um uh a a concept that John John Rubino created called um the wealth pyramid. And John, why don't you take just, you

[4:24] know, 60 seconds to review real quickly, you know, where we are, and then we can proceed into our our topic for today.

[4:35] >> Sure. Yeah, the foundations of wealth is what we focused on primarily last episode. We talked about education and awareness with, you know, having that savings account so that you're comfortable, you have confidence. It's the foundation level of the of the uh foundations of wealth. You know, you want to have a good strong foundation, so building the education, the awareness, the savings account for a goal, whether it's to buy a house, emergency fund, for travel, but having enough cash in there to help yourself. And then the next tier up is insurances and debt debt strategy, which is really to, you know, protect the income that

[5:10] you're earning as well as reducing the level of debt that you have. So, that's that's the next level we looked at as far as tier number two inside the foundations. And then the third one up in the foundations really looks at what Kevin does, and that's, hey, asset protection. I've grown my income, I'm growing assets. Now it's taking it to the next level to make sure I have a good estate plan, and I've got the tools in place to protect those assets I've built.

[5:36] >> And and I pledge to keep working on John to get him to change living trust to estate plan. So, hopefully sometime

[5:45] >> [laughter]

[5:45] >> in this series that it'll magically occur.

[5:49] >> It will, my friend. Believe me. You'll see some sparkles above my head.

[5:53] >> [laughter]

[5:56] >> No comment that can't be made.

[5:58] >> Yeah, no comment, right? Well, we're going to let that slide right by. Here's a Here's one comment I do want to make that we we referenced in the last video. It's worth mentioning here is that this is an ongoing scenario of dealing with the bottom and the top of the pyramid. It's not like you check a box and it's over. So, hence why we're referencing it in each of our videos as well. We're just going to cover different sections and John's going to you know, start us into you know, maybe the accelerators of wealth today, but and talk about maybe what's recently happened. And yet so we'll each

[6:33] time we'll probably be referencing this pyramid because it's something that each investor would keep referencing and moving in and out of different sections in their life.

[6:41] >> Exactly. So So, John, take us now into the you know, the next level so to speak so so as we move into today's topic.

[6:51] >> Sure. So, as you get through the foundations and you're in a position to now move into the accelerators, the first thing you really want to identify is current cash flow management, what's coming in as far as cash flow on a monthly basis now in my working age during the time that I'm employed or whether I own my own business, and then really looking forward, right? And saying where do I need to be when I don't have to have 25 appointments a day and work 70 hours a week or whatever it is that you do. And so, you know, we all agree we want to

[7:26] continue to maybe work and do something or we may want to travel more, spend time with family. So, what's that number that you want to have to say, I am now in a position where I'm comfortable and I can go and play golf today or go spend time with John and Kevin and do the things I want to do. So, the most important thing that starts with identifying where the cash flow is coming from. I usually do this little exercise, which I have labeled there, called the retirement income generation exercise. And again, we reverse engineer. We start with that number you want to be at, 10,000, 15,000, 20,000, and then we work backwards, right? What are the areas of cash flow that are

[8:02] coming in? Pension, social security, whatever it is, business income, and then we look at the gap. All right? So, if there's a gap, then we focus on where we need to accelerate the cash flow in those areas to get you to where you want to be. So, I'll take a pause there. I'd love to get your your thoughts, gentlemen, on that and and why that's so important.

[8:25] >> Yeah, so it it's interesting because this this plays to a kind of an ongoing theme for people making money, which is that as we move up in terms of our earnings and our earnings capacity, often times our lifestyle starts inflating faster than our earnings are increasing. Uh I know, you know, candidly as a young man, when you know, when I my business first started making money and I'm like, "Oh, this is great. I'm making all this money, right?" And and you know, the

[9:02] restaurant bills were killing me. Right? So, I think that it's important for us for for for us to understand that cash flow is kind of the bottom line. So, your top line can be going up. Uh it can be going up quite rapidly. It can be quite large, but if if the expenses are increasing a pace or faster, so the bottom line is actually decreasing, and that's not a sustainable model for getting to the top of the pyramid with right which is financial

[9:38] freedom. So, I think that's that from from me that's often times what I see is is is people once they start making money, the spending increases faster and and and and that's that's unfortunate at at the least.

[9:55] >> Yeah, so that's interesting. So, you he were speaking about building your cash flow management while you're building wealth and building income and learning how to manage it before you get to maybe what Americans call retirement, you know, this this place in time where we say, "Okay, we're going to have more election in what we do." And and when we do that, then there's also cash flow management there that gets really interesting as well because now we we don't have as much to do of our individual efforts to raise that income cuz we're amount

[10:30] passive more passively involved in whatever it is we're doing possibly. And so, there's challenges on the grow as you said, "Hey, all of the sudden you're making money and you're spending it and not realizing you're spending maybe at a faster pace than you're rising cuz it just you the excitement and the energy that comes from that." And then there's that side that, "Okay, finally you figure that out and then you get to a point where okay, now you're going to draw a line in the sand and say, "I'm no longer going to be working actively producing this. I've got to manage multiple streams of income." There's always challenges. I think that's what's

[11:06] interesting. Your the job's never done.

[11:09] >> [laughter]

[11:09] >> Yeah, but you got a blue you got a blueprint here, right? So, like we said, you know, you're not going to like say, "Hey, I'm done with the foundations. I don't need to go back to those." You've got things that you've done in the foundations. You've helped build yourself a budget, a network statement. You've got your team. You've got the mindset. You got everything there to reference, right? So, at this point, we've got that stuff going real well. We kind of understand where money's going when it comes in. Hopefully, it's not going to other people as far as debt and stuff. It's going in your pocket and you're keeping more of your money. And now you're able to really put your arms around, okay,

[11:45] what are those sources of income that are coming in? And where are those And will will those sources be there when I'm older and I no longer am at a working age? So, what other sources are there that I can either anticipate or are still going to come in now and continue to come in later, right? So, I think that's the importance of the cash flow management piece. And plus, you have other people out there that are going to help you build that cash flow management, whether it's your financial advisor or your CPA, again, the team, right? So, those are the folks out there that are going to help you, but you really want to get that maximized

[12:22] turning of money being produced for you as you get older so that, you know, you can walk away from an active employment and active business and step into a retirement position and still be, in a way, getting what you need and what's coming in at that at that earlier stage.

[12:42] >> Right. I I mean, yes, that's that's that's the case. I think we need to though keep in mind that that we that sometimes we experience setbacks. And so, no matter how well we build a foundation, things happen. And this is I think kind of the the theme for today. Things happen sometimes outside of our control, right? And and so, while, you know, we had a business that maybe maybe the business is generating, you know, $200,000 a year in profit, annual profit, um and then something happens and all of a sudden, you know, the business is closed.

[13:15] >> Right.

[13:16] >> Um and so, this is why I think it's important to to keep in mind this issue of lifestyle creep or lifestyle inflation because it's really easy get habituated to a more expensive lifestyle. It's far harder to to scale that lifestyle back, right?

[13:37] >> Right.

[13:39] >> People talk about um uh what's his name? The The Wizard of Omaha. Uh uh

[13:45] >> Oh, Warren Buffett?

[13:46] >> Warren Buffett. So, candidly, you know, not a not a Warren Buffett acolyte, but what what I think is is exemplary about him is, you know, despite his enormous wealth, he's always been somewhat um or he's always not somewhat, he's always been very disciplined about the size of the of the lifestyle that he leads, right? Now, most of us are not going to make anything like the kind of or have the kind of wealth that that Warren Buffett has. Uh but, I think that we can look at that and say, "Okay, part of

[14:24] this is is developing the discipline so that when the inevitable, you know, setbacks occur or when the shifts occur that maybe require me to retrench, uh uh I'm able to do that much more easily than if I'm, you know, living a a much larger lifestyle.

[14:48] >> Yeah, I agree. And I think, you know, that gets us into the next level, which is, you know, hey, when I identify those cash flow management items that are coming in and I know what to expect, now it's, all right, what kind of investment strategy should I be focused on? What is if there's gaps in the future that I anticipate or if I'm not taking advantage of tax-free type investments like a Roth IRA or if I'm not taking advantage of of things like a 401k or a self-directed IRA. What are those things out there that I could take advantage of in the investment strategy world? first from a traditional side,

[15:24] right? What's out there that's in the market? What's out there that's in an investment retire or an individual retirement account? What are those things that I can do traditionally that someone else is going to manage, right? If I've got a good financial advisor and a good team. And then what are my alternatives? What are my alternative investments, right? Like what what are the things out there that not everybody gets to play in? Uh whether it's uh investing in oil and gas or passive real estate investment or in Bitcoin or other things that are out there that a lot of people don't get to play in that you now have realized or is revealed to you

[15:59] that's available to you to go out and potentially participate in. So, that's where it starts getting exciting.

[16:06] >> You know, one of the central thoughts behind all of this then to where it works better at each level is when there's some forward thinking, there's a team of advisors, there's people in your life that you can be accountable to and talk through some of this. It's not just accountability. Sometimes it's I was just meeting with a gentleman earlier today and it's thinking out loud, having someone to bounce ideas off. And sometimes that might be a spouse or a partner and other times it might want to be someone outside of your immediate realm. So, you're getting some additional vantage points, some uh less than a mentality, a little bit more

[16:42] objectivity. And uh whether you pay for that or you just get it for free, you know, sometimes us three represent that for other people. I know for me in my life preparing for the next stage before it comes, thinking through that, looking at it, studying it, looking at what other people doing, asking questions of people who are further down the road. Maybe it's just a friend who's come into more financial uh independence before you and you're asking and looking at what they're doing and you're making assessments. I mean, we do that as parents. We do that in other roles in our life, too. We look at what others

[17:18] are doing and we kind of glean from that and then implement that in our own life. And so I look at this financial thing very much the same. It's an ongoing journey and constant evolution, requires outside third-party support and help, needs a plan and strategy, and then there's this what just happened,

[17:39] >> Right.

[17:39] >> right? That you can't even predict. And that's that's one of the things that we also want to talk about today. What really just happened a few years back and we're still living with some of the repercussions, but you know, what happened and how does that impact us and what do we do moving forward?

[17:57] >> Yeah, so JC, I think you just hit the key, right? Because we've had a number of fairly disruptive events over the last the previous, you know, four or five years. COVID, spiking inflation, um shifts in the business climate from tariffs, etc. And I I and I somebody I know uh is actually a friend said something to me yesterday. It I I I don't know why it never resonated with me before, but he said, "I didn't grow up learning any of this." So when we talk about these things,

[18:34] I'm in some cases learning this for the first time. He's been in business a long time. He does very well.

[18:40] >> Yeah.

[18:40] >> But you know,

[18:42] >> [laughter]

[18:42] >> I you know, what I suggested to him, he's like, "I don't know why I never thought about doing this, you know, 20 years ago, right?" So I think that a good place to start cuz sometimes it's hard to to you know, talk to people about our own finances, but you know, we can ask people how did you survive COVID? Like for somebody who's in business, right?

[19:09] >> That's not an uncommon question, Kevin, that you brought up. You know, it really isn't. I had lunch today with a young lady who's in her early 40s and she said the same thing. We were talking a little bit about estate planning and we were talking a little bit about other things like investments and we had a really good conversation for like 15 minutes and she stopped and she's like, "I never thought of this stuff. Like, no one's ever taught this to me and no one's ever shared this with me." So, again, I'm not saying that to to pat myself on the back. I think it's just a reality right now that a lot of people don't think of that. And I think that

[19:40] >> They're busy living their lives, right?

[19:42] >> Living their lives, trying to make money, trying to succeed.

[19:45] >> Take care of their families. Yeah.

[19:48] >> Right.

[19:48] >> So So, but it's a it's a like like if when I meet restaurant owners, for example, one of the questions I how did you if you still have a restaurant now, how did you survive COVID? Cuz so many I don't know about other parts of the country. Here in LA, so many restaurants closed. They just couldn't make it through, right? So, if someone has made it through they've got knowledge I I don't have. Right? And if and if I can get them to share that with me, now I can share that with other people.

[20:19] >> Exactly.

[20:19] >> So So, this is I think you know, in the in the John John will know this cuz we did this in the military all the time. You do a hot wash, right? You do an after action report. What happened? Why did it happen? What do we need to do differently going forward, right? That's kind of the process. But I think that for people who you know, don't feel like like, you know, they know enough about this, that's a good place to start because while whatever disrupts things going forward will probably be

[20:54] different than what happened in the last four or five years, still how people responded to things in the last four or five years will help people craft in their minds what they need to do going forward.

[21:09] >> Yeah.

[21:09] >> Yeah, and I think we should talk about that, John. We should talk a little bit about financially and and from the investment world, like what happened, right?

[21:17] >> Yeah.

[21:17] >> So, like, you know, obviously COVID happened. We knew there was going to be a change. We knew that the markets were kind of you know, we were in this prolonged uh economic uh sta- that's stagnation, just kind of steady, right? Interest rates, you know.

[21:33] >> Well, it was a cliff, right? Everything

[21:35] >> It shut down. It wasn't

[21:36] >> by design, and then and then everything had to open up again. That's pretty unique in our history.

[21:42] >> I want to get John's perspective because he he knows it better than than I do. I I know of how things were before that, right after the Great Recession, and that period between the Great Recession to COVID. I mean, we were in unprecedented times, John, right? So, like, how did that shape

[22:00] >> Absolutely.

[22:00] >> really hurt that cliff that we fell off of on in March of 2020.

[22:06] >> Yeah, it really it really did have a quite a big impact. Everything that we're talking about is really interrelated because if you haven't built these resources, you don't have anybody to look to, you aren't looking for anybody to get answers from, you aren't observing that a that a a restaurateur uh likely would have gone out of business, and most did, and then you realize this one didn't, and your mind doesn't think, "Well, maybe I should kind of figure out what he did, cuz that could teach me some things." If you don't think that way, you don't operate that way, you don't have the practice of of thinking forward, like I mentioned, you don't really have resources around you. Most people in

[22:42] America don't have a great financial handoff, then you're just living in the moments that you are, and the tendency here in America is that it's always going to be like it is right now. Uh many people are not great historians, they don't look back. Most people don't look forward. We're living in the moment, and there's something to be said for being present in the moment, no doubt. But, I do believe that we can learn from the past, we can observe uh trends, and we can become aware about things from leaders and people who are pioneering and pushing the future to today. If we're uh analyzing all those

[23:19] things, then it's okay. But, what happened with interest rates, uh especially interest rates in the credit world, you know, America has the least expensive credit system and the most accessible one in the world. Uh you can finance anything and at reasonable terms anywhere from so many sources with ease. Uh and when rates were low, they were low from the beginning of '07 all the way up until, you know, the beginning of 2020, and then stayed there all the way through the majority part, the initial 2 years of COVID. So, that's a long time.

[23:55] Matter of fact, I meet people who were adults that weren't adults in '07 and '08 when the crash happened. And they're now and they're actively working adults out here in the and they're investors, and they're very, you know, they're fulfilling various roles. And I'm like, "Wow, you you were in college or high school, or you were even in, you know, you were young when that happened." Cuz now there's a lot of people in their 20s that are producing uh you know, financial wealth and things. And so, it's like we I meet people of all ages, and some of them didn't know a different life. They grew up and maybe graduated out, and they only had from 2009 to

[24:32] 2021. They're used to low rates for 12 years. So, they just thought that was normal. And when I say low, it's it was extremely low.

[24:42] >> Right. And that's that's the important point, JC, is is people they they people call it low interest rates. No, no, no. They were historically low interest rates. Cuz even when my parents bought a house back in the '50s, they were paying around 5 6%. What we're paying today, which which is that's actually 5-6% mortgage rates is low.

[25:01] >> Pretty normal. Pretty low.

[25:03] >> Yeah, normal low. Below that is extraordinarily low.

[25:07] >> Absolutely. And so if you have a long period of time and you're floating, you're going to call that normal and the decisions you make without a really well-rounded strategy that's based upon experiential understanding that we get from others, right? Cuz what you were describing with that restaurant tour was to go up and find out his experiential expertise. No, no, you went through it. You were here, you changed, you were impacted, you adjusted, and you came through. Like how did you work your way all the way through that? It's important to understand the mechanics because the rest of us were just like a bomb went

[25:44] off. We don't know what's going on. We didn't realize why all of a sudden everything that we were doing was no longer the same, right? We were just plugging along and all of a sudden everything just got twisted on us. And I think John, you you experienced a lot of this even dealing with GID and your various investors, right?

[26:05] >> Yeah, I mean, you're you're exactly right. So I mean, looking at the the actual technical side, like you said, you know, interest rates when they went up, you know, 575 basis points, you know, in a in a year's time, that that's like, you know, extreme shock, right? We we were significantly over leveraged from that period right before COVID and through that period after the Great Recession. So, like you said, John, like 2010 to 2020, deals were being leveraged where we were going out and leveraging 75 to 80% bank

[26:43] debt at very, very cheap interest rate, you know, 3, 3 and 1/2 percent. And these were floating rates, so that when the interest rate started to skyrocket that those those interest that those interest payments were tripling and quadrupling, you were burning through interest reserves and banks were banks were saying, "Hey, we want our money and we take the deal back." Now, the good news was that a lot of the deals had a lot of equity. Um unfortunately, a lot of the equity investors where I sit got burned because now that the valuation of

[27:19] those properties are getting cut in half, the bank's still protected on the leverage from the property, so they're taking the bank the the properties back at their loan amount and they have a hard asset on the books, which was different from 2008 because when the banks took the properties back in '08 when all these people foreclosing, the properties were worth pennies on the dollar, dimes to quarters on the dollar. Whereas with this, banks were able to still have financial strength from these properties and what the leverage was on those. Well, when your interest rates go from 4 to 9 and 1/2% in 6 months,

[27:55] it's

[27:56] >> [laughter]

[27:57] >> cash free and so I I have to chime in here. Yeah, we were just trying to survive. We were trying to survive and so now we went from, "Hey, money is available. It's cheap. We can leverage 75% from the bank" to "We can't The deals are there, but they don't pencil the way they used to. They now pencil at 50% leverage." More equity, more expensive debt. Equity's more expensive. So now the margins are closing tighter and tighter and you cannot underwrite a deal like you did pre-COVID even today. It's changed

[28:33] immensely.

[28:34] >> Yeah. Yeah. So, when I first started in my real estate career, we would have loved to have had a 9 and 1/2% interest rate. We [laughter] were looking at double-digit mortgage rates and we had to get very, very creative in how we financed a deal. So, we were using wrap-around if you if you know what that wrap-around financing where, you know, there would be a fixed rate on the wrap-around loan and if the underlying variable rate loan rate increased, so then the margin on the wrapped-around second would be reduced

[29:11] because otherwise we could not sell properties, right? So, come it's it's interesting how things cycle around because these days you don't see that kind of uh very creative financing being done in order to make because still by historical standards interest rates are pretty moderate, right? Um yes, lenders are requiring maybe, you know, higher down payments or such, but it's not, you know, we're not seeing I mean, we when I started my real estate

[29:47] career, 18% mortgage rates, not credit card rates, mortgage rates, right? This is in the sort of mid-1980s. Uh and I'm not saying across the board, but in certain in certain cases, right? How do you make a deal pencil out on on that kind of those kind of numbers? And the bottom line is some people had to sell properties. They needed the cash for various reasons, right? At the same time we had accelerated depreciation. So, you know, you had these huge tax write-offs that you get from depreciation, so people weren't as

[30:24] concerned about cash flow. So, they would buy a property with a small negative cash flow, um but because, you know, if you were a doctor making a half a million dollars a year, but you had a property that was losing $300,000 a year on paper, you just save so so in taxes, right? You know, you were going to buy that building. So, uh you know, the tax climate is different now, the interest rate climate is different now. Uh so, all of those all

[30:52] >> Values, what things cost are a lot higher now. I mean, yeah, yeah.

[30:56] >> Right, right. So, all of those things have to be understood, but until we understand the historical context,

[31:04] >> I think it's hard to really

[31:05] >> plot that course, JC, we're talking about in terms of going forward.

[31:10] >> That's the word that I want I was I was going to say, you just said it for me. I think the main thing here is that things are best understood, planned, strategized, implemented, purchased, and financed with context. If you don't have contextual understanding, and that kind of goes left or right, back to forward, and and present tense. You you can't just live in one of those boxes. You need to gather enough information, and most of the time we don't have the ability or the connections singularly to have all those answers. Or it takes so much time, and you need to act faster.

[31:46] Uh what I saw was a lot of people, again, falling asleep to a certain rate environment, whether it's high, medium, or low, really doesn't necessarily matter. The the reality is getting lazy, falling asleep, not looking to others, not getting contextual understanding is the downfall, regardless of the interest rate environment you find yourself in. And then if you flip it around and say, "Well, I'm not like that. I don't want to be like that. I Obviously, I've got to where I am in life because I am I'm not like that, but I I I need to know more. How can help me? I learned this

[32:21] much. I'm confident in this much. I've got this down." But typically, there's an area or two, at least, that most of us might have some blind spots, need help. I think the first thing is we got to realize you got to reach out. We have to have context. I saw a lot of investors buying properties, building properties, making investments based on really, really extraordinary, historically low interest rates and not much of a contingency above that. Literally building a plan around 2.75 to 4.75 interest rates like they were just

[32:56] going to stay there. But then the documents they signed said they're going away in 2 years, 3 years, or 5 years. It's just a short-term balloon or a variable interest rate, but you're treating it like it's going to last forever and the entire plan was built around that moment in time. Again, could be high, could be low. It'd be better to build on a high rate plan. Most people would rather build on a low one. We always want to shoot for the bottom and hope for the stars. And and I think what ended up happening is then they got out then the market shifted, right? The bomb went off and all of a sudden the rates

[33:32] that they built their deal around, which the category we're talking about right now really is cash flow. Right? Their cash flow on an an investment, whatever it happened to be, a business, as you mentioned earlier, making 200 grand a year on your business profit and all of a sudden now you're you're sweating and scraping and trying not to close the doors. Or you bought a property based on 2.75 to 4.75 and and now the rates, like John said, they went up about 6 to 7 years worth in 6 months. From February of '22 to August of '22, multiple years worth of interest rate

[34:08] growth happened in 6 months. So the world shifted massively. It's like it's like earthquakes under the ground and all of a sudden two or three of them hit at one time and plates shift. And all of a sudden you're not standing where you thought you were. And to get to the where you thought you were going, boy, it's a leap away and you're wondering, how am I going to survive? And so it you don't always want to build a plan based on absolute disaster or that much economic shift cuz most of those we can't predict. But we can estimate like what the trends are, where's the wind blowing, people that have gone before,

[34:43] it's what they've gone through, how we should do it. Maybe they should those people back when rates were 4.75, what if those investors built their plans at least at 6.75? You know, building a buffer, say, "Hey, it's not going to be like this forever. Sure, we can get that right now. That's just going to But if they counted that difference as excess cash flow as opposed to the whole deal is based on this, and then if the rates shift, the deal is blown." Which is what I saw. Most people built their long-term plan on the short-term information. And I think we need to do it the other way around.

[35:16] >> Yeah, John, and and and a lot of times, you know, when you're looking at deals that are long-term, usually fixed rate makes more sense cuz you're going to be in the project for a longer period of time or the investment. Um when you're when you're in a project that you're building, new construction, let's say, or if you're in a value-add investment where you're going in and doing some modifications to bring your apartment units to market rate to get better rents and to improve your occupancy, you're on a shorter-term loan, so your tendency is going to be, "Let me get a two- to three-year

[35:51] variable interest rate loan. I'm only going to need it for two to three years, and then I transition to a fixed rate for longer-term cash flow." But when that bomb went off, everybody was caught. Uh uh they knew it was coming, but like it was a cliff. It wasn't a gradual reduction. Um and then what ended up happening from what I saw, too, is investors, everybody was jumping ship. Everybody just wanted their money back. Everybody just didn't understand that now we're locked in. We've been locked in. We've been illiquid. And now we've got to deal with the ramifications of

[36:27] what just happened. And then you get unfortunately investors that are now paying attention to the legal documents to a point where they say, "I've got to bring in more capital. I've got to deal with a potential recourse. Wait a minute. Hold on." So now we went in that law where everything was great. We were making money and now we're actually seeing the impacts on the investor's side and what they had to deal with and some lost money. Some lost everything and didn't realize the risk that they took on on some of these investments which again it's a lesson learned. It's

[37:03] a painful lesson, but that's why you have to go through those documents and understand to the to the T what the what the risks are.

[37:12] >> I want to try and sort of wrap this up here. So I'll throw out a thought as as maybe kind of a you know, saved round here. Seems to me that too often we think in terms of good and bad like low interest rates good, high interest rates bad. But of course if you're a retiree on a fixed income and you've got a bunch of you know, you know, very conservative investments high interest rates good

[37:47] you go put your money in a bunch of CDs that are now getting twice as much generating twice as much income as they as they did before. So I think [clears throat] we we need you know, value we all have our values. We all make value judgments, but when it comes to investing I don't think that's a useful perspective. What we need to be doing is is looking at each investment on its own merits, not on its value merits. When I mean values is in terms of good bad merits per se. You know, and so that way we, you know,

[38:23] it it's a, you know, it's a good investment at 2.3% in, you know, interest rate. But, but you know, that's that's ridiculous because 2.3% investment or 2.3% loan rate is is is not a realistic long-term strategy, right? So, we we need to step away from the value judgments and get into what really makes this investment work. What are What are the risks in it? Uh, and and and, you know, how do we mitigate those risks? So, So, gentlemen,

[38:58] you know, kind of final thoughts here before we wrap up the, uh, the episode.

[39:02] >> Yeah, John, if I could start, I would say that, um, yeah, whenever you're looking at an investment, you've got to look at what is reality right now, right? And and making sure you understand what reality is, how reality got to where it is, um, what changes happened, and ensuring that when you're looking at deals or looking at an investment, you're taking into like these two gentlemen said, the context of where we're at. You always want to take on what the real risk could be, and run sensitivity analysis, run break-even analysis, make sure you kind of understand the dichotomy of that

[39:39] economic, uh, situation and where you're at. And and now we have to become sharpshooters, you know? You have to really look at the markets you're in, you have to look at the asset classes. So, you know, the United States may be X, but Charlotte, North Carolina might be Y. And so, when you look at those two things, you want to make sure you take into consideration the actual micro level economics in each of those markets. So, I love to invest in markets that are market are recession resilient, right? I love to invest in markets that have good population growth. Companies are moving into those areas. So, that's what we focus on because

[40:15] those foundations are in place, and they were able to weather the storm and a lot of our investors who were patient, a lot of our investors who can come in now at a position where it's really attractive. We'll talk about this in episode three where there's opportunity now, right? Because everything is going to show that we went through a lot, we got hit with a bomb, but now there's opportunity. So, that's my two cents. Johnny C.

[40:41] >> Yeah, you know what? Yeah, how I was going to wrap it up was simply to say there's more coming in episode three, which is how do we move forward? What are some strategies? What did we learn? What do we continue to learn? What should we do? And then how do we move forward? So, stay tuned and tune back in on episode three to find out more.

[41:01] >> Well, and that's that's a good note on which to end. So, first of all, thank you very much for joining us today on our mini series Money in Motion. If you have questions, comments, criticisms, just look right below you into the show notes. There's links to social media there. And [snorts] if you have a friend you think might benefit from hearing what we just had to say, so send them a link. They can watch it on any of the major podcast platforms, YouTube, Spotify, and Apple Podcast. And tune in again next week at Wednesdays

[41:39] 10:00 a.m. at 10:00 a.m. Pacific time, 1:00 p.m. Eastern time for the next episode of Money in Motion. So, JC, John, thank you so much for for being with me today. Yeah, there you go. Got to got to salute, right? The plane captain is going to let me off the deck.

[42:00] >> [laughter]

[42:03] >> Oh my goodness.

[42:04] >> story that I will tell you sometime over a bourbon.

[42:07] >> [laughter]

[42:08] >> So, that just that just requires me to say to sign off and say Marie darling, you are my bell. Courage at all