FCP 131: Special COVID-19 Coronavirus Multi Family Situation Update – Featuring James Kandasamy

Jack: Hello, everyone. And welcome to another special episode actually of our “Forever Cash Life Real Estate” podcast with yours truly, Jack Bosch. Today, I am going to talk about the COVID-19, the coronavirus impact on multifamily investing. We’re gonna get started in just a second.

Man: Welcome to the “Forever Cash Life Real Estate Investing Podcast” with your hosts, Jack and Michelle Bosch. Together let’s uncover the secrets to building true wealth through real estate and living a purpose-driven life.

Jack: All right. So with that said, let’s get going. So my guest today is James Kandasamy. James, how are you doing today?

James: I’m doing very well, Jack. Thanks for having me on your podcast.

Jack: You’re very welcome. James, so you own and operate how many units right now?

James: Right now it’s almost 1700 units across 9 apartment complexes in San Antonio and Austin market.

Jack: So you’re in the San Antonio and Austin markets, not Dallas, but in the Texas market?

James: Texas market.

Jack: Two of the three hot markets over there, or two of the four. And you have owned those for several years right now and you also manage them, right? You have a property management company that manages them yourself?

James: Yes, absolutely. We have a vertically integrated company.

Jack: Wonderful. That’s perfect. So now your properties are typically A, B, C, D class, what are they typically?

James: Class B and C, I mean, we got started buying a lot of Cs and now we are more into the B space, B and C is what we focus on.

Jack: It makes total sense, that’s actually smart thing to do that. We were doing the same transition, we started in Cs and now we’re going to the Bs. And so now with that said, tell us what you see on the ground right now with the COVID-19 virus? How has it affected multi-families so far from just from a day to day operation?

James: Day to day operation, there’s a lot of things changed, right? Right now, I mean we are almost at April 1st, I mean day after tomorrow I’ll be April 1st, and the next, April 1st plus 10 days, we are gonna look at how are collections gonna be, right? Because so many cities and government has given messages that evictions on hold. But it is for people who are impacted on COVID-19, right? And we have to communicate a lot to our residents on what do we expect from them, right?

So we are not telling them not to pay rent, of course, some people think that they don’t have to pay rent but we’re telling them that rent is due, you have to pay, but if you lost any job, we can work with you on some kind of plans like payment plans, right? And we’re gonna waive all the late fees.

So few things that are doing as an industry in Texas right now and that are the two actions that Texas, Auburn Association recommended. One is a waive all late fees and the other one, payment plan now for residents who are impacted.

So there’s a lot of communication, it’s like my brainwashing the residents thinking that, “Hey, you still have to pay rent, right? And that’s what the message is. But if you’re impacted by COVID-19, we definitely sympathize with you and we really want to work with you and help you out.” So that’s what happening right now. It’s so busy communicating that, we will know soon on how effective is our communication in the next couple of days.

Jack: Similar in the properties we own, we do the same thing. We don’t self-manage them, but we have been working with the management companies that are communicating overall across the board, pretty much the same message. This is not a free for all, if you don’t pay and you have a job then you’re ultimately still gonna get evicted.

So you’re expected to pay and it’s good for you to pay too because you stay on track, you don’t have that thing against you later on. But if you have problems right now, come forward, communicate, tell us, we’re willing to work with you if you have problems. And I think that’s a really solid message.

James: Let me add a few more things. So the other thing that we have done is we also create a standardized Q&A for our staff because this is a very rapidly changing environment, not only on the rent. I know a lot of people are focusing on the rent, right? But what happened if one of the residents has tested positive? What is the response from our staff?

Because I mean, it’s a bit too late, right? Sometimes by the time tested positive and everybody in the complex get to know, people who want to leave your apartments or what, right? So what do you communicate to the resident? What you don’t communicate to the resident? And what if one of our staff is impacted with the virus, right? How do you all respond?

So there’s like 10 different Q&A that we’ve prepared to communicate to our staff so that everybody has a standard message. Because in property management, that’s the tricky part, right? Communication is tricky and with this kind of fluid environment as it becomes more critical how do you make sure that everybody gets the same communication? Everybody makes the same communication to the residents as well.

Jack: That’s 100%. So great. So this is going on and obviously we both belong to a mastermind of multifamily owners and then we had a call there and then the time of it, it’s like the consensus, everyone is like, “Hey, somebody has trouble, let’s help them.” But it’s not a free for all. So I’m glad to see that, but not everyone knows that out there, right? So like we discussed sometimes believe that we know all those things but outside of our circle, people don’t know other landlords are gonna be generated. But now what people are thinking is like, “Oh, no, this is all, I don’t have to pay because they’re rich anyway.” Right?

James: Well, I don’t know whether they think that way or not, I think they think that this is a nationwide crisis and people just do not know. I mean, there’s so many messages on the rent that it’s been coming, right? Even yesterday, I think during the White House briefing, I mean, I heard the President say, the landlord’s gonna take it easy, I said, what do you mean landlords gonna take it easy? That’s no easy right for us, right? I mean, we owe our lenders in all ways, right? I mean there are some forbearance and all that but there’s no free ride at all, right? We still have to pay.

Jack: As a matter of fact, let’s talk about this next. What happens if a whole bunch of people don’t pay and what happens to you or to us as the landlords then? So what are the rules right now? There is the forbearance rule, right?

James: Yes. There is a forbearance rule. I mean there is three or four things that any landlord can do, right? One is quickly go and put in forbearance, which means basically you’re delaying the mortgage payment for next 3 months to up to 12 months. And for some lenders can go up to 15 months, right? But the thing is the guideline that FHFA I think Financing Housing Agency has given is you cannot evict anybody during this time which means they are giving us forbearance but at the same time we protect the residents as well, right? So that’s one way to do it, right?

The danger with that part is if the residents not paying after two, three months, they may owe a lot of money at the after two, three months and now they are gonna be thinking about skipping, right? Because it’s a bit hard for them to get out from the situation, right? And I know we have a lease and all that, but in class B and C lot, not many people look at lease as right…

Jack: People in class B and C are like month to month. I mean they’re not month to month, they have annual lease, but they live month to month. They don’t get paid, they don’t have any more money so that’s why the law of the industry is concerned because we’re providing good housing of the tenants if they can’t pay. But as you said, if now they don’t pay for three months, most don’t have the money to ever catch up on that, so they’re gonna probably skip which ultimately means that we’ll never get that rent back and now we have a problem for fulfilling our recommendations to our obligations to the lender.

And that’s the other part of the forbearance thing, people like, “Oh, well you don’t have to pay.” Well, yes we do. We still have to pay; we just have to pay it afterwards. And if we can’t pay after three months, then in the fourth month, if we can’t pay, then it goes to special services which actually means, in essence, you get put on probation and things like that and potentially the deal can go down, the property can go south and a lot of investors lose millions of dollars.

So this is really an important thing to remember if you’re a tenant that you’re not dealing with just the rich guys that are doing stuff, you’re dealing with also with a lot of people’s money, with a lot of people’s investments and with the potential that that goes also down the drain.

Now obviously there’s ways to protect them. So we have substantial reserves on the sideline if we don’t have a tenant in for in our property for the next year, we can pay the price of the mortgage for the next year. So we have lots of reserves in the background for that won’t happen. You probably have lots of reserves in the background?

James: Yes. We have reserve for all properties as well, but we want to make sure we use for the right reason, right? So that’s another way, right? Just put in your own reserve. The other ways you can do is you can also do manage it; you can fund the deal as well. I mean you can have personal money going into the deal and the third one is do a capital call to the investors as well, right? So these are the few options that we can work on while we go through this bumpy road of if the residents are not paying, right? So but hopefully that all doesn’t happen. Most residents, hopefully, they’re gonna pay.

Jack: I personally think it’s not going to be as bad as everyone says because again, 80%, 90% of people still have jobs and they are going to be able to continue to work. Plus people have two jobs, like the husband and wife or so they have their work live together and have two jobs, one job continues to come in, the other one now is getting a $1,200 check, right, in the next three or four weeks. Which, plus a child, another $500, which in many cases is more than people make per month.

James: Correct. All that counts right over there. I don’t think so it’ll be too bad too, I mean, especially for April, right? I think it’s more tricky for me because if someone lost a job they may not have got paid for the whole March, not to pay the rent for April, right? They may have the money for April but May could be more tricky. But May is when all this money’s coming from the government, I think that’s gonna be a lot more stimulus package we’ve been given by the government just to make sure that people don’t lose their houses, right? And at the same time, they want to make sure all the small businesses continue to be running because now everybody need to be paid on the payroll and all that.

Jack: Now one thing in the stimulus package that I think don’t ever and not everyone understands when they hear it says like, “Oh, small businesses is getting so many billions and the people are getting so many billions, oh, business-government is only supporting the businesses.” What people don’t understand though is that the money that people get is basically money that they get, right? They don’t necessarily have to pay that back down the road, right? The money that we’re getting if a small business gets money, they get it as a loan, so they have zero revenue right now, it’s a small business, not even multifamily right now.

Somebody has a pizza store down the road, not even pizza store, clothing boutique down the road with the $3,000 a month rent and they have nobody coming into the store anymore and they’re shutting down and now they are losing ton of money of inventory, can’t pay the bills and so on. If they, in order for them to be able to survive, they might take on a $50,000 or $100,000 extra loan but that’s a loan that they’ll have to pay back to the government, to the small business administration itself, and in addition to all the loans they have to take on to even start the business in the first place. So it really is something that gets people deeper into hole it allows them to survive but it’s gonna burden them for years and years down the road. How do you see that?

James: I mean, from what I know is there’s two loans that’s being rolled out by SBA, one is called the disaster recovery loan, right? Which is a disaster loan, which is basically what you’re talking about. It’s a loan at what 3.75% where you can use it to recover but it’s still a loan, right?

But I think the CARES Act which was approved a few days back, I believe they have forgivable component to the loan, right? So if a restaurant owner, they can take up to 2.5 of the payroll amount that they have. And of course the restaurant owner, his restaurant is closed, right? So what is he gonna do payroll, right?

But I think business owners need to be creative right? You’re gonna get paid with this money somehow because there’s eight weeks forgivable amount that the government is giving if you keep people on payroll, right?

So they have to figure out something else, maybe some kind of training for their employees, right? Something to do with them, maybe do some kind of audits, right? So that’s what we are doing right now. We’re doing a lot of lease file audits and we are making sure people are employed and making sure people still get their pay and everybody is employed. So the second part of the SBA loan, which is called the payroll protection program that has an eight weeks component, they’re gonna give it as a grant, which is a freebie for the business owners if they keep everybody employed.

Jack: Right. Wonderful. So, in essence, what are we talking about? So if you summarize this so far. The people are not gonna be evicted, so that’s good for the people. We don’t think that many people are gonna be stopping the pay. As a matter of fact, we ask our tenants and not a single one came forward and said they have issues, and another property only one person came forward and said they’re gonna go have issues and then the next day they’ve paid the advance the rent for April already. So somehow they either got an issuance or got a severance pay or something I don’t know or they or they didn’t have any issues ultimately and things got resolved.

And there’s ways for us as operators to get this forbearance program and also be able to buffer that even though obviously afterwards we have to pay a higher amount then but there’s a ways for everyone to get through this crisis. This is overall good, whether at least, inflation down the road, that’s a different question, but that’s overall good.

For the business sector too, small business sector, there’s ways to get loans for forgivable pieces and so on. So there’s a lot of things that are being done, which is good, which is positive news at least in the moment right now in terms of surviving for those businesses, surviving, getting through their crisis and so on. So now let’s move over to the financing. What are you seeing?

Actually, before we move that, how long do you see this going on? I don’t know I mean, obviously nobody has a crystal ball, but how long do you expect this issue to last right now?

James: So in my opinion, I mean everybody talks about this or that, there is no crystal ball in front of them, but in my opinion, there’s gonna be two phases to this recovery. One is the V-shape, right? As people are talking about is the V shape or U shape or Nike swoosh, right? So I think for class B and C people who work in these hotels, being a server in restaurant and people who have just lost their job on hourly, they’re gonna come back very quick. So their recovery would be a more V-shaped from what I see.

But people who are class A who are highly paid or people who are professionals who are working in large corporation which does businesses across worldwide, that’s gonna be a slow recovery, like a Nike swoosh recovery for them because this has impacted worldwide, right? It has impacted worldwide. So definitely there’s a lot of demand gonna slow down, right? And they already lost a lot of money. And big companies a bit harder for them to recover very quickly, right?

I mean, as I say, unless the social distancing a created a what you call a capacity issue in the restaurant, right? Because you know there’s less people who can be [inaudible 00:16:06], that could be a case too. But I think it’s a V-shape recovery within two, three months for the class B and C renters but class A renters or people who are working in large corporation, the entire economy is gonna take some time for the recovery, that could be at the end of the year, so that’s the Nike swoosh recovery.

Jack: I mean, it makes sense. I mean, if you look at it manufacturing that car manufacturing right now the trade between China and the U.S. is down by like 60%, 70% or so that’s just the number of boats going back and forth. Airplane traffic is down. Now, of course, that picks up again.

So the airplane and the urgent stuff, you want a new iPhone from Apple it’s gonna be produced shipped and two days later or a day and half later you have it in your hand, well that’s not happening right now. But that’ll pick up quickly in the air, but on the boats on the ground, the boat take several weeks to come over there and in order to backlog all in just the stuff that’s being produced that’s sitting there.

Like, Michelle and I we ordered some face masks, they’re still sitting on the loading dock in China, we can track it, it’s been sitting there for three weeks. It doesn’t, of course, it’s like it’s not the highest priority, right?

Jack: Not the highest priority.

Jack: A ventilator produced in China that this needed in an American hospital is much higher priority than a box of paper face masks that might prevent me from getting sick or so on.

James: But I do think once recoveries happen, I think our economy will be much, much more robust and the growth will be a lot more higher compared to what it has been in the past five to six years, right? And the reason is because the government have realized the dependency on China has become so much. Right now they’re gonna start to produce a lot of manufacturing in house or maybe they go somewhere else I’m not sure, I think probably a lot of pharmaceutical medical things will be in house but they will try to go less dependent on China which has always been the case. But now we have a solid case, right?

Jack: You almost have to, if you’re like a manufacturing company this like a car manufacturing company, is this on-demand just in time delivery has gotten really popular over the last, I don’t know, 40 years, that you only carry like one or two days’ worth of inventory because it’s constantly being shipped from China.

Well, you can’t rely on that anymore, you either have to build up your warehouse as much more or you gonna have a local provider that can jump in and produce at least a portion of that so you can keep going.

Like the reason why, in Europe at least, I don’t know in the U.S. but in Europe why Mercedes Benz is closed for the last month already is not just because of the coronavirus it’s because they’re missing the pieces to actually produce the car. They have a certain piece, like the front bumper that comes from China and no front bumpers arrive anymore, you can’t put any more cars out without a front bumper. So once they’re out of bumpers, they’re out of production, it’s missing pieces. And if out of 10,000, I don’t know how many pieces are on a Mercedes Benz, but out of 10,000 pieces, there’s even just 50 missing and you don’t have a local provider to provide them, you have to stop production, you can’t just keep going.

James: Absolutely. One key piece that the government needs to resolve, I mean, they have been helping the people, they’re helping the business owners and all that. But the mortgage industry, the debt industries is very tricky industry, there’s so many. I mean we’re only buying from like Fannie or Freddie or any lender, right? But they do resell some of their loans to some other people and that market is gone right now. So right now…

Jack: Let’s jump into lending. So what’s happening right now?

James: Maybe I jumped too quickly. I guess so.

Jack: Go ahead, it’s the perfect time.

James: So lending has fundamentally slowed down, right? I mean like Fannie Mae has put in a lot of stringent requirements. Like they want a 12 months reserve or 18 months reserve for a loan above 6 million. Below 6 million 18 months reserve, above 6 million is 12 months off principal interest and tax insurance, and is a lot of money, which basically they’re saying that we are not really wanting to take any more risk right now, right? Which kills a lot of deals out there.

I mean the sellers have not come to their senses that the market has changed. The buyers is not buying anymore, right? Whoever in the deal they’re trying to get out, right? Either they’ve gotten out, or they’re getting out if they can, right?

So the sellers have not really dropped down the prices because this happened so sudden and the sellers think that, “Okay, maybe we can write this down,” and all that. But if this continues forever, I mean not forever, if it continues for another one quarter a lot of sellers will try to sell.

And on the lending side, a lot of lenders on the [inaudible 00:20:48] side is gone, they are usually middlemen, right? They usually resell their loan to third party to securitize them. But none of that is existing right now, there’s no more market or available over there. So basically the [inaudible 00:21:03] lenders are gone.

Jack: That’s why I know my land business, by the way, just have to throw that in because in the land business we don’t deal with tenants, we don’t deal with lenders, we don’t really think. But we are talking about multifamily right now.

So just as to say to summarize, as you said, Freddie and Fannie have put up such high restrictions that it kills a lot of deals right now. The bridge lenders have pretty much gone away right now. I was in the process right now of just even on some single-family homes that we have free and clear I wanted to refinance then and from one day to the other, they basically say we stop lending right now.

So I don’t expect that to last forever, this is more like a knee jerk reaction right now, because nobody knows what’s gonna happen next. Everyone is just like, okay, let’s stop and wait. So if in three, four weeks we see that or five, six weeks, whenever it is that we see that this entire situation all gets easier I expect this all to restart. But the bridge lenders coming back in and so on, but don’t you think everyone will continue for a longer time to have much more stringent requirements?

James: I think so, yeah. Because, you know, as I said, people a lot of lenders out there really got scared, right? I mean, keep in mind in February everybody was just lending normal, everybody was happy, there’s so much liquidity in the market, there’s so many lenders out there, but now a lot of lenders are gone, right? So they really got scared that they didn’t expect this to happen.

So they’re gonna be very, very scared for the next, at least one quarter, I would say, to lend any money. So either the spread is gonna be very high, the interest [inaudible 00:22:43] is gonna take some time to come up, because for the past three recessions, once it goes down, it’s gonna stay down for a very long time, at least two, three quarters before it starts picking up. But the spread is gonna be high by the lenders, right? So I think a lot of lenders…

Jack: In other words, for beginning investors, so what you’re saying is interest rates are not going down, they’re actually going up because there’s a perceived risk and the uncertainty of the economy right now.

James: Perceived risk and also there is no competition, right? So, Fannie and Freddie, there’s no one else out there. You want it, take my loan otherwise you’re not gonna do any deals, right? So there’s no competition. So [inaudible 00:23:20] has gone up pretty significantly, right? So that could cost a lot of cap rate to expand because now to make the same return…

Jack: Okay. So now let’s talk about the opportunity that comes from that. I mean we have seen markets where the cap rates, and again, for anyone that doesn’t know what the cap rate is, it’s basically based on the sale price, the return property throws off. So therefore the higher the sales price, the lower the return. So if a property makes let’s say $1 million a year in net operating income and it sells for $10 million, that’s a 10 cap. If it sells for $20 million, the million only represents 5% so it’s only a five cap.

So we have seen properties trade in the major markets, like Dallas, Fort Worth, Phoenix, Arizona, LA in the 3% and 4% cap rates. And brokers literally laughed in our faces when we told them we want to go buy a property in Phoenix, Arizona. They’re like “Yeah whatever,” basically. So what I’m already noticing is the brokers are calling me, the brokers are going through the books because all institutional buyers are gone. And how long do you think they will be gone? What do you see the opportunity and how long do you think theirs will be gone?

James: I think there’s no opportunity right now yet, for the next one month even though brokers are calling all of us. I had a few brokers calling me as well, but I think the prices have not come down because the sellers are, as I say, this happened so quickly, a lot of sellers are still in their old mindset, right? If they have thought their deal is gonna be $100,000 a door, then I’m gonna say buy today for $80,000 a door unless they have got a really, really big problem, right? So, but there’s not many sellers out there with that kind of problem, right?

So a lot of sellers have not brought down their price expectation. They may go a bit less, maybe 10% less, but not a lot of less, right?

And also there’s no guidance on where’s the cap rate right now for a certain market because no one knows. And there’s not many transactions happening, right? Even though you put a deal under contract today, you do not know the T plus three, right? The next three months, because we need that T plus three to make sure our loan proceeds are maintained, right. And you do not know what’s gonna happen, we don’t know how’s April collection gonna be, you don’t know what’s May collection gonna be.

Once we know April and May collection is and if nothing really crashes, if everybody’s still getting, plus, minus 10%, if people know that, okay, the 10% less than what you used to be, that’s where the baseline start being establishing. Right now, it’s very, very difficult to put a deal under contract even though you, and I think that is a great deal, you might be completely wrong, right? So no one knows because the spread is not determined, the loan procedure is not determined, so there’s a lot of caveats at this point.

So I think the opportunities has not started to pop up yet until we get some information about the collections for April and May. Once we get that then would be a good time to really establish a baseline. Having said that, there could be a deal which is like going 50% off the price, which was three one month ago, that’d be an awesome deal to do right now. But I don’t think so there’s many sellers out there who is bringing down their price that low.

Jack: Not yet, but here, what happens if they have a property particularly the A-class as you mentioned in A and A minus and so on, what happens if there now they have several people that also got laid off because big companies don’t just lay off the factory workers, they lay off the white-collar workers too. And they take a longer time to buy, the movement into different states slows down just a little bit, like Dallas doesn’t get the 100,000 people every year more but perhaps only 20,000 more and so on and growth continues but just not as much.

And now all of a sudden these properties, they go through that they have trouble, they go through the forbearance, month four comes, they can’t really continue paying yet because the loss in rents that nothing do has not coronavirus immediately impact, but more like unemployment or general unemployment that doesn’t pop right back up because this is not just a whole bunch of waiters that go back to work when the bars open up again. And now those properties could go into distress at that point.

James: Could be at that point of time, yes, absolutely. But there’s also, I mean, we are talking about traditional buy and sell, right? I mean, you buy a deal, you put under contract to a broker and all that, right? But I do think there’s a lot of opportunities can be capitalized much better if you go nontraditional buying and selling.

For example, you can look for seller financing deal, right? Deals where the sellers are willing to sell a finance on multifamily, which just never existed before this, right? But that’s an opportunity right now because you’re not taking a bank loan right now, at the same time you have the seller giving you the…and as a buyer is much more lower risk, right?

A second operative that you can do is something called a master lease agreement, right? So you can have an agreement with the seller where you are able to tell them that, “Hey, you know, we have this lease agreement, I’m gonna pay you this fixed amount, but I’m gonna run the operation.” Right? So these are the nontraditional buying and selling which not many people does in the upmarket but in a down market becomes very, very powerful.

Jack: Okay, very cool. I like that. That’s exactly, that’s where I wanted to go towards the last part of our call right now and where are the opportunities. The opportunities are not always in only in like foreclosures and bank-owned property, things like that, there’s opportunities again in seller financing [inaudible 00:29:08] find a buyer pool. If they give you really good terms.

Actually Liberty just saw about a deal where this was a creative financing deal where a note expert helped one of our friends of mine to get a deal done. And they’ve structured it such that they got a 2% loan for the first 80 months, a 4% loan for the next 80 months and it’s 6% loan afterwards. But if the seller doesn’t want to go that long then there is a buyout clause at that point of time with some other provisions in it.

And it was brilliantly done such that the seller was very happy with it but the buyer was very happy too because if you can get it for the next 80 months, which is five and a half years or whatever that is, six and a half years, you can get a little more than six and a half years, you can get a 2% loan. I mean, that beats about everything out there.

And for that though, the seller got a little bit of a higher price than he would otherwise get and it just still made sense. So creative finance is going to be very interesting right now. Creative finance has a great opportunity.

James: Let me add to that. I mean you’re absolutely right. I mean, you guys do a lot of creative financing in land business, I presume, and in in wholesaling, not in wholesaling…

Jack: We do a lot of seller financing.

James: Yes, seller financing and in commercial…

Jack: Whatever you can agree with the buyer.

James: Correct. So that’s why I say that kind of thing doesn’t exist in the normal market in multifamily, right? Because normal market all sellers know that they’re gonna get the deal done through brokers, right? But when downturn happens, a lot of sellers are in distress and a lot of brokers may not be able to find buyers who are willing to work this way. And sometimes brokers want transaction-based commission, right? But so if you can work out like what you described just now, if that’s a certain class in terms of financing and a certain operation that the buyer can take over or can promise without going through this larger lending program, then you can make deals happen, right?

The third thing that I want to mention. The third thing that anybody can buy a deal right now, I mean not right now, the next couple of months which can be an awesome deal is look for banks which are selling debt, right? There could be some bank which has over-leveraged and maybe they have made a mistake of over leveraging and they want to get rid of this loan from the books. So you can buy debt rather than buying the asset, but if you structure the debt so that you can foreclose and take over and as an operator, you can get really good deals as well.

Jack: Or even if you get big enough discounts and it’s a performing asset you just continue that way.

James: Absolutely. You can do that as well.

Jack: All right. Oh the hand’s coming in on the side, you have like some light going…oh no, that, that’s great. Good. So I’m excited to hear that. So this is great, great stuff. Thank you, James, for being on the line with me. So it’s not all negative [inaudible 00:32:21]. So we saw like there is government interactions, although I’m critical of them because ultimately they potentially blow the balance sheet of the government further up, they create more liquidity in the market that once the U.S. economy comes back, there’s all this extra liquidity now in the market that could potentially lead to a weaker position years down the road and eventually perhaps in our lifetimes to actually destruction of the United States dollar, but that seems to be still further away.

What is important is right now that the tenants can stay where they are, the landlords have a way to survive, the purchasing activity has a bit stopped right now because of the lenders but there’s creative ways, if guys like you creative ideas, creative ways to make deals happen. If somebody is really truly ready to retire and ready to let their properties go and let the properties sell and have seller financing options and master lease agreements and those things, fantastic new options. Not new options, have been around forever, but they’re forgotten but they’re being forgotten during the good times and then they’re coming back in during the interesting, turbulent times.

James: And one more thing I want to add is, I mean, as you said, forgotten and also not many gurus teach that, right? Because most of the gurus started during the upturn, right? And they just know the traditional buying from broker methodology. So it creates an alternative where people who knows that this is a different options of buying and selling.

Jack: Exactly, right. And good thing to mention that, yeah. We don’t teach any multifamily, we teach land flipping because land flipping works, it works in this market, worked in 2008, 9, 10 and 11 worked on the market down and works on the way up and we are having a blast right now, there’s lots of deals. We are hiring a new land salesperson, we’re hiring additional guys in our office, virtual assistants, things like that. So we are actually going full out because right now is the perfect time for our business to keep buying properties, selling properties.

But on the multifamily side, obviously, it’s a bit different, there’s opportunities comings, there’s some stressful times right now, but there’s opportunities coming for those who position themselves the right way. So we are positioning ourselves right there. How are you positioning yourself for that? Because we’re positioning by putting cash on the sidelines, by getting lines of credit. I just talked to another guy yesterday, it’s a hard money loan but we have our portfolio of free and clear properties that we haven’t tapped into, we can tap into now in a matter of like 15 days. We can get a nice chunk of money out of that. So we are positioning ourselves for the upcoming opportunities in the multifamily space to really be able to capitalize on that. But we’re patiently waiting for them to come up. And I agree with you that they won’t come up in the next few months yet.

James: Absolutely. Actually, I mean I’m doing the same thing as well, getting line of credit, just be prepared and putting cash aside, stopping all CapEx and making sure we don’t have any renting because it, just going back to notice to vacate, trying to get them to stay and all seems to be working. I mean people are still paying rent right now and hopefully they do in the next 10 days. But I think…

Jack: On both of our properties, we had our highest collection with rents in March right now. On all the properties we have like we have the lowest delinquency so far of all the times that we’ve kept our properties. It seems like March started really good for people then it changed, so let’s see how [inaudible 00:35:47]

James: It could be just the unemployment being paid out, right? I mean that’s what the President is saying, people are guaranteed like almost 100% of the pay for the next four months, so why do people don’t pay rent, right? On top of the $1200 that they’re getting from the government.

Jack: So it looks great, it looks exciting. We told our investors also that we are raising the payouts right now, but we told them all if things look really good, we’re just gonna pay out six weeks later than we usually do or eight weeks later than we usually do. So it’s not that we don’t pay out, it’s just there’s not enough information in the market to know whether or not it’s a good idea to payout. So we’re just delaying our payouts because we got the money from the deal, we got the money for Q1 and most of our properties and so we’re just delaying that out then and seeing how it turns out and we have gotten a lot of understanding from our group too.

James: Got it. Got it. That’s awesome.

Jack: Wonderful. Thank you, James. That was wonderful. Great, thanks for having such great ideas and giving us a good update about what’s going on in the multifamily market. Obviously with 1700 units that you own and manage, you’re breathing, sleeping and reading, and eating and inhaling and everything this business all day long. So if somebody wants to get in touch with you or wants to hear more about what you do, how can they hold of you?

James: They can get hold of me through Facebook, LinkedIn, I’ve a Facebook group, Multifamily Investors Group. And also in LinkedIn James Kandasamy, look for me and my website is achieveinvestmentgroup.com, A-C-H-I-E-V-E, like achieving a goal, achieveinvestmentgroup.com email is james@achieveinvestmentgroup.com. I have my own podcast, “Achieve Wealth Through Value Add Real Estate Investing Podcast.” And also, I have my own book in Amazon is called “Passive Investing in Commercial Real Estate” which is we have sold thousands of it.

Jack: All right. Wonderful. Awesome. Well, that’s it. Thank you very much. Thanks for coming on the show with us. And with that, that completes our show for today. It’s a special edition, The COVID-19 Multifamily Impact Show. Give us a five-star review, share it with others, post it in different places, watch it on YouTube, give us a thumbs up. Again, share it. And thank you very much and thanks again, James.

James: All right. Thank you.

Jack: Thanks. Bye-bye.

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