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Craig Fuhr (00:12)
Hey, welcome back everybody to this post Thanksgiving episode Jack we're in the holiday season officially it's real investor radio. I'm Craig fewer with Jack BeVier Good to see you my friend.
Jack BeVier (00:24)
Yes sir, yes sir, you can tell the Christmas decorations are up everywhere now. It is official. It is Christmas season.
Craig Fuhr (00:30)
We did a sort of a non-turkey Thanksgiving at my house this year, Jack. It was the first time for me. I'm not a huge fan of turkey, usually only eat it about once a year, same with my entire family. So they enticed me into a Italian, Italian Thanksgiving, Jack. I made stuffed shells. No, I'm sorry, baked ziti with fresh meatballs. I was gonna bring some in for you, but you were in Scottsdale over the last few days and...
Well, maybe I'll bring something for you tomorrow. But it was pretty good. Don't know if I'll do it again. I still think that that's that one day a year where you just go with tradition, stick with the turkey, the stuffing. I wound up making all the sides anyway. mashed potatoes and baked ziti don't really go well together, Jack.
Jack BeVier (01:00)
Dude, that sounds amazing. That sounds amazing.
Yeah. Yeah. I got you. I can see the Italian feast being, like if you just, just dove straight into the full Italian feast, that would be amazing. My, my mom was, my mom was always kind of like a, non-traditional Thanksgiving. would do like, we would do salmon. We would do like, we'd do a lot of like salmon, seafood, stuff like that. Like as opposed to, Turkey, like if you're like, is anyone in the mood for that? Not really. Like, you know, she'd get this like massive piece of, King salmon and
Craig Fuhr (01:23)
It's, it was the main attraction. mean, what the hell? But I.
Yeah.
Jack BeVier (01:45)
We'd have that as the main attraction. Enjoyed it. I liked it.
Craig Fuhr (01:48)
Yeah, drop in the comments on what your Thanksgiving was like this year. I think we're going back to straight up Pilgrim next year, Jack. We're going to go with the turkey next year. So, but I digress. Like thank everybody for joining us again. Man, Jack, I just wanted to point out quickly, you know, we've had some amazing guests on over this past year, and it's been such an honor as I was thinking back and sort of looking at the episodes over the past year.
Jack BeVier (01:56)
Fair enough, fair enough.
Mm-hmm.
Craig Fuhr (02:17)
I would just encourage anybody who hasn't taken a dive into some of the guests and episodes that we've had, over 2024 Jack. mean, obviously people that you've known a long time in the industry, some real heavy hitters. And frankly, I, what I find most fascinating about a lot of the guys that we've spoken to is they all started off basically the same way, Jack, you know, started off with that first house and, you know, Danny Katan comes to mind, you know, a guy who,
comes from nothing, gets a great education, walks 6,000 houses to buy roughly 450, sells the portfolio, then gets into large multifamily. And it's just such a fascinating trajectory. But I found the common thread through a lot of those same people, Jack.
Jack BeVier (03:01)
Yeah, absolutely. the thing that I really like fell in love with about the, the single family space as an asset class was that it's a skillset that you can take really anywhere in the country, right? Like, you know, if you learn how to do it in one city, you can pick up and move to another city and apply those same skills, there. And it's like, the barrier to entry is low enough that you didn't have to be rich to start, right? Like you can't like,
Craig Fuhr (03:14)
Yeah.
Jack BeVier (03:28)
get into investing in office buildings or get into investing in strip centers, like, you know, as a 22 year old, like middle-class kid, right. But you can find somebody, you know, to partner with or to lend you money on $150,000 house. And so if you can, if you learn how to operate houses, well, then you know, money and in these days, the money is kind of the easy part, so to speak.
And that was like, yeah, I think that was just a thread throughout throughout everyone we've talked to is they figured out how to be great operators. And then they just applied it, applied it, then tried to, learn, had learned the challenges of scaling along the way. But, but that's been the set of challenges, but the, the core, like, you know, the core skillset of, of finding and renovating and adding value to a single family houses is the, know, that's like the fundamentals, so to speak.
Craig Fuhr (04:20)
Yeah, and I'd also encourage folks, we just posted episode 68 today with Brad Chandler, co founder of Express Homebuyers down in Northern Virginia. I've known Brad, you've known Brad for a long time, Jack. And one of the things that I found fascinating about that conversation is something that I think a lot of entrepreneurs struggle with, which is sort of like the mind game of it all. And the why and so you know, Brad obviously built Express from nothing, literally nothing.
and made it into one of the biggest wholesalers in the in region. And really for the longest time struggle with why the heck am I doing it? What am I what am I spending, you know, 20 hours a day for and really finding the happiness in sort of the flow of it all rather than the end goal of it all, you know, we all think that we're going to make that first million and all the troubles fade away. And, you know, you've reached that you've reached that thing that you've been
thinking was going to give you happiness, but never did. And I think Brad's story and what he's into these days is, and helping others sort of find that, happiness in life, is a fascinating, listen. So, I would encourage everybody to go check out that episode with Brad Chandler, both episodes, frankly, we did two with Brad. So Jack, you just got back from Scottsdale, I, the I am an single family conference. I was lucky enough to go last year on that trip.
met some really incredible investors who all appeared, you know, in December of 2023 to be moving full steam ahead, no, with no regard for the economy and what was going on whatsoever. You know, we were talking to guys that were, we just bought 3000 lots, we just bought 1500 lots, we're doing, you know, 100 single family homes here and there. So you just got back, I think late last night.
What was your takeaway from IMN? Maybe briefly tell people what IMN is again, the single family conference, and then tell us what the takeaways were.
Jack BeVier (06:12)
Yeah. I am. N is a conference company. put on, they put on conferences, business conferences for, lots of different, business related, conferences specifically. They've got a niche in real estate and they were the conference that kind of the, or the first big conference company that picked up on the single family asset class forming. And so they have a, they put on a lot of conferences that are around.
the single-family asset class may be expanded now they do it dsc our conference they do it short-term rental conference and and you know and it doesn't others as well
Craig Fuhr (06:44)
How many years have you and Fred and Dominion been attending?
Jack BeVier (06:47)
whatever the first one was for the, for the single family, might've been 2012 or 13 was 2012 or 13. One of those. yeah, a bunch of years it was what, know, man, the, the, the, the conferences have changed significantly over the years as the industry has changed and evolved and matured. back in the day, it was a bunch of wall street firms. was, was Blackstone and Cerberus and, colony, you know,
Craig Fuhr (06:55)
so many years.
Jack BeVier (07:13)
And the early, you know, what became the reets that, know, large funds that became the reets, like all getting together. And it was just a massive land grab basically was the nature of the conference. and then the, you know, fast forward five years, the debt markets started to mature a little bit. so, know, lending companies started to be like the main sponsors and the topic of conversation, as the land grab phase was kind of over and people like, all right, how do we operate this, these things? And then,
most recently and I would say most past like three or four years, the conferences have become more dominated by local like operators, local and regional operators. like invitation homes is no longer like, you know, maybe a guy will show up a couple of guys will show up, but now it's like mostly like local and regional guys who are there and the vendor room has changed, you know, as well. So now it's like all the hard money lender or all the
Craig Fuhr (07:54)
The 800 pound gorilla. Sure, sure.
Jack BeVier (08:04)
hard money lenders, but all the private lenders and a lot of vendors around operations like property management, maintenance, software, data companies, stuff that, yeah, exactly. So stuff that like local guys can use. And there's been much less institutional emphasis because institutions aren't buying as much right now on a relative basis. So.
Craig Fuhr (08:13)
property inspection.
They do a series of keynotes and roundtables and panels as well. So, and I'm sure you did you were you a speaker on any of those this year?
Jack BeVier (08:33)
Yeah, Yeah, Fred was a speaker on a financing panel. I was a speaker on a DSCR specific panel. They went well. It was good. I would say this year the conference was a little. Yet attendance was down from they do it. This main one it's called SFR East and West. They do one in Miami in May and one in December in Scottsdale each year and I would say attendance was down from. From Miami.
Craig Fuhr (08:42)
What was the attendance like?
Jack BeVier (08:59)
back in May, more vendors, fewer operators. mean, I was putting my own narrative on it, right? Like, I don't know why I don't, you know, I don't really know why, right? But like, my conjecture was that it's harder. It's been hard. It's been a hard year for an operate for operators. And, you know, maybe they just didn't splurge to take the trip in December. You know, they're more focused on just operating their real estate and
they just don't have the extra cashflow to go look for like growing the business right now. but, you could tell that it was more lightly attended. The vendors are all still there and they're all like, you know, eagerly like doing business development, but you know, we, we have, had a booth there and I'd say half the people that came up and talked to us were, this is the feedback I got from our team was that half the people that came up were
were operators, like potential customers on the lending side, and the other half were vendors. Pitching.
Craig Fuhr (09:53)
Vendors coming up looking for our sweet swag.
Jack BeVier (09:56)
Exactly. Exactly. Right. They're like, dude, that logo is amazing. so, so, you know, just, just, you know, you know, being like, Hey, we're an appraisal management company or like we're a software, you know, what, software are you using to, to load origination software, whatever. Right. so it was, a little weaker from in that regard. the, and the,
Craig Fuhr (10:00)
I gotta have that sweatshirt, baby.
Mm-hmm.
Jack BeVier (10:23)
But it was still, I would say it was still like a lot of, a fair amount of familiar faces. It really.
Craig Fuhr (10:29)
It's not the kind of conference where you'll generally find a lot of newbies and sort of, you know, tiny mom and pops. It's not an inexpensive conference to go to, And so what was the, so what did you think of the general quality of the operators that were there? Similar than what we've seen in the past or no?
Jack BeVier (10:41)
Great.
I would say that the operators that were there, there were fewer operators and the ones that were there are the bigger guys. Folks who were looking for portfolio financing were probably more prevalent, like build to rent as a theme, funds that are... Because buying houses is hard right now, right? Just finding inventory is really difficult. So there's not like...
tons of groups that are like, yeah, I got houses. Like, you know, I need all these other products, right? Cause I've got, you know, cause I got plenty of inventory. So I think that's still like, that's still the hard part, right? Is being able to find enough, enough houses to, to, to make it a, to make it a business. and so, yeah, that was, that was a little bit different. so I'm, I'm really curious to see what happens in may.
Craig Fuhr (11:26)
Yeah.
You always say that your best conversations usually happen around the bar, having a few drinks. What were some of your bigger takeaways there with the folks you were speaking with?
Jack BeVier (11:44)
Yeah. you know, a little bit of general depression, right? Is, has been a theme. I feel like that, you know, so it wasn't like shocking, to me, that that was kind of the mood. You know, people were like, yeah, things are fine, but you know, kind of everything's hard. and there's the interest rate environment. People got excited. everyone was like, yeah, 60 days ago, there were a lot of folks that 60 days ago, they were like, this is it. Let's go. And then.
Craig Fuhr (11:47)
Yeah.
It's the new norm.
Jack BeVier (12:08)
Yeah, exactly. This is, and they started like aggregating loans or started putting, you know, putting contracts down on land because they were like, Hey, you know, the, the, the rate site, you know, they were convinced that the rate, cycle was over and we were going to go back down, to, know, rates that are a hundred and 200 basis points lower than they are now. And then the market just turned around and did a U-turn on them. And so, you know, those folks feel like they've got their pants down around their ankles right now. there was some of that.
in terms of the mood and the folks that had waited to see were like, told you like not coast. Isn't really quite clear yet. and I would say probably the topic that came up most often on panels was just, just opining on the Trump factor. Like what is a Trump presidency going to do to interest rates and the economy and like, should we plan? Like, is he good for real estate? Is he bad for real estate?
Craig Fuhr (12:51)
Yep.
Jack BeVier (12:59)
or like different sectors or how should we think about what a Trump presidency is going to do from a 2025, 2026 planning perspective?
Craig Fuhr (13:08)
Well, I know you spend a lot of your time talking to really smart guys. I'm sure you heard both sides of the coin. You know, it's going to be horrible. It's going to be fantastic. You know, what would you, what's the takeaway there from, from the smarter guys who you were chatting with?
Jack BeVier (13:24)
Yeah, so like the bull case is the bull case for Trump is that he's going to be great for the economy and that there's going to be some fiscal austerity and as a result, inflation is going to come down and the deregulation, you know, his deregulatory pressure is going to be good for real estate and, you know, business broadly and specifically real estate. And so he's going to be the best of both worlds.
And the inflation goes down and the economy takes off because we take the shackles off everybody's ankles. the bear case is that the tariffs, his tariffs are going to continue to drive up costs, which is going to be hard from a replacement cost perspective. So it's going to drive up the cost of housing and therefore the affordability challenge is going to be, is going to, you know, purveyed going to remain and.
Craig Fuhr (13:55)
Sure.
Jack BeVier (14:15)
his and he's not going to be able to have enough of an impact or not going to be willing to make enough of an impact on the budget. And the tariff effect is going to keep inflation high. And so interest rates aren't going to come down. And so we're going to have higher home price or sorry, higher costs to replace and a higher interest rate environment, which is bad for affordability, which is bad for liquidity in the market, right? Like deal flow. So that's kind of the bear case. And then, and you heard both sides.
convinced, you know, arguments made very convincingly. and so where I kind of come out on it is that, yeah. So where I come out on it is that, I think both of those sides are convincing arguments. I don't, I don't actually lean one way or the other on it, but I don't think it matters. I'm not sure that it actually matters because my thesis is by American real estate.
Craig Fuhr (14:45)
That was my next question. Very good, Jack.
Jack BeVier (15:03)
because if you buy American real estate and you get the first case, well then decreasing interest rates are going to be great for asset values and renters and rents are going to go up because you've got a strong consumer or at least, you know, your, your credit loss is going to go down because you've got a strong consumer. so American real estate is a great place to invest. If the bear case is correct and we're going to have then everything that we're going to have higher inflation for longer and higher interest rates for longer.
because you got higher replacement cost, then everything that you already own is going to be worth more because you can't replace it for less. And rent is a fantastic inflation hedge, you know, fantastic hedge against uninflationary inflationary pressures and environment. And we'll be able to at least maintain with increasing rents relative to other places to put your money. And so I'm like, either way, my job is to get out there and buy more real estate.
Craig Fuhr (15:58)
Well, then let's, one of the things I've, you know, that the big takeaway I've always gotten from Jack Bevere, it's that long-term view. And I think for people who might be listening to the show that say, well, there's a guy that owns 850 houses. He's got it, you know, he's got it made. And what about, and I don't believe that by the way, I just think you have to, you get better and better at operating them and get better and better at finding and buying them.
Jack BeVier (15:58)
So that's my take.
Craig Fuhr (16:24)
But but your long term view is one I don't. Right. So what about that? What about the guys that are out there that are buying two, three houses a year? They're adding a few houses a year to their portfolio, or perhaps they're flipping. What about those guys, Jack? I mean, obviously, the long term view. I agree with you. I mean, if I was going to be bullish on one thing, it would be American real estate.
Jack BeVier (16:26)
I suck at golf too, so that keeps me coming to work.
Craig Fuhr (16:51)
But what about the short term Jack over the next six to 12 months for the smaller guys out there who are listening right now who are you know, trying to break into two more deals scale a little bit get bigger. I talked to guys every day like that talk to borrowers every day that say to me, we're going to ramp it up in 2025. We've really we've figured it out. We've been doing it for a few years now. What do you say to them?
Jack BeVier (17:14)
mean, if you figure out deal flow, the money part's pretty easy right now in terms of like availability of money. And so it's, I mean, it's.
Craig Fuhr (17:22)
on an equity end that side.
Jack BeVier (17:24)
No, on the debt side, but, kind of deals, but, but you don't need a whole lot of equity right now. I mean, in terms of like, you have lenders that are so aggressive right now that like, if you find a deal that's in the money, like that's the Holy grail still it's been the Holy, that's nothing new, right? The past that's been the Holy grail for the past couple of years. think it's still is the case. The constrained deal flow is still the, the, the, the most, I think like powerful factor in the, the industry right now.
Craig Fuhr (17:47)
pressing factor.
Jack BeVier (17:51)
And so if you get good at finding deals, you can, the cost of capital is not like, is not like going to put you out of business, know? Like, I do think, I think RTL, I think short-term rates like RTL rates, fixing, loan rates, are gonna come down over the course of the next year. because the short-term, because the fed's gonna, if, if, if the fed continues to continue to decrease short-term rates, then
Craig Fuhr (18:08)
Cool.
Jack BeVier (18:17)
you know, we're making 12 month loans. So the cost of capital for, for lenders, especially national lenders is going to improve and they will just from a competitive pressure perspective. Push, be able to push RTL rates down to get more market share. I think that there's still a lot of appetite for, the fix and flip loans.
from the Wall Street perspective. So I think that there will be competitive pressure that'll push our TL rates down. I'd say, I bet the whole market comes down 100 basis points over the course of the next 12 months. Not that that makes deals work though. Whether you're borrowing money at nine or 10 or 11 or 12, that doesn't make or break your deal if you've found a good deal. But it's nice, it helps. So I think that, yeah, it feels a little better.
Craig Fuhr (18:50)
Wow.
I
Feels a little better, you know, it definitely lightens the mood
Jack BeVier (19:08)
Yeah, and we get closer to, get closer, the industry gets closer to bank rates, then people stop opting to deal with the pain of their local banks and press the easy button for an extra, when it's only an extra 200 basis points versus an extra three or 400 basis points. So I think that's a factor. But the long-term rates, I don't think that, I don't think that, but the thing is, I don't think that this has changed much, right?
you're not going to live off the cashflow of your rental properties in the first 10 years of your investing career. It's just not a thing. Like it's never been a thing for us. I've never seen great examples where people were like, yeah, I'm getting such good cashflow off my rentals fully levered that they, that, know, like I'm that I quit my day job. It just, you don't get there. Not in the first 10 years, you know, maybe, maybe after 10 years, but so like whether you had a, whether you had a little bit of, know, whether you had some cashflow or
Craig Fuhr (19:47)
I'm quitting my day job. Right, exactly.
Jack BeVier (19:59)
a little tiny bit of cash flow, still doesn't affect your ability to make payroll or pay your mortgage. So I think that...
Craig Fuhr (20:09)
Is that Jack, is that you say the first 10 years? Is that because people don't start out with 500 houses throwing off $300 a month, they start off with one or two? Or is it because you're figuring out the business and how to effectively operate it within those first 10 years?
Jack BeVier (20:27)
Well, the, I think that people are usually wrong about their expense ratios. and they think that they've got 400 months, $400 a month or $300 a month of cashflow. And they did the math wrong and they don't realize how big turnover costs are. so like, yeah, you have 300 bucks a month of cashflow. And, but then you have a turnover every three or four years, and then you give all that cashflow that you hopefully didn't spend back on the turnover.
And so like after you make your debt, after you make your debt payments and, know, unless you're working at very low levels of debt, which few, few people who are building their portfolios are right. Like unless you're the rich uncle, like few people are, are if you're shoestring in it to build your rental portfolio, it's, it's really hard to find enough deals that spit off that much cashflow to, move the needle in terms of your P and L at the end of the year.
And so it's usually 10 years before you've seen enough appreciation that you can either sell out of your portfolio and harvest some of that appreciation and or refi and pull some of that appreciation off the table through a refinance event. Or, know, because, because, you know, because it takes that long to see enough rent growth that you to really accumulate enough excess cashflow.
Craig Fuhr (21:42)
make sense. Hey, so while we're doing this sort of back and forth episode here, going to do a couple of these today. We mentioned short term bridge landing RTL as we call it. And then but but and then just briefly touched on DSCR you mentioned that you were part of a DSCR panel at I am in
what was the topic of the panel and what were your takeaways there? Cause I'd love to get into a little conversation about the SCR and where that's heading.
Jack BeVier (22:07)
Yeah, yeah, we were talking about just, know, hey, what are the terms that people are getting in the market right now? Just, you pretty basic stuff. And then what's the, you know, are there any concerns in terms of like, what's the product going to look like next year? Because right now in 2024, well, sorry, I don't want to skip ahead. then what the, and then, know, then
prognostications on what's going to happen in the macro economy and like, should borrowers think about using the DSCR product to grow their rental portfolios? So those are kind of like the three main topics that, that we all opined on.
Craig Fuhr (22:45)
So the one of the things that you and I have discussed on previous episodes was prognostications for what we might see as an appetite from Wall Street and large insurance companies in 2025. And for those of you who are just listening to this episode, so DSCR
is a really interesting product that was designed by Wall Street specifically for real estate investors and frankly, has taken the place of that local bank that, you know, Jack and I used to walk into in the early 2000s when when the vice president would be sitting at his desk and you like I've got, you know, five rentals that I'd like to put long term financing on and generally speaking, the terms are kind of what they were to our today, Jack, they give you a 20 year 25 year note.
with a five year call, it was probably gonna be around 7%. They charge you a point and a half or two for their fees. Very similar to what it is to the DSCR product that we know today, which was designed by Wall Street and frankly has taken the place of many local banks. It's really taken them. It was kind of a loss leader I think for local banks, Jack. It wasn't something that I think they were making a whole lot of money with. And so...
a lot of the a lot of the bucket of money that comes to these Wall Street note buyers are from large insurance companies and we won't mention them by name. But let's just say that the bucket of money for one of our note buyers this year was $3 billion. You know, your task now we're giving you $3 billion to go out and buy single family small multifamily
notes around the country and Dominion financial is one of the largest lenders in the country for this Jack. And so what's your take on sort of and where we are ending the year because we would think that that bucket of money has now been emptied for 2024 is close to it for a lot of these larger note buyers and your sense of what the appetite is for 2025.
Jack BeVier (24:51)
Yeah, yeah. So it's, it is very interesting. Because insurance companies literally work off of an annual allocation, right? Like, it's I'm so used to thinking like, hey, it's just the market, right? Like the market like 1231 is an arbitrary date. Well, actually not not in the insurance company world, like they actually have like, hey, this year, we're gonna buy this much of a product. And here's our asset allocation for 1124 to 1231 24.
Craig Fuhr (25:01)
Sure.
Jack BeVier (25:19)
And then we'll, and then towards the end of the year, they reevaluate and they decide what their asset allocation for the next year is going to be. And then they have a mandate to go by, you know, to go fill up the bucket in that, in those proportions. And that's how they do.
Craig Fuhr (25:33)
And not only that, and in allocating that capital, it's allocating all the risk associated with that capital, allocating all the returns that they want in that specific bucket of capital. And so, yeah, go ahead.
Jack BeVier (25:44)
Yeah. Yeah. So they're like, they're not day trading it, right? Like they're actually making, they're very slow about their investment mandates. which is weird, right? Like, I don't know. It's, it's, it's a, different way of, of operating. It's a high, it's a highly regulated environment. I get it. Like they've got to report to their regulators and get green lights and their regulators on, on those mandates. So, that's how they operate. So for 2024,
Craig Fuhr (25:53)
Sure.
Jack BeVier (26:11)
the insurance company appetite was huge for DSCR. So, particularly the insurance companies that we've been working with, the ones that have been the best bid in the DSCR market literally bought eight and a half billion of DSCR this year. Now that's, yeah, yeah. It's a big chunk of the market. It's not the whole market. It's a sizable chunk of the market though. And for 2025,
Craig Fuhr (26:25)
$8.5 billion.
Jack BeVier (26:34)
their allocations are, their allocations are going down for 2025. And as a result, I think that pricing is going to not be quite as sharp as it was in 2024. But the offset to that is, cause there's really been kind of two different bids. There's been the insurance company bid for DSCR paper. And then there's been the securitization market bid.
And so if you go to your local broker, like mortgage guy who does your home loan and get you the best rate on your home loan, he's selling those loans to securitization shops who are going to package up those loans and do a securitization and borrow money from Wall Street. Those rates, the rates that those folks get are actually higher than if you can sell directly to the insurance company. Cause the insurance company is otherwise the one buying the securities that that's, you know, that
Craig Fuhr (27:21)
Right.
Jack BeVier (27:23)
that comprise that securitization. So if you can take out the middle man, exactly. So if you can take out the middle man, everyone wins, right? So Selling Direct to Insurance Company is great. Like they're the best bid period, hard stop. They are able to be the best bid if they want to be. And so in 2024, they were far and away the best bid. It was like 50 basis points better in terms of rate better.
Craig Fuhr (27:24)
No middleman.
which is significant in this in DSCR.
Jack BeVier (27:48)
Yeah, from a debt service coverage ratio, 50 basis points of rate helps a lot. so in 2025 though, those mandates are going down. That said, there was really like three or four big insurance companies that were buying everything in 2024. And the rest of the insurance market has now caught on that, this product is pretty good. And the thing is there's
Craig Fuhr (27:52)
yeah.
Jack BeVier (28:13)
There's 300 insurance companies that make these kinds of investments. So four of them were really big, really kind of dominated the market in 2024. Their appetite is going to be lower in 2025, but the other 296 are starting to come into the game. Yeah. So.
Craig Fuhr (28:30)
Really? that, you know that for a fact? You're saying that?
Jack BeVier (28:35)
Yes. Yeah. Yeah. I mean, it's not all 296, but like, but, know, but, but the folks who were like losing, right? Like if you didn't have an insurance company relationship, you spent 2024 building insurance company relationships so that you could compete in 2025. And so those rails are, have been put in place, are continuing to be put in place to the other 296 insurance companies. So it's going to be a more, a more liquid market.
Craig Fuhr (28:38)
Of course.
Jack BeVier (29:02)
But I think that the short, so I think that the short term effect is that credit spreads are going to be a little bit wider in the first quarter or two of 2025. it's, I, I'm, is purely conjecture, but I think the competitive pressure is going to lead them to tighten up a little bit as other insurance companies keep getting into the game. And now it seems to be like a thing that like, you know, there's, there's more and more companies coming into the space. And so I think that that will lead from a competitive pressure perspective lead to.
to credit spreads tightening again as the year progresses. Where the five-year treasury goes, which is the reference point for pricing, I have no freaking idea. So I don't know what the base credit and what the base index is gonna do, but I think that we're gonna see a widening of credit spreads and then an eventual tightening back up as 2025 goes on.
Craig Fuhr (29:43)
Yeah.
Yeah, so for those of you listening, the these DSCR loans are all indexed off of the five year Treasury bond. And that has been sort of on a rocket ride since September 18 with the Fed cuts. And so today, I looked it up prior to getting on the call. And we're at like 4.122. Jack's not happy about that. Not not good for biz.
But and so generally, you know, we're quoting 30 year fixed DSCR right now, Jack, in the, you know, low to low to mid sevens, depending upon your LTV. Whereas a couple months ago, we would be in the low to mid sixes. So, you know, when the five year goes up 100 bips, since September 18, you can expect the the DSCR rates to go up with them as they move directly almost with the with the five year. And so
Jack BeVier (30:37)
Mm-hmm.
Craig Fuhr (30:50)
you know, frankly, we'll get into the next episode, you know, sort of what some folks are talking about in terms of the bond markets right now and what some larger institutional investors are doing right now in terms of cash positions. But why don't we end this one here, Jack, great episode on DSCR and we thank everybody for tuning into this quickie. Well, it's been a half hour, maybe not so fast, but
We're going to end this quick episode here and come back with a couple more on a sort of a state of the market and what to look out for in 2025. We'll see you on the next one.