00:01.34

wongga

Wow! So yeah, 2008 I think wasn't a pleasant time for anybody. Um, you call it a crisis I'm sure people would have stronger words for that. But you know you mentioned some losses. How did that period shape your understanding of real estate vesting and what lessons did you. Maybe take away from that experience.

00:23.21

Stewart Heath_ CPA

Ah, well it didn't shake my belief in that real estate should be a core of most everyone's portfolio. It gave me a much more healthier respect for debt.

00:39.32

Stewart Heath_ CPA

And the proper use of leverage in a transaction. Um I mean I went under because I was aggressive and yeah I was I didn't have partners I was doing deals without any equity whatsoever. Ah, cash hard equity I would buy this property wait eighteen months refinance it take cash out and you know what they call it equity stepping which you know all my bank partners were well aware of and and and happy to go along until you know the merry-go-round ended but you know. Like I said I'm a cpa I'm smart enough to know what I'm doing there was I didn't I didn't build reserves at all could have and really didn't hold on to any cash reserves and had I held on to cash reserves of. Just say as little as $300000 when everything stopped in 2008? Yeah I could have saved the portfolio that I'd built up of $25000000 and carried it for a year you know with with just. Really a small amount of reserves and still have some of those assets I mean I had I had put together some some great assets I probably would have liked to let some of them go but um or or cashed out by now. But so it's just basic good investing fundamentals because you don't know.

02:12.21

Stewart Heath_ CPA

What you don't know nobody knew that the world would come to a screeching halt in 2020 with a worldwide pandemic nobody expected 60% unemployment and you know while the markets and and.

02:19.41

wongga

Hey.

02:30.92

Stewart Heath_ CPA

Many people have done great since then you know the blue collar folks didn't do so well back then? Yeah also nobody knew that um the fed was going to raise interest rates 500 basis points in a year you know yeah sort of had a suspicion a lot of us were standing around asking in late Twenty Twenty why aren't they raising interest rates I mean the economy was on fire to me. It was the most predictable inflation period in the history of man. But ah so so I say all that we don't know what we don't know. So you've got to have reserves. It's the same reason you buy insurance because you don't know what can happen or what will happen and so that that has changed how I approach investing and especially real estate investing. We build reserves into every deal that we do and. Um, some I've been accused of having too much reserves. Um, but you know I've seen the lack of and does it impact Irs yet it does but nothing will impact ir r like having to give a property back to the bank. Yeah, that tends to. Put the iron r in the tank. So.

03:51.18

wongga

Yeah, hundred percent you know um I just released I think yesterday the day before an Instagram reel on cautioning people to not be obsessed about cash flow versus equity. Um, obviously there's differing opinions but I find a lot of starting out investors or even seasoned ones are just chasing that almighty cash flow and if you're not building equity at the same time. Um I think you're you're touching on a few of those challenges.

04:19.47

Stewart Heath_ CPA

Absolutely yeah, you got to drill down a layer or 2 and say all right? What's driving the cash flow is your cash flow somewhat based on ah on a very favorable interest rate that could change next month you know. Ah, or or how solid is the the tenant base that's that's ah providing the the top of the funnel for the cash flow I mean you should be building equity when you have cash flow but are you are you maintaining your property properly. 2 that that maintains the equity you know? So it's it's the whole picture.

05:01.63

wongga

Yeah, you know what? you you kind of ah I was going to ask about. You know your 35 years in real estate and some lessons and we're kind of touching on those because what you're talking about being a Cpa is underwriting the asset ahead of time and making sure you're looking at. Absolutely everything not just one sexy aspect of it right.

05:22.36

Stewart Heath_ CPA

Yeah, yeah, yeah, um, yeah, we just exited a contract last week um and I I really want these properties I mean they're literally a quarter mile from my house and. Ah, kind of like owning stuff that's and these are retail properties I live in a small suburb of Huntsville on the Tennessee side of the line and you know we did our due diligence and the price wasn't too bad. Um. But then doing our due diligence. We realized well. Okay there's 17 hvac units with an average age of 15 years Yeah, they're not maintaining them every single one of them had a dirty coil in it and and that reduces the life of them to so you know we're just all right in the next three years I've got a quarter million dollars of capex to do on that property and and and even then you know all right at a price I'm still game but but what really broke? Yeah for us is. Ah, they were renewing a few leases and and when they sent us the leases. Yeah, there were new 5 year leases which is great for that type of a property then we read the termination clause and the tenant had a ninety day out I've I've never seen such in in a yeah.

06:54.46

Stewart Heath_ CPA

And a commercial property like that. So you know so what it amounted to was a yeah was a ninety day lease with 5 year guaranteed pricing and I'm not opposed to ninety day leases but yeah I want I want my 30% premium rents for that. You know. Ah, so I mean that's that's what that's what we we really backed out of it. It's just like um they they weren't they're not taking care of their properties. You know, physically or financially so I didn't want to buy somebody else's problem. Yeah.

07:27.75

wongga

No I love that I love that you know getting down into the weeds on that let's drill down a bit because um, the warning sign itself when you're not just talking about you know coils and you know potential Hvac units. You're talking about what else am I going to find right.

07:42.44

Stewart Heath_ CPA

Exactly.

07:45.35

wongga

And that's fine I mean if the lyft and the rento is going to be sufficient enough. But what you're saying is your and your partner's experience sees these warning signs and it's like okay if they're if they're not maintaining this and they're not writing a proper lease. What else are we going to find that are going to be the surprises that. I Mean there's always going to be Surprises. You can't avoid it So that's.

08:07.14

Stewart Heath_ CPA

There's always going to be spread. You know is the roof leaking you know, but we didn't see it but you know in truth we didn't finish doing our due diligence when we found the Hvac and just like all right? so because that costs us money So All right. So We stopped there started trying to renegotiate the price knowing that we would have to spend some more and in um, I'll say part of my experience is this is a physician owned property and.

08:40.40

Stewart Heath_ CPA

You know they they see the benefits of real estate investing themselves. But I've found an awful lot of physician owned properties are not professionally managed. They they either write. They either write bad or dumb leases or many times you find that they're taking beautiful care of the the physical. Structure. Ah, but they don't understand leasing at all and when you're doing multi-year leases kind of like reserves you have to plan for the unexpected. Yeah, there was another building down in Huntsville that I really really wanted still do. But. Ah, all of their leases were flat leases, no cam provisions and had been flat for for 8 years and they didn't understand they didn't ah talk to him. It was a very nice couple. You know? ah. I told them what to do to go fix it and then said you need to hold onto this building for four more years after you fixed the leases and I don't know if they're doing that or not but they were convinced their their building was worth $5000000 and and yeah, my numbers said that it was worth three point. 4 and that was before interest rates ticked up a few more times so but um, so you know when you're dealing in multi-year leases. You've got to ah plan for the unexpected you've got to build in.

10:11.91

Stewart Heath_ CPA

Rate increases and in provisions for common area maintenance factors to increase and so forth and so on.

10:18.93

wongga

Yeah, no, um, something that you said just resonated with me again. I mean as you know this podcast is not about me just bringing on a bunch of real estate investors and tuting our own horns I'm trying to really bring back to the community some good lessons. Um. You know, being a cpa. Um, one thing I I can be almost certain that no one has ever accused accountants of being emotional um and um and you talk but you said it twice Stuart you know there's a couple properties right near where you live like you really really liked those right and yet you still had the courage.

10:45.20

Stewart Heath_ CPA

Yes, yes.

10:53.56

Stewart Heath_ CPA

Um, yeah.

10:55.68

wongga

To walk away from those because the analysis wasn't good speak to me about emotion versus real estate being just inventory and part of the business.

11:03.95

Stewart Heath_ CPA

Well, anybody who knows me for any part of my I'm a passionate guy I can get emotional and I made many mistakes early in my career by bulldoggging and making sure I bought properties ignoring the warning signs. You know it's the old I'll make it up on volume kind of excuse and and you know it's a mistake I'm much older now and you know I have the ability to learn from my mistakes. Um I've also learned to be patient. Our most recent acquisition was a property that we liked and we talked to those owners for six months it's it's another physician owned property little bit different. Um, ah they to their credit. They hired out. Ah, the leasing side to professional people who and they wrote really good leases with the problem with this one is that the doctor occupied 60% of the building and he was retiring and so his practice office is there then he had this unfinished space that you know. He worked on his race cars and so you know he's just a guy like me and you you know because he had a place for his race cars and so um, but again they thought so their their come onto the market was that the doctor would lease back that.

12:34.84

Stewart Heath_ CPA

Space for 1 year and my position is ah um I don't value a one year lease you know unless they've given me indication that they plan to renew so I have to plan on vacancy for that. Ah, especially in a commercial property. It's not that unusual that you know it can take a year to fill a fill a vacancy but same thing built a nice relationship. They were at two point 5 and you know and I first made my offer back before Thanksgiving. Um, all right? 1.5 give you 1.5 because that's what the numbers show and and then they came back how about 2.2 I said how about 1.5 and so we we did that until early March and they said how about 1.6 I said okay. And so we just closed it for 1.6. It's a 12500 square foot office building. And yeah, we're we're actively leasing the the doctor's office and but now in the unfinished space. We're moving forward with the city. Um. Ah permission and we're going to put some climate controlled storage in there where where there's not so it's sort of a downtown hospital district area and there's not any storage for a three mile radius and what there is is on the other side of a.

14:01.70

Stewart Heath_ CPA

Pretty major highway which is pretty hard to get across from one side to the other. So So we should realize a lot more from that space than if we built it out and rented it for office. So um, we're pretty excited about that one. But I don't know how long you know the the the built out office will will take but um so I guess what I'm long. Story short is I'm I've learned to be patient too. Once I see something that I want I Just you know. You've got to wait until the deal is right? because if you you make your money on the buy. You don't make your money when you sell.

14:47.91

wongga

Hundred percent and wow I mean 2.5 to one point six I think we can all learn something from you from negotiating and being patient. Um, but yeah, let me round out the the whole picture for the audience. Why don't we back up. Ah 2 steps and. harvard grace capital can you sort of explain to us the mission how it aims to help people build wealth through real estate investing.

15:12.14

Stewart Heath_ CPA

Sure I touched on that early on Um, ah you know part of my conviction through my own experience is is that cash flowing assets should be the core of of everyone's investment portfolio.

15:29.68

Stewart Heath_ CPA

I read recently a survey of I think it was a couple of thousand family offices and well into the 90% of them had core investment positions of real estate and I call that the boring part of your investment portfolio and it should be boring if it's core. Um. Yeah, that doesn't mean it's your whole portfolio and once you've established a base. Yeah for for whatever your investment objectives are then you have other pieces you can go buy bitcoin or tech stocks or. Or whatever and where you can perhaps achieve your greater capital gains all the while yeah, having comfort and security in in your core positions now that can be partially dividend stocks dividend pay in stocks with a cash flow position. Although there's there's there's none of the big dividend paying stocks that that have paid a dividend. You know as long as income producing real estate will generally last. So anyway, obviously I'm in favor of the core being real estate but but. Primarily the core should be cash flowing. So what Harvard Grace has come to market to do is to provide investors recurring and increasing cash returns from the investments that we bring to market. Um, we are not doing development deals.

17:04.72

Stewart Heath_ CPA

Yeah, that we're bringing to market I mean I get offered these all the time and I've done it before and yeah, it comes back to passion I really want to do them. But um, but but that's not what we're what we're bringing to market. And we're not We're not doing big value ads. We're not buying old apartment buildings and fixing them that is not skill sets that's in our wheelhouse right? now we are buying stabilized properties where we do see room for improvement through proper management. You know if I can buy it right? and I know I can fix that lease twenty four months or thirty six months from now. Then there's your value ad you you increase your um, your rent income 10% yeah I just made that asset a lot more valuable. So ah. So we're not really into the construction side or the development side we're we're trying to value add from the financial and management side.

18:02.72

wongga

Fascinating Fascinating Okay, some light bulbs are going off here because you seem to have started out the same way I did as a single duplex multiplex guy. Um sure I mean I got hurt in some of these you know downturns as well. But that you have a lot of experience in that Why why turn to commercial.

18:25.15

Stewart Heath_ CPA

Honestly, um, it's a personal reason I do not like residential management. We like what I call suburban office some people call it service retail and we like storage I think housing is the path to follow. In commercial real estate investing for instance huntsville has 14653 apartment units under construction right now and believe me, we know where they are and we're looking around there because um, small commercial. And you know, commercial small retail and suburban office will they will correlate directly with housing growth in every market and has probably as long as records have been kept. So. We're playing the housing play but I I like storage because it's doing housing without the toilets and you don't have the management headaches. You know, long evictions and stuff like that I had 200 personal rentals at one point and I just. Decided that was my definition of hell because we do manage everything that we that we bring to market.

19:42.15

wongga

Okay, so I have a question then um, we're talking office spaces. We had a thing called covid um I know if you were to come up here to Manitoba. Um, right now. It's very very warm. It was I think ° yesterday but don't come in winter.

19:51.22

Stewart Heath_ CPA

Yep.

20:00.21

wongga

Um, but no, all jokes aside office spaces I see a lot of release signs um is there like how how are you combating that challenge or are there opportunities there.

20:03.67

Stewart Heath_ CPA

You.

20:11.77

Stewart Heath_ CPA

Well I know we've I've had a lot of people tell me I'm crazy. You're doing office. Yeah um, no listen listen I said I said suburban office service retail there's 6 subcategories of office. What we are not interested in at all are central business district class a office buildings. Um, you know these are the high profile usually have somebody's name on them or they're in a you know a newer suburban area where. People used to just go and work the type of office you know service retail that we do they host doctors offices, insurance, companies, mortgage companies dentists. Ah, people were that properties were the tenants are consumer facing. And they are not going remote. Your doctor is not going remote. He's not coming to see you. There are businesses like mortgage companies and insurance agencies that are legally required to have office space and you know that could change someday. But um.

21:24.32

Stewart Heath_ CPA

Ah, you know the the government has an interest in in those people because of fraud you know generations ago of of lending and insurance they have an interest in these people maintaining an office. So they they are required to do so and and they're facing the consumer. We're not really interested in. Um, what comes to mind with most people with office and as soon as I say that? ah all real estate is local.

21:59.72

Stewart Heath_ CPA

And Huntsville is a different market and Huntsville is primarily a defense contracting town and a lot of these defense contractors never stopped going to the office because a lot of the work that they do has to be done inside a skiff you know an electronic. Protected zone and that's still the case and so you know defense contact contractors haven't exactly vacated their office down here. So um, but I don't know what that future holds. Um. There's an awful lot of building in that sector down here. So um, ah so that's just that's just the the class a ah subclass is just not something that we are. Ah.

22:51.00

Stewart Heath_ CPA

Focusing on right now we're focusing on consumers.

22:53.95

wongga

No I love it. I love it. That's probably the best answer that I've heard when I've asked that question um and smart I love it that you said you're following the residential because ah, that allows you to also predict and maybe buy some assets um ahead of time. Um. And then yeah redo those leases and you're getting value out of that paper. Um, it's brilliant I love it. Um, why don't you I know you said your purpose I think you just said you're purposefully um, purposefully investing locally I believe the Tennessee Valley ah why why is that.

23:29.47

Stewart Heath_ CPA

Well um, couple of reasons as I already said we manage what we buy I've never had a good experience with a third party property manager I'm not saying that there aren't good ones out there say I never met them. Um, in. So we manage every every deal that we sponsor that means it has to be close to home. So our our general rule is we can't be further away than and than an hour from that property. Um.

24:02.58

Stewart Heath_ CPA

And so I'm investing what I know now I could be up in Nashville with with almost every other real estate investor in the world. It seems I think the nashville proper is a very crowded market space. It's um, it's still a great market I'm not against. My my hometown but I I just think there's better deals in some of the smaller markets now Huntsville's hardly a small market anymore. This is our um, this is our ah our focus area. What I call. Ah, yeah, the Tennessee Valley or the 5 the eight forty five 65 corridors so eight forty s a loop is a interstate connector south of Nashville and 5 65 is an interstate connection that goes to Northern Alabama and I'm looking at all of the communities in between those 2 roads. Ah, including some subcommunities like where I live in faetteville Tennessee ah, there's just you know Huntsville is a town that has doubled in size in the last twelve years there seems to be no end to it. It reminds me of Nashville thirty years ago when I missed. Every opportunity that I saw in the rearview mirror and so all right I'm not going to miss these. You know there's just more and more industry and Huntsville's economy is becoming more and more balanced. It's not just.

25:33.69

Stewart Heath_ CPA

You know governments and and government contractors. It's manufacturing its its service providers all coming into that community. It's it's a very highly educated community. Yeah, their chamber of commerce loves to brag that it's the highest number of ph ds per capita than any other city in the nation and well you know what they're most of them are rocket scientists so literally and but it's it's. You know Usa today are I'm sorry us news last year it was the best place to live and this year it's the second best place to live according to according to their report. So just it's just a target rich environment for a lot of assets that I think have a lot of. Room to run.

26:24.80

wongga

Yeah, and the fact that you guys are choosing to manage your own assets should give a lot of confidence to your investors and that's a great segue into the next question I wanted to ask you? um with Harvard Grace what's your approach to real estate syndication. Um, and you know. Think you were advertising fifteen plus ah roi to your investors. How? what's your approach for that.

26:48.58

Stewart Heath_ CPA

Ah, the the biggest approach is is buying it right? You know if we can find an asset that you know we're comfortable with its position. Its location and who it's and who the income payers to that asset are. And if we can buy it where we can generate a 1.4 times debt service coverage that should allow us to um from day one pay investors a minimum of ah 6% cash and cash return. So that's our approach. That's how we define success. We might stretch that you know one way or the other. Um, yeah, but it's also in discussion with with our investors so it is a um we also invest in each of our deals so we are not just a sponsor. We're also. In the class a group as well. Ah, but but but we have some investors and it's like if we think it's going to be 5% cash on cash year one but jump to 7% year two you know we think that's a good deal in a goodbye and.

28:01.60

Stewart Heath_ CPA

So it's all just a sort of a fluid due diligence process in modeling process. Yeah, it's been fun looking at our models changes with interest rates changing. Yeah we we kind of lost a deal in January on a. Perfect asset. But and we came to terms and then the seller took a month tweaking the the tweaking the contract and but interest rates moved twice during that time. It's so I can no longer afford to buy the price that we just agreed to and. So yeah and it was a great asset and that seller wisely chose to hold it. Maybe we can come back and try again a year or 2 so.

28:46.60

wongga

Yeah, you know I was just at a multifamily investment conference up in Toronto a few weeks ago and I mean going through the vendor booths. There's so many syndications out there so many um you know.

28:56.50

Stewart Heath_ CPA

Yeah.

29:01.50

wongga

What would you say is important for individuals to consider when they're choosing a firm because this is really true passive property investing what? what are the pitfalls.

29:07.97

Stewart Heath_ CPA

Well, the the pitfall is the biggest but is how well do you know your syndicator. Yeah, we actually yeah have a checklist or a guide on our website that anybody can download. You. How to evaluate your your your deal sponsor and you you need to look at other deals. They've done. You should ask them for references to some of their other passive investors and what their experiences have ask them for. Ah. I Want to see copies of reporting that you're doing on some of your other deals and how often does that does that come out and how often does do I get paid and if there's any uneasiness or lack of yeah response on any of that. Yeah I'd be wary. I Mean people get busy, but ah, all of those things are should be made readily available to you. You know? What's their history. How many deals have they taken full cycle and and whatnot. But um.

30:23.28

Stewart Heath_ CPA

But the biggest thing you've got to develop a level of trust with your sponsor we we we do all of our deals as a five zero six C which means that we can generally Solicit. Um our deals but we have. We develop a relationship with every single one of our investors because 1 of the other things I've learned along the way is I don't want to be partnered with anybody that I don't want to be partnered with and because we do maintain a service level. We talk with our investors. A great deal which gets harder and harder the more we have. Ah, yeah, you know the 1 guy who's never happy. Um, you know can can disrupt your whole operation and in matter of fact about sixty days ago we had a guy who was not happy and yeah, just do you want us to just buy you out and he said yes and we did. And I had almost every single one of my investors in that deals that I'll take share so everybody else was happy and they they they wanted more and said that was the the most difficult part about it was all right? Well who do who do I let do it. You know. But but it was very rewarding everybody else was completely happy. So.

31:39.22

wongga

Yeah relationships. Um I mean investors they're not just coming with a checkbook right? They're partners I mean literally in the sense because you guys are are have equity in each deal. Um, yeah, it's so important. Um.

31:43.27

Stewart Heath_ CPA

Right? They are partners. Yes.

31:54.51

wongga

I mean I like what I'm hearing I hope the audience does and you know obviously part of us getting together today is making a little bit more awareness of Harvard Grace um but let's transition into risks because really, there's risk with. With any type of investing. Um some people would say real estate is great. The returns are great at the risks and then there is you know different types of risk with commercial How would you say that your firm manages and mitigates the risks associated with commercial real estate investing.

32:23.78

Stewart Heath_ CPA

Yeah, it's ah it's a great question. So obviously talking about my history and my experience my entire approach has been crafted from all of that to manage risk because not only are we investing. But you know I'm guaranteeing the debt on each one of these things So I'm acutely aware of of the risk Profile. We're not doing anything with variable interest rates. So. And we can do that because we're only buying stabilized assets and and what does that mean stabilized that means it has achieved ah at least a market level of of occupancy and recurring cash flow and there's really nothing left. To be done. There's no development risks still in Place. So The the property is done. It's finished. It's got all the government approvals all the tenants are in and and they're paying rent So when you approach that kind of Asset. You know. You're um, you're really mitigating you're you're eliminating a whole category of risks so you can set a lot of that aside I think we de risk our deals just about as much as any investment can be um I mean.

33:53.72

Stewart Heath_ CPA

Anybody who's held any stock you know has has rode the merrygo round for the last three years I'll just pick on Verizon I love verizon they're a great company and I bought them as part of a Dividend paying portfolio that I and I'm in that stock I think about. Fifty five bucks they're still paying their dividend which is awesome but you know these days I haven't looked last couple these days. It's at 36 now god bless them I mean they're they're still paying that dividend that that I bought into course that yield is doubled. You know so. But actually thought about buying more at 36 but I think it's ah it's a good company. You're generally not going to see that kind of risk with ah with real estate. Can you see price volatility. Yes, we've observed that in the last twelve months when interest rates do what they do and the value of your real estate asset is inextricably tied to the interest rates and but because leverage is such a key component to investing in real estate That's what makes real estate investing work. The best. Ah, so yes, that has brought some price stability but ah instability to to real estate. Ah but ah, no risk no investment choice is risk free.

35:19.58

wongga

No first.

35:21.37

Stewart Heath_ CPA

If you want no risk whatsoever. You know, go get your 5% cds at the bank. So.

35:25.46

wongga

Ah, hundred percent um no but I mean you touched on it residential real estate. Maybe you're buying into something with with the syndication and you're waiting and your money is tied up for 2 3 4 years because they haven't even broken ground yet. Um speak to me a little bit about. Not necessarily unless you guys have seen these types of mistakes with your own firm. But what could go wrong with commercial real estate if. You're not um, managing your risks correctly, you touched on a few but I'd I'd like some you know some types of examples some analogies.

35:59.78

Stewart Heath_ CPA

Specifically with our type of deals or just commercial real estate in general. Yeah.

36:04.70

wongga

It and while not your like your deals it sounds like you guys are doing. You know your extra research and you know you're talking about interest and stabilized assets and um tenants already in place. But you know if somebody's getting into this and they're like oh commercials. Great I'm going To. Do X expecting y what types of risks are are out there and mistakes to be made.

36:27.80

Stewart Heath_ CPA

Yeah, yeah, um, yeah, it's I wouldn't want to do anything and I would advise investors to ask about the financing that is in place. Yeah, we've already seen in the news a few big.

36:44.34

Stewart Heath_ CPA

Commercial deals that have gone back to banks because they were in variable rate notes. Ah so you know and there's a lot of temptation to float your rate you know at either the bottom end or the top end of the market. and and I get that it's you know to fix your rate. You're always paying a little bit more than you could if you were floating but you don't have have the risk so there's that there's always um, you know environmental risks. Um be that? um. Weather related things of that nature look look at your tenant portfolio if you are significantly dependent if the property is and significantly dependent on one tenant and maybe you've got several but but 1 of them. Ah, is huge and perhaps some of the other smaller ones also work for that tenant then you've got a concentration risk revenue concentration risk. Yeah in that particular property. Yeah one one thing to keep in mind that whatever business your tenants are in. You're in that business.

37:58.60

Stewart Heath_ CPA

Which is why we are focusing on the consumer facing properties right now. Um you need to analyze the risks that that that your tenants face as Well. Ah, so to me if you can de-risk the income stream and then de-risk the capitalization. The financing of it. Ah, the rest of it. You can pretty much insure around I mean the weather environmentally related. You can get insurance for that. Nobody wants to disruption. But it does happen I mean we had a property that got hit by straight line winds and 2020 and um, and yeah, it's all good now but it was just disruption it just something that happens actually made a little money through the Insurance. So. Um, but those kind of things can happen. Not sure I'm answering your question. So.

38:54.63

wongga

No, you are absolutely no. It's ah like I'm silent because I'm taking notes here and I love the perspective because you know in my space up here. A lot of people are really I Want to say almost hyper focused on on residential which is.

39:11.78

wongga

Considered commercial but residential right? So I think it it was really great. Um, but let's speak about the future. Um, what's what's the future plans for Harvard Grace what opportunities do you see emerging in the commercial real estate market.

39:25.71

Stewart Heath_ CPA

We we continue to analyze deals on a 1 by 1 basis now I'm not the first person who've said this, they've been talking about it in the news I think since October but all of us should be aware that there are $2000000000000 worth of commercial mortgages coming due. Beginning sometime in q 3 and and you know for twelve months beginning in in q three. There's an awful lot of people who are not going to be able to afford to refinance their their notes either. They're bad managers or they they haven't kept up with. Leases as we've talked about before they haven't kept up with cam charges and and when you got a commercial property and doing multi-year leases. You just can't up and say all right next month your your your rent is is x can't do that you are in a financial contract.

40:22.28

Stewart Heath_ CPA

Ah, yeah, which is not dissimilar from a bond and so you just can't pivot. You just can't create more income and so their their their debts is going to increase 2 or maybe more times. Ah. Yeah, a lot of those mortgages are in the 3% range most them are in the fours if you refinance today you're probably it's 7.75 or 8 depending on where you are and and how hungry the lenders are and there are an awful lot of hungry lenders out there. But even but they can't. They can't fight the fed because they borrow at a rate and then lend at a rate. Um, so I think that's a generational opportunity that's coming very much like you know towards the end of the last financial crisis that was a generational opportunity. To get into some quality assets and yeah at at really attractive prices because the seller has to sell. It's a complete flip of the paradigm. It's been a seller's market for many many years that's about to change. Now a lot of that may be highly localized I have no idea how that's going to impact our geographic target area at the end of the day you can't just run out there and buy a bunch of stuff. It's still you still got to do your analysis on a deal by deal basis. But.

41:52.80

Stewart Heath_ CPA

I Would say anybody who's looking should be prepared to do more deal analysis. You know that that there should be more deals coming your way and if you want to take advantage of that be able to to analyze them faster.

41:56.51

wongga

Okay.

42:06.61

wongga

Yeah, well we should. We should do a twelve month touch base and see where the market's at um, well it's been. It's been great Stewart um, and you know this is coming because I ask every guest this question so I want to know what you have to say.

42:10.40

Stewart Heath_ CPA

Yeah.

42:21.00

wongga

Ah, this is the investing to win podcast. How do you Define success and what does winning look like for you.

42:32.84

Stewart Heath_ CPA

I Lost you you broke up on me. Yeah, please.

42:34.78

wongga

Oh shoot I'm going to ask that question again because all right? Okay I can't believe our time is coming to an end but I ask this? you know every guest this question and I want to know what you have to say so this is the investing to win podcast. How do you Define success and what does winning look like for you.

42:56.92

Stewart Heath_ CPA

I Define success from a very personal level. Yeah I've been through my economic challenges and that had a very personal cost. So Ultimately everything that I do is for my wife and my kids and. And and so yeah I know everybody says that but but generally that's who I am doing all this for and if I can provide for them. Um and help set them up. Yeah, my kids in life then then. That's success to me. Ah I would also extend that um when I can deliver or Beat. Um my projections to my investors. That's a massive success and. Yes, I'm an investor but ah, but I mean that's I just love beating beating. What I said I was going to do and and sending them more money that than what I had projected so that also success for Me. So.

44:05.71

wongga

Yeah, no I Both of those resonate with me as you know I'm a family guy and I value that time with them more than anything but yes, absolutely under promise over Deliver I Love that.

44:21.76

Stewart Heath_ CPA

Um, yeah.

44:23.68

wongga

Okay, well thank you so much for connecting with us and for coming on the podcast and I wish you best of luck with Harvard Grace and we'll throw your your contact information in the show notes. So people can get in touch with you and figure out next steps with you with you folks? okay.

44:34.76

Stewart Heath_ CPA

Awesome! Thanks Garrett for having me. It's been an honor.

44:43.55

wongga

Take care.