How to Navigate the Housing Market in 2023 as Builders and Flippers

Dalton Elliott: Welcome to the Real Estate of Things podcast. I'm your host, Dalton Elliot. I'm joined by a very special guest and a very dear friend today, Mr. Nate Trunfio, the Chief Revenue Officer at Lima One Capital. Nate, thank you for joining.

Nate Trunfio: Likewise, man. Like you said, it's always great to be a part of this awesome podcast and representation of Lima One in our industry and real estate investing and all the things that you do for the numerous communities that you touch. So, I'm just blessed and honored to be here with you. My very good friend.

Dalton Elliott: You're too, too kind. You've worn a lot of hats in this space, the private lending world. Walk me through your journey getting into the space and your background before up getting to Limo One Capital.

Nate Trunfio: Sure, yeah, absolutely. So, I've been in all things financial services, mainly lending mortgages, since around the middle of the great financial crisis. So, I was in residential mortgage lending, went from a producer, loan officer, to a manager and that's where I got my foray into the continued student of leadership that I still am today. And took a little bit of a foray, after being in the residential mortgage lending space of six or seven years, went into what I like to call the Wild Wild West of merchant cash advance lending, which was just a great unique perspective on how to look at making good credit decisions and helped run some sales and operations for some firms there. And then I found my happy home in all things private lending around about 2018, end of 2017, and never going anywhere else. This is just my passion from so many angles, brings in the mortgage and lending element, but I'm extremely passionate in all things real estate investing. Over the last couple years I've been a wannabe investor, meaning I've had a couple rental properties, I've flipped a small couple of homes. It is nothing to write home about, and I am sticking focused on my absolute main job and passion in this world. I'll leave that to all of our great customers to do all the real investing. But I really went into that just because I love our client base, I love our community of investors, of lenders, and so I've been in this space for a little bit. Helped run a balance sheet debt fund prior to Lima One Capital. I've been at Lima One Capital now for a little less than three years. But man, what a great community, what a great organization, what a great culture we have, and I'm just blessed to help run our sales team with you and other great leaders that we have and be a part of our executive team and helping lead strategy and vision for the company. And just throwing my hat in the ring where I'm needed and playing the janitor along the way, if some things need to be cleaned up.

Dalton Elliott: I love it, I love it. That's a really good overview of what you do. I wonder that, you mentioned customers, our customer base and our customer base is incredibly diverse. You touched on fix and flips, like rehab projects, you touched on rentals. We also finance new construction, we finance multi- family, so really a massive tint. And you have a really good broad strokes finger on the pulse of what's going on in the market and especially from not just a lender's perspective, but from an operator's perspective as well. So, what about we unpack where we are now and where we're heading as we start off 2023. Let's unpack that through the lens of our different product sets and different investors. So, I think it's always good to kick it off with the base product, the core foundation, what we started the firm with, which is the rehab product. So, what are you seeing there? We've here in mid- January and we've seen maybe some positive relief on the pricing side, but is it too quick to call and jump up and down for joy, but what are you seeing on that side of the fence?

Nate Trunfio: Yeah look, there's a lot going on in the market and I think I'm the one that's going to coin this, although I'm sure it won't gain much traction, but I have deemed the year of 2023, the year of who the heck knows what's going to happen. When you look at different talking heads, or publications, or data aggregators, I mean whether you look at their prediction on interest rates, their prediction on home prices, their prediction on transactions, on rents, on flipping, it's all over the board. I mean, you're seeing these deltas from the likes of... Call it Fannie Mae, makes a prediction that the housing market goes down a couple percent and you have other entities maybe on the real estate, side thinking that the market goes up 5%. And you get others that are very bearish, that think it's going to go down 10% to 20%. So, I don't know that we've ever been in a time that I know of, in my non- illustrious career here, that there's just been so much speculation and diversity of opinion on what's going to happen in this upcoming 12 months. So, back to your question at hand with fix and flipping, I mean man, what a great run this investment strategies had over the last number of years. I also just shout out to our private lending industry and our peers within it, they're not competitors of ours, I mean technically they are, but they're really our peers. As we've helped to bring some liquidity to the marketplace, we've helped to bring new entrants to the marketplace. And a lot of that's also just because of the institutional backing behind us from Wall Street really opening their mind to seeing value in the need for this product for real estate investors and the value that they bring to the marketplace. And fixed and flipping is great because they're most of the time taking distressed assets that people wouldn't normally want to live in their conditions, outside of maybe the people that are already living in it, and helping to gentrify, revitalize communities and neighborhoods. And a lot of that's been done over the last number of years. We've seen it to all time peaks of fix and flip numbers. We've seen peaks in profit margins off of it, shortest time cycles, from acquisition to disposition of a fix and flip throughout the last five years. But those things are all changing right now. Margins on fix and flips are significantly lower than they were over the last number of years. Timeframes to complete a fix and flip has completely gapped out and elongated. A lot of that's been from things of supply chain challenges through the pandemic, or labor shortages from the pandemic timeframe as well. And so, the all in all summary is, it's just harder to execute in the fix and flip space. You brought this up, I think we in lending, in private lending that service real estate investors, really we should be focused on what our clientele needs because it's very different than the transactional residential mortgage world. We're here to provide solutions for real estate investors to successfully profit, grow generational wealth in a number of investment strategies. And so, if we don't understand what our clients need, then we're going to have a hard time staying in business and providing value to them. I bring that up because it's harder and harder now. Capital markets behind us as lenders has changed. It's caused us to change some leverages, change some pricing. It's all in tune with what's happening in other lending aspects, non- related to real estate lending as well. But it's just making things harder. So, fix and flippers are dealing with it being harder to get through their projects. It's been extremely hard to find good products over the last number of years, just because of supply and demand and inventory and things like that. So, that trend's always been tough in recent past, but it's not getting any easier. And then in another summary, one thing that, in having a number of conversations with our borrowers and just dear friends of mine that are big operators in fix and flip investment strategies, a lot of them are intentionally pulling back because nobody really knows again, what's going to happen with the real estate market. Prices have started to cool off and a number of other facts there, but fix and flip doesn't happen as much as people want to when they watch it on HGTV in a month or two. It takes a number of months and great operators are flipping properties three to six month timeframe. But the reality is, most people are the six to 12 month timeframe or even longer. And so, when you buy a property today with an expected after repair value of a couple months from now, or six to 12 months from now, you don't know what those values are going to be. You start to say, " Hey, maybe we shouldn't buy what we were buying before." And that's what you're seeing from the very sophisticated and educated operators. A lot of them have been selling off anything they can, stacking chips in cash, slowing down to make sure that they're really tight on what they buy because in fix and flipping you make your money on the buy. And so, we're seeing a little bit of less transacting from many of the, as we call them like higher tier operators. And then on the other side of the spectrum, more of the newer entrance to fix and flipping. People are starting to do the first few deals, which there's been more new entrance to doing fix and flips in the last number of years than almost ever before. And a lot of it's just because there's more access to liquidity and there's more focus on it and talks throughout a number of realms. And so, what we're seeing is that a lot of people with less experience that don't have the infrastructure that the top operators do in marketing and acquisitions and disposition teams and construction management or project management folk, they don't have that infrastructure to be able to make sure they're doing good deals and executing on their deals right now. So, we're seeing a lot of the less experienced operators really run into the challenge that fix and flipping is not predictable. You almost always come in with some variance in what you think your budget's going to be. Before, when home prices were appreciating, you could have this variance in what your construction budget would be because by the time you got through the project, your home appreciated 5%, 10% and you gained what you lost in the cost overrun of your rehab. And so, you're just seeing of people that aren't doing as many frequent deals and don't have that infrastructure, realizing it's a lot harder than it's been because of all these factors. I think another interesting stat is, and I don't know the specifics on it, but from what I recall, the amount of people that do their first fix and flip and never do another one, because of memory, I'm going to say it's more than 50% of them never do another deal. I want to say it's 70 plus percent, but regardless, 50 or 70, it's a large portion and I think you're going to see more of that. So, in summary of this long- winded tout on all things fix and flipping from my perspective, unfortunately we started to see what I call separation of the wealth gap in flipping, to where the top operators are going to continue to be strong and get stronger, and the newer entrants and less experienced fix and flippers are going to have a harder time continuing to grow. And there's been plenty of great stories that we see and have, and we're very proud of it Lima One to have over the last two, three, four, five years, do somebody's first fix and flip and now look at our relationship and partnership with them where they're doing 50 a hundred deals a year and it's like, " Holy smokes, that was really cool to be a small piece of helping this operator grow their business and create wealth for themselves or family and their communities." The unfortunate reality is that I think it's going to be less people that are going to be able to grow through scale of that, but there's plenty of exceptions to that norm. And again, I know I went pretty long- winded there, but hopefully covered a lot of bases because there's a lot going on in the market and there's not a ton of tailwinds for fixing and flipping right now. But with that said, there is still a ton of inventory, or a ton of opportunity, there's really not a ton of inventory, unfortunately. There's a ton of opportunity and if, or as, distress hits the market, you're going to see more buying opportunities. It's just a matter of who's going to be able to transact and execute and want to be in the game. I just don't think it's as many people as it's been in the game in the last number of years. It's really helped get the right limelight on real estate investment, get the right limelight on private lending who helps finance and help them grow. But we're still going to be here and real estate investors are still going to be there. It's still going to be a big portion of total transactions, but it may drop off a little bit comparatively to what it's been.

Dalton Elliott: Yeah, we've seen that in the space as a lender and the same thing is true, like you said in the operator side of the fence, that high stress can clear a lot of the deck with what's going on and it just makes sense. You have more uncertainty that creates, like you said, less entrants into the space, just overall, more cautious environment. But new construction and fix and flip both fall into a similar realm in that they're usually looking at short- term financing, want to get as quick of a disposition as possible, not looking for long- term strategy there. But in the new construction world, we still have... We're still under- building, we have a lack of inventory that continues to persist. That was present before COVID. Arguably the lack of inventory is something that really helped keep housing strong from a price standpoint during the tumultuous time. But you have rates going up, materials costs haven't really come down materially, except for probably lumber, which is normalized. Labor prices have not come down for sure, labor costs. So, where are folks in the new construction space right now from an operator standpoint?

Nate Trunfio: Yeah, do my best to speak to it, but again, just another area of passion and a lot of really dear friends that I always go to who are operators, who are running great organizations, building a number of homes, whether for rent, spec for sale, now more people are shifting away from spec because speculative building is assuming that you're going to sell the property after it's built and not pre- sell it and lock in on an exit price. And that was absolutely the move and the trend that we saw over the last couple of years when again in home price appreciation kept going up. So, a builder didn't want to lock in on a pre- sold price upfront. They were better off going four, or five, six months getting to a latter stage of the build and then looking to list and sell it spec and we filled that... We're just very proud to help fill that void as we financed a lot of builders in spec because banks don't always accommodate that as much as we do, but you're seeing that trend and shift. So, that's certainly one thing that we're seeing from a lot of builders, is that they're moving away from spec builds, they're moving back to what's been more the historical norm of pre- selling most of their product before it starts going in the ground and building up. That does mean for builders, that typically you need to build out a different realm of infrastructure to your organization around the marketing aspect of it because you need to start marketing your homes, rebuilding, as opposed to when you doing spec, you're typically starting to market your property later. So, that means you may need to add more people in the marketing side, you may need more relationships with realtors to lock in those pre- solds up front. I think a number of other trends, but I'll try to limit it to just the main salient points here. What's often not realized is that the duration of time to go full cycle build is longer than anybody ever wants to admit. No different than what I said about fix and flippers who always say, " Hey, we're going to flip this property in four months," and then eight months later you're like, " Hey, what happened?" You're like, " Oh this, that, supply chain, labor, fire a contractor, permits, this and ... " it happens. But with building, it depends on your model of build. But anybody that is building in scale right now or building communities, I should say anybody that's building communities, typically there is now a development element, an AD element. And so, to get through entitlement, permitting and then all the components of that, takes a substantial amount of time. And then you need to go in the ground, up the ground, up above the ground and go vertical. Then whether you're building for rent, you have that strategy or you're building a for sale community, to go full cycle on a deal that was taken from development to build. I mean, it's going to be... shoot, probably being a little aggressive, but 18 to 24 months, you could say 12 to 24 months, but realistically it's probably 18 to 36 months, realistically. So, if we're saying that we don't know what prices are going to be, I'm calling it the year of who knows what the heck's going to happen, this year, and it takes somebody 18 to 36 months to go full cycle on a deal, no one knows what's really going to happen with the market. I think we're at a time in the market where we used to be able to see this far in front of our face. Now we can only see this far in front of our face. And so, what you see on a trend line is that builder's sentiment is dropped off. You've seen starts and permits start to drop off. And it's just because builders are concerned with the market. They're investing time, which is money, as well as money and resources, into a project that is going to be a longer haul than other investment strategies. And with the risk in the market, they're going to want to slow down and cool down, and they don't know what's going to happen on the for sale market. They don't necessarily know what's going to happen on the rental side, if they build for rent. And then at the same time, they don't really know what we lenders are going to do at the end of their project, if they want to hold it and refinance it into things like that. So, you're seeing all of those components tie into this decline, steep decline in builder sentiment, which is starting to tie into less starts. And so, it's tough out there right now. With that said, there's plenty of other strategies and models when you don't bring in the development phase, where you can go vertical and build and have a shorter life cycle. But again, just pricing is concerning. Most people do build not truly affordable, or the higher end of the affordable market, or they build more in the higher end in luxury side because it just gives them the biggest bang for their buck. But that side of the market's also getting pretty hit pretty hard right now too. So unfortunately, there's just headwinds against flippers, many of the same against builders. What I'll say is that you've pointed this out, supply chain's eased up, labor's still a challenge, but it's eased up. The expectation is that those are actually going to get probably harder throughout this year for a number of reasons. The cost of materials, for certain reasons. And then on the labor front, unfortunately if distress hits the market, there's just going to be a lot of contractors that unfortunately go out of business. And so, that means there's less workforce, less reliable workforce, having to fire a GC on a project which is a whole pain in the butt in and of itself, cost of time and significant money and things of that nature. And so, those are the things that builders are looking at. But with that said, I do want to at least throw a little bit of a glass half full. To your point as well, Dalton, there's still such a shortage of new home products. So, there's still going to be significant demand. And if you can buy land right, which is also another thing that makes it really hard for builders right now because the price of land is continued to skyrocket, it's been a great investment if you grabbed and held onto land a number of years ago, or even a couple years ago till now. So, buying your land right and getting your land basis appropriately within the rest of the project cost is important, but as long as you're just knowing what your numbers are and conservative with hair- cutting what today's values is, and whether it's eight to 12, to 18, to 24 months out when you're going to finish your build and you're hair- cutting what you think a worst case scenario is, there's still plenty of profit, there's still always going to be demand, but we're seeing it on the flip side, we're seeing it on the new construction side. Product is sitting out there on market for longer, more price cuts and things of that nature. So, there's still a lot of opportunity because of the sheer demand and shortage in housing. But again, it's headwinds and the bigger operators are going to be able to sustain it. Maybe not with their current teams or infrastructure, but they have more infrastructure to weather the storms. They've gone through more of these trial and error, trial by fire throughout the last number of years to get their operations right and humming, and their costs down, and how they manage projects and contractors and things like that. They'll still be able to produce. The big builders are still out there, going to do fine, but again, this is just the trend in real estate investing. It's just going to be a little harder.

Dalton Elliott: No, that's a good subheader for your title of the year. It's just going to be a little harder. There you go.

Nate Trunfio: Look, harder creates more opportunity for those that are passionate, focused, disciplined in what they want to do and achieve. And so, that's where again, operators who have built good processes, built good teams, whether it's just a team of two, or a team of five, or a team of 50, you have solace and faith in the fact that if you know the fundamentals of buying right, executing on a plan, making the right decisions and not getting too greedy, there's still so much opportunity out there, in either flipping or the building realm, without a doubt.

Dalton Elliott: Yeah, it's like be more conservative, be more cautious, do more due diligence. And it seems like if you operate with that mindset, anytime there's a distressed time, whether... Stock market's the same way. I'm red, red, red, red and I just keep buying because it's the silver lining of it, is there's opportunity and upside, as long as the whole thing doesn't collapse. And if it does, then we're all screwed, but-

Nate Trunfio: We're all in it together.

Dalton Elliott: Bingo. But back to the housing piece, we've touched on the short- term side of the fence, but let's transition to rental. You've had rents increasing at a ridiculous clip even last year, whenever, 2022 when we started to get a drop in... A deceleration in home price appreciation and then move to a flat, and declining market depending on exactly where you are. Rents increased throughout last year, what's your finger on the pulse for 2023 rents?

Nate Trunfio: Yeah, I mean, look, I think just because again, there's also a shortage in rentership demands, rents overall, generally speaking, all markets nationwide, I personally think are going to continue to increase. I think also, you're seeing a lot of people, especially first time home buyers, get squeezed out of being able to buy. And so, that's just going to continue to augment the demand that there's going to be in the rentership world. Look, my thesis or recommendation, always for the last five years since I've been really diving extremely deep into real estate investing and learning from the likes of many operators who are just extremely good at actively doing it, is in any proforma for single family or for multi- family, you should really only model and expect 3% growth in income. At the same time, you should expect at least then a 3% growth in expenses. Hence inflation has shown us more than that. But look, if you're conservative in those estimates are going to be fine. I personally think, again personally, so this means very little to many of you, but I do think rents will grow 2% to 4%. And that's fairly normal, but still good growth, healthy growth. 7%, 8%, 9%, 12% low mid- teens percent rental growth is... It's pretty obvious why it's happened because of supply and demand in rentership, but we can't expect that. I think what's been talked about but not focused about enough is what people call, and I call, the affordability crisis out there. You have a number of people that have taken on housing expenses, aka let's call it rents for this purpose, higher than higher percentage of their income than they probably should be. And then incomes continue to increase and there's been this whole shifting in the workforce taking more and more new jobs and moving more quickly and gaining more income. But again, unfortunately, as we just see some of the big blue chip companies laying off in some fairly large reduction in forces, people are going to lose jobs and have to take jobs with less income and it'll be even less affordable than it's already been in times past. And so, that's the concern that I have, is that there's going to be some affordability challenges of tenants throughout different pockets of the country, for different pockets of reasons. And again, just back to... no different than with flipping and with building, operators who own just a small handful of rental properties, it's going to be really hard to sustain holding onto the rental properties and not having to just say, " Hey, I can't deal with this anymore, this tenant won't pay me. I don't want to evict, I need to sell this." I think there's just going to be more of that for people that don't have this infrastructure or a larger portfolio of 20, 40, 60, a hundred homes, where the cash flows on those assets can cover the couple of deals that are trouble, which you're always going to have in any realm of real estate investors. So, I do think that it could be challenging for more of the smaller landlords, but all in all, I mean, there's a reason why people that are way smarter than me, in organizations that have billions if not trillions of dollars, are just going as deep as they can go in all things single family rental, cash flow investing properties, you look at the Blackstones of the world and things like that. I mean, it's just because there's so much belief in the product in the future. We can't expect what we've had in the past years and that's probably an obvious statement, but I don't think you're going to see a material decline, although it'll feel like a material decline when you're not getting the either high single digits or low mid- teens increases in rents. It feels like we're dropping off, no different than the housing market with values. It's like if we're not getting seven to 10 plus percent appreciation a year and we're only going to get two or three across the nation, it feels like prices are going down, but reality, they're still technically going to go up if that's the case.

Dalton Elliott: Yeah, normal is healthy. Like you said, having... Austin is the stat that keeps popping up in my mind, or something that I've memorized. And from May, 2020 to 2021, 35% or so HPA, so a metric like that is unhealthy. Yes, it's great if you already own property, but generally, whether it's a big upswing or a big downturn, that's unhealthy. Normal is healthy.

Nate Trunfio: Yeah, I mean look, just real quick, I mean, you look at your boom cities, Austin, Phoenix, a number of places in Nevada, the ones that boomed at exorbitant rates, which technically it's not illegitimate by any means, it's fully legitimate obviously, but they've also seen the biggest drops recently. I mean, Austin and Phoenix specifically, are in two of the largest decreases of home values in the last six months comparative to other markets. And so, what goes up must come down to some extent, and unfortunately I say this and I hope it's not taken out of context, because there's some... just people that unfortunately get hurt in this scenario, buying a peak of market and then having it depreciate significantly. But that is unfortunately healthy because of abnormal prices and there's just so many other factors that tie into it. But there has to be some of that. And unfortunately, look, the government's coming out there and saying fairly hawkishly, I think, that there's going to be more distress and to expect it and that doesn't bring anybody any happiness, but it is to your point, normal.

Dalton Elliott: All right, we've really covered the one to four unit side of the fence. So, let's go big as we wrap up here. Talk to me about multi- family. I feel like when COVID hit, we started to see a ton of new entrants into the multi- family space, and not new investors but folks who were exposed on the one to four unit side with one to four unit rehabs, one to four unit rental properties. But a ton of folks I know who were squarely in that one to four either added exposure to, or exclusively went, to multi- family. So, knowing that continues to be... and I feel like anywhere you go, whether it's Greenville, South Carolina, where we're headquartered, Atlanta's close by. When I go see my sister out in Dallas, I feel like anywhere I go, I see multi- family developments popping up like crazy. Just build, build, build. So, what's going on in the multi- family world?

Nate Trunfio: Yeah, no different than the others, a lot. But all directly up and to the right too. I mean, look, first you bring last comment there of multi- family developments. I mean, they've been going at a pretty strong clip, arguably stronger than single family developments and starts and builds, and they've been bringing a lot of product... There's a lot of product coming online and going to come online of projects that have been started in recent, past years. But on existing hard assets, I mean there's just so many factors that give tailwinds to multi- family and it's such an exciting space and something that again, is just a result of so many variables and factors that have benefited. And so, first and foremost there is a significant, extremely sizable amount of liquidity and desire to invest money to gain yield in larger scale real estate investment strategies, aka multi- family, I'm going to call it in this scenario, there's plenty of other commercial asset classes that this falls into, that has been dumped into our markets. Whether it's capital markets or local markets, buying properties. And so, multi- family has been so resilient and has been such a tried and true asset class, and we have housing shortage by a significant number, that yields people to move towards the rentership side. And so, that means they need places to live and there's no better way to build it in scale than multi- family, or run it in scale than the multi- family. So, this money's come in which has driven prices up. At the same time, you typically are valuing multi- family assets from an NOI basis and NOI is income minus expenses equals NOI, and what did we just talk about with the rise in rents over the last number of years? They've just gone up and up and up and up at accelerated paces. And so, assets have yielded higher NOI, you have money flooring in, so there's so much demand for it. Which again, then you look at cap rates and things like that, just drives pricing up. So, everybody that was in it for ages from now, is still in it, has made a killing over the last year or the last number of years. People who are new entrant to multi- family operating, whether they just got into it first off, or they graduated from single family to multi- family, they've made a killing in multi- family over the last number of years, they've grown their portfolios significantly. A lot of people move to multi- family from single family because they find economies of scale. And you can build out your infrastructure and if they wanted to buy a bunch of scattered site single family rentals, well, why wouldn't I just buy one property with all those what was scattered site, which is much harder to manage, much harder to do maintenance on, much harder to do everything on rather than put it all in a central location. People have just gravitated to this as a result. And so, it's just been such a great investment class for these reasons and many others, and it's caused there to be what I call the dreaded F word, which is not what you're thinking but, frothy. It's been extremely frothy, until somewhat recently. It's still very frothy cause of the amount of capital that's in the game and on the sidelines trying to get in the game. But what we started to see is, over this last year and specifically the second half, the gap between a buyer's expectation and a seller's expectation on what the price is of a multi- family asset has just gone like this. It was like this because honestly a big component was debt was so cheap. And so, when money was frothy, well if you can tie... People typically buy multi- family to hold it as a cash flowing asset, which means they're going to hold it for a while with typically permanent debt once it's stabilized. Well, when rates are significantly low and agencies are lending 3%, 4% and things of that nature, you can pay more for an asset because your yield from a cash flow perspective, your cash and cash returns, are going to be great. But when debt goes up, rates go up, you lose your cash flow and then you lose your ability to get the returns that you wanted. So, that's where buyers felt that first because rates went up and leverage came down, they got to put more money and pay more money in equity and then pay more money for debt. So, they have to offer lower prices. And then sellers are out there like, " Nah, we're still in this four cap environment, you should be paying this four cap." And so, there's then this gap. And so, what we've seen and what you see across the market is like it's taken transactions longer. You see people backing out of contracts more. You're starting to see less bids, you're starting to see more price drops. No different than you've seen on the single family side, but things have started to really move... I said, things have started to move a little bit. That gap of buyers and sellers expectation has shrunk just because now reality is punching everybody in the face and sellers are finally knocked off their high horse a little bit. But again, there's still so much money that wants to invest and it's such a tried and true investment class. The fundamentals of supply and demand on the rentership side is so strong, that I mean, there's not going to be a reckoning in all things multi- family because of those items. It's still a great investment class. I think if you're not able to operate on any value add plans that you had, you really need to tighten up your business plan and operations and work through that quickly. Because we are going to get back to some of the normalcy that the age old investors are used to, which is can be harder to lease at the rents that you want. You're having to deal with turnover of tenants, you're having to deal with more delinquency in rent payments, and things that of that nature. You're dealing with more loss to lease because rents aren't just continuing going up and up and up and up and up in every market, and you got to give concessions to get people in the door. So, it's no different than what we just ended with a minute ago or a couple minutes ago. It's getting back to normal, but still things are thriving. And again, the outlook in multi- family is extremely strong. It's just going to be a little bit of a new normal in what the heck is going to happen upcoming world.

Dalton Elliott: Beautiful. A wonderful blow- by- blow of what we're looking at for this year. And I'm going to challenge you here as we wrap up. You and I are both wonderfully blessed with the gift of gab. I think if you put us in a room full of people and say, " Talk for eight hours," we'd do a good stretch and get after it and have no trouble and love every minute of it, so I'm going to... as I do just that right now. So, I want to challenge you. Give me a sentence that describes how you feel about 2023.

Nate Trunfio: Oh well, while I buy time to think of that really quickly, since you compared us together. I again, just want to thank you for who you are and the relationship and friendship that we have. I want the world to know that we have had this hashtag that we've never used before, maybe we can pop it on screen or something. And so our hashtag for the combo of you and I, which I think is a deadly duo, is Beauty and the Beast. And we'll let the audience figure out who's the Beauty and who's the Beast. But typically Beauty comes with blonde hair and not brunette. So, we'll let the audience make that decision. But one sentence for 2023 is, don't let emotions get to you too much. Stay the course. Focus on the tried and true, be disciplined, still look to invest. You just got to be sharper and smarter and you gave me the sub- line earlier, it's just going to be a little bit harder. And that all goes back to, again, you don't need to come up with these really creative ways to get through things. Focus on the fundamentals now more than ever. It's going to be more evident and important that you buy right, that you have the good and sound business plan. If you're doing construction, then you're really targeting a conservative estimate on what the budget's going to be. Rents, you need to be conservative on. ARV expected completion value needs to be a little bit more conservative. Just follow the main principles that have been tried and trued and tested over time. And that's the guidance that I have. So, that is a long sentence and period right there. So, I cheated a little bit, but that's what I got.

Dalton Elliott: I know if I ask for a sentence, I get a paragraph, which is perfectly good. I know. Hey, thank you so much. Not only for jumping on this podcast, but I report up to you. I've reported to you for the past year and have enjoyed so much of it. I've learned an incredible amount from you. We, I think, are so complementary in that we have a lot of great similarities and a lot of wonderful differences that just allow me to learn and grow personally and professionally from you so much. And at the end of the day, that's a huge driver for me, why I show up. It's just learning, growing, developing, so I can be more effective. And yeah, I can't thank you enough for your friendship, for your mentorship, everything over the last year and yeah, super, deeply appreciative for your friendship.

Nate Trunfio: Hey, don't thank me man. Look, it is more than right back at you. And again, as I start off, we just appreciate what you do in all realms. First and foremost, as a dear friend of mine, but for our Lima One community, for private lending community, for real estate investing community, you truly are not only a company man, but a go= giver. I know that's why we relate, is we just really want to partner. So, you said reporting, whatever, it's not reporting. I just thank you for your partnership because that's how we look at this as we continue to learn on how we lead, as students of it. And we couldn't do this without our team. And I sure as heck couldn't do this without you, my man, so I thank you as well. And again, it's an honor to be a part of Real Estate of Things here, because this is such a great thing. And man, lots of episodes, lots of content. So hopefully, people get to this episode and this part of it after all the other good stuff that you had over 50, 60 plus episodes, man. So, congrats on that and we appreciate what you do.

Dalton Elliott: Thank you my guy. Much love. Thanks again for jumping on.

Nate Trunfio: Happy investing everybody.

Dalton Elliott: Beautiful. Thank y'all for listening. Take care.