Welcome to our latest episode! Today, we’re excited to welcome back Charles Dobens, a multifamily expert and industry leader, for another insightful conversation. With over $50 million in real estate deals and more than $3 billion in multifamily transactions guided by his clients, Charles is the mastermind behind the MultifamilyOS™ system and the innovative Hotel to Apartment Conversion program.
In this episode, Charles shares his insights on the current multifamily market, highlighting the impact of rising interest rates and the challenges with maturity defaults. He also dives into the unique opportunities presented by converting hotels into apartment complexes, explaining how this strategy can capitalize on market demand and create value. Whether you’re navigating real estate or looking for creative investment strategies, Charles’s expertise offers a wealth of knowledge to tap into.
Tune in now to gain expert advice on multifamily investing, risk management, and long-term market opportunities, drawn from Charles Dobens’s extensive experience and industry-leading strategies!
HIGHLIGHTS OF THE EPISODE
00:00 – Welcome to the BigMikeFund Podcast
00:23 – Guest intro: Charles Dobens
02:35 – The challenge of maturity defaults in the multifamily space
05:55 – Solutions for distressed properties
10:00 – Market trends and the impact of rising interest rates on valuations
14:10 – Introduction to hotel-to-apartment conversions
18:35 – Key success factors for converting hotels into apartments
24:50 – Regional market dynamics and where the best opportunities are
30:10 – Lessons learned from past downturns and the path to recovery
37:10 – Final thoughts and how to connect with Charles
If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.
CONNECTING WITH THE GUEST
Website: https://multifamilyos.com/
Linkedin: https://www.linkedin.com/in/charlesdobens/
Instagram: https://www.instagram.com/multifamily_investing_academy/
Full Transcript:
Intro: Welcome to the BigMikeFund Podcast, where you’ll learn about advanced wealth building strategies from real estate investing to creating massive ROI and secure retirement profits. So pour yourself a cup of coffee, grab a notepad, and lean in. Because Big Mike has got the mic, starting now.
Mike Zlotnik: Welcome to the BigMikeFund Podcast. I’m the Big Mike, Mike Zlotnik, and today it is my pleasure and a privilege to welcome back Charlie Dobens. Hi, Charlie. Hi, Charlie.
Charles Dobens:
Hello, Mike. How are you?
Mike Zlotnik:
Thank you for coming back on a podcast. How have you been?
Charles Dobens: Very well. Very well. I was just commenting before we went on air. Geez, Mike, you look great. You look, like I said, you lost weight. You clean up your act, Mike. I mean, what, what’s going on with you?
Mike Zlotnik: I appreciate that. Yeah, I’ve lost a little bit of weight. I’m, you know, I’m working on that, making progress. So thank you. Good. Good for you. You look great too. Thank you. But we’ll skip the pleasantries.
Let’s dive straight into the what’s going on in the world of multi family and Basically, you’re, you’re, you’re an attorney, practicing attorney doing many things, many folks. Let’s talk about what are you seeing out there? Where is your work concentrated today? What is the exciting stuff? Good or bad?
Charles Dobens: All right. Well, I mean, there are really two areas that we’re seeing in this business right now. Because as you know, the transaction volume has declined on multifamily. There’s a huge disparity between the bids and the asks between the buyers and the sellers. And just, you know, two years ago, the sellers were getting top dollar for their properties.
And now they can’t can’t make the numbers work due to the interest rates. And of course, As we all know, interest rates have nothing to do with the valuation of a property, but they have everything to do with the cost of doing business. And so that’s why we’re seeing these prices are not matching up.
So what we’re seeing are, are you know, two opportunities, two areas that we’re moving into, which are maturity defaults which I’ll, I’ll explain in just a moment. And also conversion, converting hotels, existing hotels into multifamily properties and thereby really just changing the asset class of the property.
And by doing that, you change the cap rate. So those are the 2 areas that we see opportunity and and you know, this, this, I can talk quite a bit about. Maturity defaults you know, as an attorney, my clients contact me over issues they’re having with their lenders. Dealing with one right now with this, with my, my client didn’t even know that the property was being placed into a special servicer and was becoming a a, a troubled asset with the bank.
But the problem we’re seeing right now is that they’re, you know, it’s as one person said on Globest the other day, Mike, Mike Mark Silverman of Locke Lord partner said that what’s happening now is really just a timing issue. And I could not agree with them more. The problem is that the, you know, there were so many transactions done back in the, in the late teens that if there were five year terms, they’re now coming due and they’re coming due at a time when the interest rates are extremely high valuations, cap rates have gone up, the properties have lost value, and they just can’t make the numbers work.
And therefore You know, kind of like back in the old 2008 days where the banks were just kicking, kicking the can down the road, they were extending and pretending. We’re starting to see more of that in, in the industry right now where the, where the lenders are extending the, the the maturity dates so that these properties.
Are defaulting at maturity and have more time to get back on their feet and figure out a solution because the banks don’t want to take them back.
Mike Zlotnik: Yeah, I appreciate that wisdom. In general, I concur that most of the banks don’t want them back, but they do want to untwist it a little bit. So maturity, maturity cliff was the term, maturity wall was the term.
And absolutely maturing loans for five years ago that were financed at meaningfully lower rates today can’t really refinance at the, at the current rates especially if you look at the debt service coverage ratio, hard to meet, right? And then LTV is also questionable. So what solutions are you finding?
So you’ve got two types of maturity defaults in a manner of speaking. One, Let’s call it term maturity, right? The other one becomes, are you seeing bridge loan maturities which is a little different beast, but it’s the same kind of a problem where these loans, well, a few categories. So term maturity on a fixed rate debt, sort of a term maturity on a bridge loan from a few years ago, and then I’ve seen another thing that’s been aggravating banks.
They basically don’t like death service coverage. You, you have some kind of provisions default based on covenants. So, they are getting agitated with something, death service coverage ratio being one of them. That they want the borrowers to bring some more cash to the deal, right? That’s the ultimate solution.
What do they want? They want the borrowers to the risk bank’s position, bring some cash, put it in escrow, pay some down. And, how are you dealing with these situations?
Charles Dobens: You know that that is exactly how it works. I mean the banks You know you’re dealing with two types of banks you’re dealing with what I call frank’s bank Which is your local lenders and you’re dealing with the fannie mae’s and the CMBS loans, which is a totally different beast but as a matter of fact, that was one of the issues.
I just saw creep up where you know, the client obviously if it’s A-C-M-B-S note, those, they’re, they’re getting reports every single month and they’re reporting to, to the GSEs on how the property’s doing. Soon as the property triggers a debt coverage loan Covenant breach then, then that’s when you see these, these banks start to put them on the watch list.
And when they go on the watch list, that’s when it triggers a lot of notification among other investors. I mean, that’s when you start to see the vultures start to, to go in and, and go after those properties. But the, I mean, I tell you, I had a situation back in 2008. I had just closed on a large multifamily property and, you know, then Fannie and Freddie filed for bankruptcy and the world changes overnight.
And I held onto that property for, let me see, 2007 years, seven year term. And by the time I got to that, that maturity, the property hadn’t come back. It had not come back in value. And in those days, I sat down with the bank. The bank came out to the property. We sat across from each other. I said, guys, I just need more time.
I just need more time. And, and, you know, I know I can make this thing work. I haven’t missed a payment. I haven’t, I’m running this property beautifully. It’s just the value has, has, has lost. Just give me more time. Now, remember the guy just sitting across from me in the office, very matter of factly saying, no, that’s not how we work.
We just take the property back. I’m like, no, we just need more time. We just need, no, we just, hey, we just shake hands and part friends. No, no hard feelings. That’s how it works in the CMBS world. I’m like, wow. Okay, well, thanks very much. There goes everything. And we moved on. As opposed to today. When I just mentioned, I’m now starting to see some of these dust lenders, some of these, these servicers coming up with creative solutions so that they don’t have to do that.
And if they have a good owner who does have a lot of capital, then they’re willing to work a little bit on the loan and, and help the, help the guy out. Otherwise, They’re just taking the properties back like they did in the past. But now, I mean, in the past, there was only one option. They took the property back.
Now you’re starting to see these people starting to get a little bit creative because they don’t want to take them back.
Mike Zlotnik: Yeah, and understood. And what is the creative solution look like? I’m just curious. What are they saying? What options are they giving the borrowers? Today, what are the viable solutions?
And I think they all learned a lesson of the past. They really don’t want to take those into REOs. And that’s when the market really starts correcting when they grab too many of those assets, that’s when the real problem happens today. There isn’t a big market correction because. The, the distressed inventories are not, not high, so they’re vultures looking for deals, but these workouts with banks is what’s sort of saving the market from, from going into, you know, meaningful correction.
And, and what’s really interesting is, is the fact that the Fed started to cut rates. I mean, we’re recording this post fed September meeting 24 and we know the rates already moving in the right direction. So if you give it enough time the market should start correct based on the cost of the cost of money Obviously interest rates. So what are you seeing what solutions the banks are open to?
Charles Dobens: Oh, well, I tell you what i’ve seen in this most recently are just extensions of the of the maturities of the mature maturity dates That’s what we’re
Mike Zlotnik: What do they want for the extension?
Charles Dobens: Oh yeah, they do require in some cases a rate cap lock, which is I mean rates are coming down So that that’s meaningless in some cases.
I haven’t seen it yet, but I know in the past Like you said before show us the capital. We need cash bring down the bring down that note now if you’re dealing with a frank’s bank a local lender somebody that’s that’s not governed by the feds But is more governed by the the the state bank regulators You Yes, you’re seeing that.
I mean, I had to do that back in the past. We had to bring a quarter million dollars to the table just so that one of our properties would achieve that 80 percent LTV and look good on the on the bank’s books. And so that that was one solution. The other one is the old AB loan, which is where you, you rewrite the underlying debt to be 80 percent of the new valuation.
Okay. And that shortfall, that amount that you had to carve out, you put that in a separate personal note in the form of a B loan that stays kind of off the real estate books with the bank. And that, that’s what you’re seeing on local, local lenders looking to get creative. You know, that, that becomes, that B loan becomes a personal loan that is not secured by any real estate.
But the real estate book looks really good because it’s, it’s a collateralized properly with the, with the with the bank. So those are some of the solutions that you, you tend to see. But here’s, here’s one of the biggest differences over last time, the multifamily business. The fundamentals are still very, very strong.
The demand for our product continues to grow. The supply is still incredibly limited. The problem is obviously inflation, but what’s happening is people having to bunk up and, you know, you’re getting more, more income earners living under the same, same roof paying your rents. You got to go up in the rents because inflation is impacting everybody.
But the thing is you’re, you’re, you’re keep you know, you’re seeing some, some drops in vacancy, some increases in vacancy in certain markets. But they’re not like they were back in 2008. So it’s you know, because remember back in 2008, I mean, I remember when I when the, the the short selling bank bank fiasco occurred.
I had to start competing against the single family homes. As you know, in the marketplace that I never had to do before and all of a sudden I’m getting 7. 99 for a two bedroom, two bath and now you can go down the street and rent a three bedroom, two bath house for less than what I was charging for rent.
And that’s, you know, that was the problem back then. We’re not having that problem now because we’re not having that single family home fiasco like they did back then. So the fundamentals,
Mike Zlotnik: That’s actually a really, really good point that the short supply of residential housing, including 1 to 4 doors because of that shortage, you have significant demand for multifamily.
So this is a sort of a substitution effect. Interesting about the family formation comment that some folks can choose to, you know, get a roommate if you can’t afford the, the rent. Oh, that’s always been the case for big cities. That’s kind of a, you know, some folks can live with roommates and some folks can, but at the end of the day, if you can’t afford apartment yourself, then you, you find the roommate.
At the end of the day, that’s but now let’s go back to the opportunity side. So banks are doing these workouts. Transaction volume is. Super low. Are you seeing great buys? Are you seeing that there are situations where the sellers just can’t, can’t raise or the owners can’t raise enough equity to keep the bank at bay and they’re forced to do some kind of a distressed sale, it seems like it hasn’t been really happening in volume.
Everybody talked about this, but it’s kind of like. Is it ever going to happen?
Charles Dobens: Yeah, the thing is, it’s going to be a lot more silent than it was in the past. I mean, these things are happening. I mean, obviously, you know, this is a sales and marketing business. You’ve got to find the motivated customer, the motivated seller.
Those are the people in distress. They’re not going to advertise their distress. You’ve got to go out and find them. Come up with the, with the solution to their problem, and then you will be this, the the salesperson that made the sale. And the best way to do that is, I mean, you look at CREXI. CREXI has some great information.
There, I, we’ve just switched over our our data analysis from CoStar to CREXI because CREXI was really starting to, to provide data. On the local banks the, the, the smaller mortgages, the non CMBS mortgages, you know, you look at a costar and okay, they’ve got, they’ve got all the, you know, the the CMBS information in their system.
Great. So does everybody else. That’s easy to get. But when you look at CREXI, CREXI went ahead and they’re starting to go down and find the private mortgages. They’re going to find the local lenders. You can do incredible searches on CREXI that CoStar doesn’t even come close to. And that, that data Is is helping us find those deals before anybody else’s.
And so we can go in and find banks that that are, you know, if we find one distressed asset and we find who the lender is, we can do a whole search in that particular market for how many other multifamily properties does that bank have. Have loans with and and then we can do a search that way.
We can contact the sellers or the owners at, you know, using that type of of data. It’s a lot easier that way to find because you’re not everybody’s going after the C. M. B. S. Because everybody’s got that data. It’s the other data that really separates the wheat from the chaff because that’s where the where smaller, newer investors are going to find their deals.
Mike Zlotnik: Yeah, understood. So, it’s an interesting new tool. I, I haven’t heard the what’s called
Charles Dobens: CREXI. C R E X I.
Mike Zlotnik: CREXI. Got it. Thank you for the education. We’ve been using cold start, but that that’s that’s I first time. Oh sure
Charles Dobens: Dinosaur Mike. You’re a dinosaur.
Mike Zlotnik: I know I know I admit that fact. So now, let’s reverse the role. Are you working with existing owners that are reverting to raising fresh capital and how they’re raising fresh capital to buy time?
Are they doing mass? Are they doing secondary data? Are they doing preferred equity? Because a lot of these deals, if you give them enough time, and the fundamentals, as you pointed out, are good, the time and the execution of the value add strategy, whatever that is, might solve all the problems. And the distress is not that severe.
In fact, stress is really related to the interest rates. There’s not a fundamental distress. It’s just the cost of financing, which will be corrected over the next It’s called year and a half as Fed executes their policy. So, where, where are we gonna basically, where do you see the opportunities in this environment?
Is this in the deployment of preferred equity mass debt? Is this still looking for deep buys through the Tools like, like Xi or is it something else?
Charles Dobens: You know, there there’s a you know, one thing that I’ve seen that I am not a fan on of are these debt rescue funds. These where these syndicators are now out raising more money to be a source of, of a debt financing.
In a lot of cases, they’re doing it for their own deals. They’re, they’re taking money again to go bolster up their own deals. This is seen you can actually follow it if you check out viceroy research.org. They are, Viceroy Research is a very unique organization. They are short sellers. They go out there, find distressed companies you know, buy their, buy their stock short short, short their stock.
And then start monitoring how the business is being run and then report on it. One of their biggest punching bags right now happens to be Arbor Financial. Arbor Financial is one of the biggest lenders as, as a as a bridge lender and as a, as a dust lender for Fannie and Freddie. To value add multifamily properties, B’s and C’s, and they are a lot of their properties they’ve had to take back and a lot of properties you know, you’ve seen a lot of these syndicators, like, you know, remember that Apple’s Way debacle where they took back four properties, that was Arbor Financial, but in their most recent report, Arbor Report, they, they break down how these syndicators use.
are using debt funds in order to bolster up their, their original deals. And essentially they’re, they’re using those debt funds to pay back Arbor and Arbor will then rewrite the interest rate and extend the deal. So that’s how some of these syndicators are keeping their deals going by, by.
Essentially, what they end up doing, and this was spelled out in the, in the Viceroy report, Viceroy report was that they were the, the, the original investors will essentially end up with nothing. And, but they will be able to keep their property going. So that’s, that’s what I’m seeing and I don’t like it.
And it, it I’ve yet to see any one of these types of debt funds really create safety for the original investors. It’s really creating safety for their business and, and hopefully giving these investors in the debt funds a great return, but I’m not seeing it and, and, and the numbers speak for themselves.
Mike Zlotnik: Yeah. That’s an interesting observation. And I do concur with the point of view that the new money as it’s being deployed, and we do some of it on our own past deals. It’s a conflict, right? If you raise the money in the past and you’re raising the money now, but the priority is obviously for the new money.
It’s kind of one of these funny situations where you you certainly want to give these past deals opportunity to survive and to thrive, but in order to survive, they need liquidity, right? If they can’t raise liquidity, capital calls haven’t worked very well. So I don’t know if you’ve seen this, many people have tried and they get very low participation.
Yeah. So in absence of that what do you do as an owner of the property you either run out of cash and turn the asset over to the bank. You go through a distressed sale and you get very little to original investors. So you take on fresh Mez or fresh preferred equity and that dilutes existing investors, but it buys time and the opportunity to get the property to better, you know point of time and point of performance.
So as much as you have the right point that the mass debt new money objective first and foremost objective is to be safe New money right with its own safe new return And the side effect of that is to help original deals in order to help original deals They have to survive at the end of the day.
That’s that’s kind of the path if you’re sitting on a property 90. You can’t refi Into agency debt, you are still forced to be in a bridge loan. Then you don’t really have too many options. You gotta get to the 90, called 95% occupancy, execute on that, and then if you can refi into agency as soon as you can, and then hold the property long enough when the market recovers.
But you still need, you need time and money to get to that point where you can actually refi. Or hopefully, if you get the bridge in 18 months from now, the market is meaningfully better, then you could sell. Right? You, you have optionality.
Charles Dobens: Yep, I mean that you’re absolutely right and it’s the timing issue And the problem is that that was what their intent was early on and they ran out of money and they ran out of time So now they’re trying to you know, keep the deal going, to try to make up for the lost time You know, I had a just to give your listeners an education here because I had a client contact me.
He had been an investor I signed on as a gp in one of these big big, guru, multifamily guru trainers investment. So he put it in, they made him a GP and then, you know, five to seven years later they get notification that the bank is, you know, going to start the proceedings for taking the property back and they all get involved.
They had a cash call. Many of the investors put money in, but there was one guy who was running the deal, and he was part of the you know, the upper echelon of that guru’s organization, and he was supposed to be keeping his eye on it. He never did. He was always moved on to the next deal and the next deal and the next deal.
And so my client looks at this and says, Hey, I don’t want to lose my money. I want to get involved now and start turning this thing around and the problem was in the structure of the operating agreement and the ownership as well. What does it take to get rid of that guy who was supposed to be managing the property, the asset manager of the property?
And it was all drafted in the operating agreement and it was drafted in such a way that You couldn’t get enough votes to get rid of this guy And so that’s something that people need to look at when they’re entering into these types of deals You’ve got to understand what what happens during the divorce How do I get rid of that spouse and and what’s it going to take to remove that person as an operator?
So that we can get in there and fix the property if we have to And that was the problem that they were coming up against but there are a lot of people that are coming up against this problem
Mike Zlotnik: Yeah, I just want to give you a little love and appreciation for that point. So what you just described, well, lessons learned, right?
We’ll go back and we now start analyzing what we should have, could have done better on many fronts. Of course, there’s two big lessons here. One of the biggest lessons of them all, this should have been capitalized with much more cash to be able to survive unknowns and problems and issues. Whatever scale, right?
So many deals were just not set up for that. And then the second interesting point is a lot of these operating agreements were written in a really bad way. So how do you fix it? Well, on a future deals, of course, you, you, you learn the lessons. How do you, if you prepare for situations where GP just becomes dysfunctional and they can’t, they can’t Perform in a good case scenario.
They’ll just literally disengage and say, listen, I can’t help the project. I’m of little value. You guys are on the show. I’ll just, you know, sign whatever paperwork can be off the deal. And in some cases, if they turn confrontational, then of course you’ve got a, you’ve got a troubled deal with the troubled partners.
And some of them sink because of that type of bad arrangement in the, in the first place.
Charles Dobens: Yeah, that’s exactly it.
Mike Zlotnik: So let’s continue the discussion. We have a few, a few more minutes. Just want to kind of see any other really interesting opportunities ahead. I know you talked about hotel conversions to multifamily and are you seeing this?
Cause what I’ve seen interestingly enough in that space, just a couple of comments and I’ve seen some successful deals, but I’ve also seen deals where they converted extended stake hotel to the small apartments. And then in those markets, you have new supply that came in. So you have this converted small apartments now competing with the product that they can compete with.
So they can’t really get the target rents. It’s kind of interesting. The new supply problem in multifamily is real in some markets where when the rates were low, a lot of starts took place and then they delivered it in the worst possible time when the deal started to struggle and the new supply came in and you got that’s actually negative.
appreciation on rents and the rents started to soften in some, some cities and markets, right? So I’m just curious you’re doing new projects, very carefully selecting the right type of property that, that still makes sense to convert.
Charles Dobens: Exactly. And, and, okay, so you have touched upon some of the big issues that people don’t even think about when you’re talking about hotel conversion.
I mean, when you’re dealing with, You know, it’s so important to be able to find a property where the market rents are high enough to get the returns for your investor. And, you know, that ties into obviously how low you’re buying the property to begin with. One of the issues that we’ve seen in these hotel conversions, there was one big hotel converter, he was a multifamily guy, and he decided he was going to try to get into the hotel conversion business.
So we ended up thinking, Oh, I’m going to buy three hotels in the same sub market and almost the same street in a particular city. Well, what ends up happening is when you’re done, you’ve now flooded the market with 550 studio apartments. in one area. That’s a tough absorption rate to swallow. And that, that, we have never seen that be that successful.
I mean, we look at properties between 70 and 125. The one we’re doing now is 141. So that’s a, that’s a large size property, but 70 to 25 are typically the right size that we’re looking for in these types of properties. And, you know, when you buy them at the right price, and you know that you can get over, you know, 1, 000 a month per unit, those tend to be a great deal, and the numbers look fantastic.
So there’s a lot of things you need to look at. I mean, primary markets are tough. Secondary markets are much better for these types of conversions. Is usually a huge demand. We’re not competing against those types of new construction that you were just talking about because they’re not going into those secondary markets in order for new construction to to pencil out and to get the returns that their investors need.
They need to be in a primary market where they’re getting top dollar and many times those new constructions. They, a studio apartment doesn’t make sense for them from a financial standpoint. So they’re building more of the twos, ones, twos, and threes. And so the, the, the type of person who rents our units can’t afford those new class A properties.
And so they are, they looked for our types of, of properties day in and day out. So, so it really is Finding the right market getting the right valuation, getting the right price, and then putting the two together, and that’s how we come up with our successes.
Mike Zlotnik: Yeah, I appreciate that. This is all local, and it needs superb execution, and obviously the example you gave.
Where it’s too much supply in a given market could be a gigantic problem. So it has to be done very, very careful. All right. We kind of running out of time, but any final comments, thoughts about where things are going from here? What do you see on the. It’s called recovery path, and the reason, even though the fundamentals are still strong in multifamily sector for many reasons, one of them being the product not oversupplied.
Let’s just let’s just talk about non oversupplied market. Some markets got oversupplied, but that aside, we still we still have a lot of, need for the housing units, especially one thing that we, most people don’t really recognize. We’ve let I don’t know, millions, maybe tens of millions of undocumented migrants into the country.
And that’s aggregate demand for housing. Think about it. I live in New York City. I’ve seen they build temporary camps, almost like military camps. And there’s a lot of folks living in these short term. I don’t even know what they called temporary housing units. And this is, this is, doesn’t work on a long term basis.
So you, you, you have aggregate demand growth. That’s, that’s happening. Plus U. S. is still one of the most desired places to, to immigrate legally. So with, with overall market conditions are still being favorable for multifamily. What the recovery path should look like, because we’ve seen high, higher for longer interest rates, a lot of pain, maturity cliff, maturity wall bridge loans that are maturing.
But those problems, you know, appear to be temporary. If the Fed does what they just signaled to do, we’re going to start moving down, maybe not. As fast as we’d love to, but it’s still in the right direction. Is it a year and a half, two years? And we find ourselves in a much, much stronger market. What do you think?
Charles Dobens: You know, Mike, you and I are old enough to know we’ve been through this before. I remember back in 2008. Oh, this is just going to be a year correction. This is just going to take it took a lot longer. So I am not looking at this as being a short term 1 year fix just because Jerome Powell decides he’s going to drop, you know, you know, 100 basis points or something.
This is going to be a, a It’s not going to be like 2008, but there, it is going to take longer than anyone anticipates. That’s just the nature of the business. I mean, he can, he can change the interest rates tomorrow, but it’s not going to bring all the cap rates back down to where they were before.
I mean, I, I honestly think that the whole concept behind free money, which is what was essentially going on before, Forehand, the interest rates are so low. That is you know, that’s in the past quant, quantitative quantitative easing has, has gone. And now you know, we’re, we’re on the other side and I don’t think we’re gonna be looking back anytime soon.
I honestly tell you. And, and I, and I don’t mean to get political or, or anything. I think. And this is really, I don’t mean to, I’m not trying to pick sides. This is just my impression. If we get Donald Trump back in, I think there’s going to be a just a change in the mindset. Many people are just hired here.
It’s almost feeling like the, you know, the old Jimmy Carter days. I don’t know if you were around for that, but you know, that’s this, it was, you know, bleak. It just felt bleak. I think getting, getting Trump back in In there will change people’s mindset and make things move if Kamala Harris gets back in there I mean, it’s just more of the same and I don’t think people are looking for that.
You know, that’s just my my opinion you know that’s just the way i’ve seen this before I I kind of take take, you know Look at politics the same way my father did, you know the day after a national election He’d walk into the office and say who won? And everybody would laugh, but his point was it doesn’t matter.
He’s, he’s still got to go back to work and feed his family. So that’s, that’s kind of my, my attitude towards it all. I just think that, you know, we do need a shot in the arm. That’s the, that’s the fastest way to get us through this, this these doldrums.
Mike Zlotnik: Yeah, I appreciate the comment. Yeah, I, I I share the, the sentiment that in general, Trump is known to be a real estate guy, right?
So if you come to the office, he might bring back 2017, what I would call jobs act with the extended bonus depreciation, and he will be viewed as a more pro business pro, let’s call it real estate while Kamala will, will look like Joe Biden number two. And it’s sort of a, that’s what it feels like. I agree from that, with that point of view.
Charles Dobens: Let me just tell you something. As an attorney, we do some estate work at my firm. You know, there’s a sunset provision on the estate tax deduction. Right now, the estate tax deduction is over 12 million. 2025, it’s supposed to sunset back to 5 million. That means everyone dying. Is going to be responsible for so much more in estate taxes because of, because of that estate, you know, they, they keep you know, they keep extending it, but if the Democrats get into control again, they want money.
They want, you know, assets, they will let that thing sunset and then it’s going to change everyone’s, everyone’s perspective or, or, you know, every wealthy person is going to look and see, hey, wow, I got a, I got a big problem now because my tax is more than doubled overnight because of the estate tax deduction sunset.
So these are things that, you know, you don’t think about, but they exist and you know, it’s, it’s a real, it’s a real thing.
Mike Zlotnik: Yeah, absolutely. It’s a real thing. And. Of course, all those things should be adjusted for inflation, but they haven’t been adjusted. So they’ll just sunset and we’ll be pulled back to what they were many, many years before.
Charles Dobens: Exactly. Yep.
Mike Zlotnik: Yeah, understood. So, but I’m going back to the one final point and then we’ve got to wrap up. It doesn’t matter who wins. I really don’t think that whoever runs the White House is going to make all the difference in the world of business. Of course, there’s going to be some big pushes and political agenda, but at the end of the day.
Most of the, you know, I, I like to compare who is more powerful, the president of the United States versus the Fed chair. And the, the interesting, my view is the Fed chair is much more powerful because interest rates are so ingrained in what we do. The cost of money, like you used to, you said used to be free money or low cost money.
It’s so ingrained into the economics of the investing and there’s more power in Jay Powell’s hands. Then where was the president, especially when you have the House and the Senate that can put up a battle and if you have sort of a split government, you have at least some kind of balance of power while the Federal Reserve, there is no balance of power.
Fed chair runs the open market committee, and they had one descending member. If you look at the last meeting, one typically out of a dozen people descends. And the dissension was, let’s cut the rates by a quarter versus 50 basis points, because if you cut a 50 basis points, it’s going to scare the market. So,
Charles Dobens: You know, keep in mind, I mean, you and I are about the same age and, you know, in this book, Big Shifts Ahead was kind of kind of dated now, they said people in our generation are retiring with the least amount of equity than any previous generation before us. And you think to yourself, why? Why is that the case?
What is different about our generation than everyone else? And it’s very simple, and it makes total sense. We are the first generation that has lived our entire life off the gold standard. And we have been subject to more economic upheavals. More economic cycles than any other generation before us, and that has created a lot of problems and and, you know, it ties into the Fed and somebody’s in control because we don’t have a standard.
Mike Zlotnik: Yeah, I appreciate that. That’s why gold and silver precious metals are going through the roof because ultimately there’s a concern that the government will keep printing money. Yeah. What’s the best way to reach out? How would folks reach out if they want to work with you, ask you questions, et cetera?
Charles Dobens: All right. Well, the way can do is you can reach me at Charles at Dobens law dot com, or we’re just switching over. It’s Charles at Dak dot law. D a c c dot law. That’s one way you can email me. I, I represent my, my specialty is really on the multifamily side. I, I love representing people buying properties and taking them through the whole acquisition process.
We don’t do securities work, but we tie in with a great securities firm to make sure that you’re doing everything correctly. And also the multifamily investing academy is my educational arm and that’s multifamilyOS. com. And that’s That’s how I teach you the business of multi family ownership which is, I still believe is the greatest business in the world to be in. So that’s it.
Mike Zlotnik: Thank you, Charlie, for your wisdom. Thank you for sharing and appreciate you coming on our podcast. Thank you so much.
Charles Dobens: My pleasure. It was a lot of fun. Always good to see you, Mike.
Mike Zlotnik: Likewise.
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