He Tripled His Cash Flow by Doing What Most Buy-and-Hold Investors Won’t | Ep. 1003

Episode Summary

Many real estate investors reach a plateau where expanding unit counts creates operational friction rather than proportional returns. Continuing to hold legacy assets without ongoing evaluation introduces significant opportunity costs, particularly when property appreciation outpaces rental income growth and reduces return on equity.

Chris Lopez, co-founder of Property Llama and host of PassivePockets, advocates that real estate owners should operate like active fund managers by systematically reassessing, rebalancing, and pruning their portfolios. Through analyzing his personal portfolio transitions—including selling residential rental properties, exiting 3% mortgage rates, and accepting tax events—Chris demonstrates how reallocating capital into passive real estate structures like private lending and syndications can triple cash flow while eliminating management overhead.

Evaluating passive opportunities requires rigorous sponsor vetting, analyzing capital stack safety, and assessing downside protections rather than relying solely on projected returns. Operators who maintain conservative leverage ratios around 60–65% loan-to-value and preserve strong cash balance sheets are best positioned to navigate market downturns and rent contractions. Investors should establish strict portfolio allocation guardrails, cap single-sponsor exposure at 10%, and utilize strategies like “lazy” 1031 exchanges to offset capital gains. Ultimately, treating real estate as a fluid capital allocation exercise enables investors to optimize for risk-adjusted income, liquidity, and long-term wealth preservation.

Key Takeaways

Takeaway 1 Investors should conduct an annual portfolio review to reevaluate and rebalance real estate holdings just as they would traditional financial assets.

Takeaway 2 Holding low-cap-rate rental properties with substantial built-in equity restricts cash flow potential and traps capital that could be redeployed more productively.

Takeaway 3 Transitioning from active landlording to passive investments like private debt or syndications can significantly increase income while eliminating operational burdens.

Takeaway 4 Thorough sponsor vetting requires investigating key-man risk, verifying full-cycle track records, evaluating worst-case debt structures, and consulting independent limited partner references.

Takeaway 5 Conservative leverage between 60% and 65% loan-to-value combined with healthy cash reserves provides essential downside protection against market corrections and falling rents.

Key Topics Covered

• Portfolio Rebalancing and Capital Allocation Strategies
• Return on Equity vs. Traditional Buy-and-Hold
• The Opportunity Cost of Holding Low-Cap-Rate Rentals
• Transitioning Capital from Active Landlording to Passive Investments
• Private Debt and Hard Money Lending Funds
• Tax Strategies and “Lazy” 1031 Exchanges
• Sponsor Vetting and Key-Man Risk Mitigation
• Capital Stack Evaluation and Debt Structure Risks
• Market Cycles, Rent Contractions, and Historical Drawdowns
• LP Portfolio Diversification and Risk Management Guardrails

Episode Chapters

00:00 The “Problem” with Buy-and-Hold
Kevin and Chris discuss why investors must transition from acquiring more units to evaluating whether their existing portfolio still aligns with their financial goals.

00:33 Assessing Portfolio Performance
Chris shares his background in financial planning and explains how a mentor helped him realize that holding onto an asset indefinitely can stifle wealth creation.

06:29 Chris’s Condo (Deal Breakdown)
Chris breaks down his first investment condo deal, demonstrating how low cash flow on high equity made it an underperforming asset despite low original basis.

10:23 Finding the Replacement Property
The discussion turns to the challenges of finding suitable replacement assets in a 1031 exchange without overpaying or taking on inferior investments.

15:19 Selling His Rental Properties
Chris explains his decision to sell rental properties, pay capital gains taxes, and exit sub-4% mortgage rates in favor of higher-yielding passive investments.

22:44 Passive Investing Isn’t Passive?
Kevin and Chris unpack the realities of passive real estate investing, emphasizing the intense upfront diligence required before committing capital to a sponsor.

28:52 Don’t Bank on Rent Growth
The hosts examine historical market cycles and caution investors against underwriting deals based on aggressive, perpetual rent growth assumptions.

33:27 Sponsor Red Flags
Chris outlines critical red flags when evaluating syndicators, including solo general partners, aggressive leverage, short-term debt, and lack of transparency.

42:21 Concentration vs. Diversification
Chris details his personal asset allocation rules, balancing stock index funds with real estate while capping sponsor exposure at 10% of investable net worth.

48:31 Using Leverage (Conservatively)
Kevin and Chris highlight the importance of maintaining conservative leverage around 60–65% LTV and keeping cash reserves to survive economic drawdowns.

54:12 Connect with Chris!
Chris shares where listeners can learn more about his portfolio analysis tools at Property Llama and connect with accredited investors on PassivePockets.

Full Transcript

[Transcript begins]

Kevin Bupp: A lot of real estate investors spend the first part of their careers focused predominantly on one thing, and that’s acquiring more. More properties, more units, more cash flow, whatever that might be. But at some point, I think the question starts to change. And instead of asking, what should I buy next or what should I invest in next, you start asking, does what I already own? Does my existing portfolio still make sense? And so today, Chris and I are going to be diving deep into these topics and much, much more during our hour together. So Chris, welcome to the show, my friend. Excited to have you here.

Chris Lopez: Kevin, I am excited to talk shop. Thanks for having me.

Kevin Bupp: Yeah, yeah. Well, let’s dive into it. And I think I would love to start, maybe kick this off with very few folks ever really re-underwrite their properties once they’re in their portfolio. If they made sense in the beginning, they just kind of keep them there, set it and forget it. And I’m not saying that’s right or wrong, but again, it’s just it’s something that typically doesn’t happen. And so my question for you would be, you know, what do you see investors get wrong when they look at properties that they’ve owned for a long time? What are some of the mistakes that they’re making?

Chris Lopez: Let me even take a step back from there, because most investors like me, like, I don’t even think we know on how to evaluate our current properties, right? All the trading out there, all the focus is, hey, how to go out there and source a good deal, how to write, how to buy, how to manage, right? And it’s just, and for a lot of us, we go out there and, hey, just buy, get more, get more, get more, and scale, scale, scale, right? And we get very, I think we get very fixated in tunnel vision, right? And I’m guilty of that and most investors. I think the two unique perspectives that allowed me to kind of unlock and start looking at like, hey, I’ve acquired, now what do I do with it? My college degree is in financial planning. I could sit to take the certified financial planning exam. I’m not a financial advisor. I’m not a financial advisor. But now it’s my training because I want to learn, hey, how can I make money over my whole life? How can I have a practical skill from college? And I didn’t want to become a traditional financial planner because I was like, well, hey, you know, spend less than you make and invest the S&P 500 index fund, right? I, I’m not good. I can’t earn 2% fees doing that in the worthwhile. I’m like, that’s free advice. So you shouldn’t pay me for that. Right. But that’s what led me to get into real estate because I realized with real estate, if I put, put time and effort in there, I can have that insider knowledge. I can go out there. I can build wealth in real estate. I think over 30 years, um, I can two or three X my wealth creation, real estate that I could, you know, index investing in the S&P 500. So I was always like, my mind is not how I get rich, but how do I build wealth over 30 years? If I stick with it for 30 years and take some risk, but doing things stupid, I should have a great lifestyle and 15, 20, 30 years type timeframe. And the second thing on here, I had a mentor come along the way. And this was after I bought, I had bought my first property a couple of years before. And I was trying to figure out what to do with it. Cause my first property I bought as a foreclosure, I bought for like $67,000. This is right after GFC. And a couple of years before was trading at like 230, 240 at the peak. So I bought for a third of the value, right? Just that like, I got lucky on the bottom. But then I bought it with a 0% down private note, a 15-year fixed private note. I got very lucky. It was my first deal and bought low, 0% down. And my mindset was, why the heck would I ever sell? I bought for a low basis. I literally have zero money in there. Why would I ever buy? Or why would I ever sell? I’m sorry. Okay. And then about four or five years after I owned it, I was like, all right, the market’s recovering. I got a bunch of equity and I’m getting close to like $200,000 of equity between pay down and just the rip and market appreciation. And I was trying to figure out, like, how can I get more cash? How many more deals do I need? Because while I had the mortgage on there, it’s cashflow in $200 a month. When it would be paid off, it cashflow like $800 a month. So, I mean, I will always deposit that check, but $300, $800 a month is not life-changing money. It’s not, I’m going to retire my wife. I’m going to put my kids through college on there, right? It’s a meaningful stream on there, but it’s a very small stream. And I started doing the math of how can I accumulate more? I need more greenhouses. I need more red hotels in my portfolio, right? Yeah. And my mentor said, well, Chris, just because you bought a great property doesn’t mean you should never sell it. And this like blew my mind at the time. I was like, what do you mean never sell? You buy, you pay off, hold on forever, right? And then he started showing me like, well, yeah, you put $0 into it. But let’s look at today’s market. Now you have almost $200,000 of equity. That is real money in your piggy bank. If you want to go out to get more cash flow, you need to break the piggy bank and extract the money to go reinvest. And this opened my eyes into so much beyond just the buy and never sell mindset. As you said, I agree. It’s not bad advice, but it’s not going to optimize for wealth creation or optimize for cash flow, right? Yeah. Financial advisors, typical investors, they rebalance their portfolio every single year. It’s either auto done and fidelity. The financial advisor does it. Us real estate investors, we never do it. So my, my biggest piece of advice to any landlord out there is once a year, sit down and reevaluate and rebalance your rental portfolio. Like you would your stocks and bonds. Even if you don’t have any stocks and bonds, follow that same exercise because most investors never, ever do it.

Kevin Bupp: No, that’s great advice. And maybe let’s dissect that example a little bit deeper because there’s multiple layers there. You know, another opportunity or another option for you could have just been to recap it, right? Do a cash out refinance. But if I gathered correctly what you had stated, it sounded like even with the 0% mortgage, it was only cash flowing at an incredibly low basis. It was only cash flowing $200 a month, correct? And so recapitalizing it and pulling cash out, my guess would be that it would have probably been negative cash flow at that point. You might have had equity to go play around with to buy something else, but you would have had a negative cash flowing investment um with the condo is that correct?

Chris Lopez: You nailed it. It was, you know, speaking in commercial terms, it’s like a 3.2 cap rate because the prices appreciate so much. So you know, putting on six percent debt on a 3.2 cap rate, you know, that’s not great, you know, not great leverage, right? It’s negative leverage and that’s why I would negative cash flow, which I am not a fan of. I think in very, very rare circumstances you have negative cash flowing asset, otherwise it’s, it’s a liability.

Kevin Bupp: Yeah. Would your decision, would you approach it differently if you had the ability to do a cash out refinance, maintain that asset in your portfolio, take a meaningful amount of equity, not 100%, maybe not all 200,000, but maybe 150 or 140,000 of it, and still know that you’ve got positive cash flow on that first investment and then be able to go reallocate or reinvest those additional funds into other deals? Would the decision making have been different given that that’d be the scenario?

Chris Lopez: Absolutely. And I, and I’ve done both. I, I’ve, uh, I’ve cashed out refod and reinvested. I’ve also, uh, sold in 1031. I’ve also recently sold and just paid taxes. Can I share my screen for a second? Yeah, absolutely. And this is me nerding out a little bit, you know, as a with my financial advisory advisory type hat on, but this is actually, uh, the first condo I ever owned. It was in Reno, Nevada. And the number is a little bit off here, but you’ll get the flavor for it. You can see what I come down to when I analyze a property, you have three main things to do with the property. You can keep the property. You can increase rents. You can lower OpEx. You can do this stuff, right? But you can only squeeze so much of a property, right? Until it’s stabilized and optimized. I can’t do anything more. You can do a cash out refinance, but for a lot of single family homes, when prices appreciate so quickly and rents don’t keep up, it doesn’t mean it’s a bad house. It just means it’s no longer a great rental property, right? Or the third is you can sell and trade up. And so I run these scenarios for myself. Back when I was a broker, I used to do it for a lot of clients as well. But you just run the numbers, right? I got this asset. Can I keep it? Can I increase the rents? And for a two-bedroom, two-bathroom condo, there’s only so much I can do. I can’t add another bedroom. I can’t add on the ADU. I can’t increase rents above what my neighbor is, right? I can only do so much. And since the property was so low in a cap rate, even at the time, I could get a new loan at 5%, buy a 5.5 cap rate property. I’ll be negative cash flow, right? You run the numbers on here and you can see, great. My cash flow. Now this quick example I did, you know, like cash flow increases marginally. And that’s just because the current asset is negative cash flowing. The new asset is negative cash flowing. Well, that’s not a good trade. So you just go run through all these examples that, you know, what you can do with the property. And what I ended up doing was, and this was in 2017, I think I did this. I did a 1031 exchange, right? And that is a lot of times the mantra that we go through. So I bought a fourplex at 5.5 interest rate. It was a 6% cap rate property. So I’m at positive leverage in there. Looking at this, you can see my right-hand side here, my cash flow increases dramatically. I go from $600 a year to actually it was close to $10,000 on actual transaction I closed. And it made sense in that market cycle. I could go out there, sell this greenhouse and buy a red hotel. And to me, it comes down to really three things. Analyze the property. What’s the base? What’s the case for it? Does it make sense to hold a refi? What opportunities are there in the market? And what are my goals right now as investor? And you have to find the sweet spot in those three things, like a Venn diagram. And where that lands, right? 44-year-old Chris has different priorities than 24-year-old Chris does, right? I take a lot more risk when I’m 24. When I’m 44, I want less headache and more cash flow. So you have to go out there and look at where you are in the market right now.

Kevin Bupp: Run me through the decision-making process. Well, I get the premise of the 1031 and basically reinvesting that capital into a cash-flowing asset, something that’s going to give you a higher return on equity. That all makes sense. I would say that I would love to get your thought process and your mindset around this. Now, selling an asset that you know, right? There’s a lot of times if you’ve owned something for many years, you’ve worked out a lot of skeletons in the closet. And every property has got skeletons in the closet. No matter how much due diligence you do, right? There’s still things that you want to cover there after the fact, right? And so there’s risk associated with those unknown skeletons. So selling a known asset into an unknown asset, sometimes you just don’t know what you’re getting into. Now, in addition to that, sometimes it’s very difficult. Selling a property is the easy part. Finding a good replacement property is a very difficult and challenging aspect. And I’ve seen it on occasions where folks get very caught up with – they get very caught up with being so against paying the taxman, right, the capital gains that they might when they sell a property and realize the profit, that they want a 1031, they end up 1031 into maybe an inferior asset, right? Just to save the tax man from taking some of their capital, but ultimately they buy an inferior asset. And so the challenge associated with finding that replacement, knowing that that is difficult, how do you help someone make that decision?

Chris Lopez: I call that 1031 derangement syndrome because you get so focused on, I want to save 10 cents. Like I said, I’m going to save 10 cents to the tax man, but I’m going to lose a dollar on the investment, right? And I saw a lot of my clients when I was on either side of the tables or broker, I would talk clients. I’m like, dude, you’re buying a bad deal. Just like not financial advice, but I would try to talk them out of it. You know, talk myself out of commission because I’m like, I think you’re buying a crappy deal, man. Like sometimes if you can’t find it. So… You know, this comes back to what is realistic in the market? Now in 2017, finding an uplink that made sense, that 45 day and six month ID window, relatively easy back then. Knock on wood, you align it, but even before you list the property, you can run numbers, hey, what assets can I afford? Talk to your lender, hey, what can I leverage up to? You get your broker to go out there and do a BPO for you on your asset. For, hey, what type of assets I can go out there and trade into? And that depends on the market conditions. Like for me, when I own active properties, I own a buy in my market. That’s Denver metro area. I know it. I know the streets. I know the good, the bad, the ugly. I know the right property managers, right lenders. I know all that stuff, right? If I go invest in, you know, Arizona or I mean, there’s a lower cost market, Ohio or Memphis. I have no clue. And I saw so many people get burned with investing like in single family out of state because they don’t have that expertise on there. So it comes down to, you know, what makes sense in the market and then your local market and hey, what type of asset you want to own and manage. Now, I’m a big believer in do your best to understand the market and then you adapt the market because the market in adapting to what Chris Lopez wants in adapting what Kevin Buff wants. Right. It’s going to do its thing. And interest rates will do its thing no matter how much I I gripe about it. Right. And then like looking at market cycles. Right. You know, now we’re in the higher interest rate era. Right. Now me doing a 1031 exchange, like a lot of times it’s like a lateral move. I can sell an asset with, you know, half a million dollars of equity. Well, if I 1031 exchange into like a multifamily or triple net, just where debt is, since that’s gone up so much, operating expense gone up so much, like, great. I bought a new asset. I have higher leverage and my cash flow is about the same or maybe better. And that’s just because it’s hard to find like great uplegs. Now, at the same time, you know, Denver is a hard market to go out there and find cash flowing assets. We’re kind of like more of a coastal market right now. And that’s just a fact, right? It’s hard to find great cash flow in Denver like it was 10 years ago, like many other markets. And the other thing is you got to look at the market cycles, right? While single family homes for the most part and, you know, residential fourplexes, you know, prices have kind of flattened and stagnant in the last couple of years. It’s not the GFC type price crash. I can’t go out there and buy an amazing deal. I wish. Right? But we’re seeing that distress in commercial, right? With all the three-year, five-year, seven-year amortizations from all these multifamily and some syndications. Like, hey, that’s where the stress is. That’s the next crash. So what I started doing in 2022, 2023 is I started selling rentals. I paid taxes. I did two sins that most investors would say. I paid taxes, and I gave up a 30-year sub-4% debt. And people said, Chris, you are freaking crazy.

Kevin Bupp: I want to talk about that. I want to talk about the debt piece. I think that’s a big one. So I don’t want to gloss over that because I think there’s millions of folks out there, investors that are sitting on 3% and 4% mortgages. And I think psychologically, that’s a challenge, right? That’s a challenge in giving up that cheap debt for buying another property, which might now carry debt that’s maybe twice as expensive, right? And so help me walk through your mindset on that.

Chris Lopez: Talking about like 1031 is the same thing. It’s a very important variable, but it’s one variable. I think to me, people get focused on like one data point and then you get tunnel vision on there, right? And just because I have a great debt on there, it doesn’t mean I hold the property forever. So like when I put 30-year debt on these properties and I refied everything in the COVID low interest rate area, everything was like sub 4%. To me, it’s like, hey, it’s going to get me the best cash flow. And to me, it was risk mitigation. If interest rates spike or prices go down or in five or 10 years, I still got this fixed interest rate and it protects so much downside for me, right? But it doesn’t mean I’m gonna hold on to it forever. And this is where people have to look at the opportunity cost. Hey, I’ve got this asset, I got this property, here are the numbers. Like a couple examples, I sold some other condos in 20, I think 2023. And these were Class C condos. They were nothing great. These were not trophy assets in the amazing school district. These were just your, you know, Class C type assets. My equity had doubled to tripled in there. I was like, man, I don’t see how these can go up any higher. Rents have topped out. And looking ahead, I’m like, okay, appreciation is going to probably like flatline and go negative. Rent growth is going to stall for a couple of years. And my cash flow will kind of, it’ll still be positive. It’s going to be very small. So here’s if I keep this property, like that keep, refi, or sell. If I refinance them, numbers don’t make sense. If I sell, what can I do? And I looked at all the opportunities out there. And when I say all the opportunities, hey, I could sell and I can go hands off. I’m a big believer in kind of, I think there’s a good opportunity for active landlords to go passive right now. Like so many went, you know, built up a great net worth, myself, including the last market cycle. I became an accredited investor somewhere along that journey, started investing as an LP. I was like, oh, wow, I got money now. My time’s a lot more valuable. I got a family, got kids. I got, you know, professional demands with my business and everything. Where’s the best opportunity? And the two biggest asset classes I invested in were private lending. And I did a lot of like, do you know the term lazy 1031 exchanges?

Kevin Bupp: I do.

Chris Lopez: Okay. So I’ve learned this from Hall CPA, right? That’s where I learned it from. And, you know, it’s not a real 1031. And, you know, mobile home parks are a great asset for lazy 1031. It’s where, hey, you sell an asset. And then you reinvest it in that same calendar year. And then you take that depreciation from the new investment and you can offset hopefully a good part of like your capital gains depreciation from the property yourself. So I would run analyses like, hey, I can 1031. It’s a lateral move, right? And for a lateral move, what you said, why do I want to go through? I got to date a new property. I got to figure out what’s good, what’s bad. I got to go through that one or two year stabilization period. I don’t wanna go through a heavy lift and unknowns for like a lateral move. But when I looked at selling and paying taxes just to go private lending for just pure cashflow, I would oftentimes two or three X my cashflow compared to my rental cashflow, even after paying taxes. And then I did some lazy 1031 exchanges where I would get a 50, 60% type like depreciation where great, it would reduce my tax bill by half. And so those were the two things I primarily did as I sold a handful of rentals or to go out there and reinvest. So it’s like, hey, based on where the market is, based on where my interest is as an investor, I think this is what makes the most sense. Now, this was two years ago or two and a half years where I sold these assets. And I told you, Kevin, I got a lot of grief from other, my peers. Like I would have my sleepless nights because it was like, dude, you’re crazy. You’re paying taxes and selling your 3.5% mortgage. If 30 people tell you that it, it makes you second guess yourself. Right. Which I appreciate. But I was like, no, this, I think this makes the most sense. I’m looking at the market trends. Like this is what I believe. Right now, two and a half years into it. You know what my response is? I wish I sold everything. I sold about half. I wish I sold everything because those condo prices, they’ve gone down by 20%. Rents have gone down. Headaches have gone up. My private lending has just paid every month or every quarter. My lazy 10th run assets, most have done pretty well. A couple have taken a couple of bumps along the way. But overall, I am making more cash flow, more upside with less headache than if I kept my money in those properties. Now, of course, there’s a lot of risk anytime you move. There’s a lot of risk anytime you invest in private real estate deals. But that’s where it comes down to due diligence. But you have to put the opportunities out there and also look at what makes the most sense for what phase of life you’re in. Right, Kevin? You’re doing an awesome family trip right now. You don’t want hands-on stuff. It’s the whole thing, right?

Kevin Bupp: Yeah, no, absolutely. No, it’s, and I think that’s a, there’s a typical evolution. I mean, I can look back, I, you know, I bought my first rental property when I was 19. And for, for, for many, many years, for the first decade, I was very actively involved in the business. I mean, I was kind of wearing all the hats with the exception of maybe an employer too. And that was not scalable. And then ultimately, you know, started building out an organization and, and, you know, and, and, outside of our own investments, I’ve got other passive investments, but it’s a lot of work to actively be involved. You’re trading time for dollars. And at some point, there’s typically a ceiling or a threshold where you have to make a decision of, do I want to just keep doing this and grinding away? Or do I actually want to grind for a little more, but actually take the burden on building out a large organization, actually putting multi-layers together of an organizational chart in place and actually building out a significant company, or just maybe take the chips off the table, sell the portfolio that I built up, that I’ve busted my butt to do, and then reinvest it actively with groups like ours, a group like a Sunrise, or there’s many other syndicators out there that are really good at what they do. They’ve built a great organization, a great team and know their art inside and out. And I don’t think there’s there’s not a right or wrong. Right. I mean, I chose the I chose the path of building an organization and I still really enjoy. I’m still very involved in the business. I am one of the things that I get the most enjoyment out of. I’m a deal junkie. And so I am still very intimately involved on every acquisition that we do. I touch every single one. I’ve got a great team underneath me that, that ultimately does a lot of the, you know, the admin and the more busy work, but I still am very involved in making the decisions, hunting out the deals, finding the best ones. And I would, I would be hard pressed to give that up. I would be hard. I would, I would feel like I might not have a worth in this world if I actually didn’t, if I couldn’t do a deal, but that’s just me. Right. And so, but like for, for other folks, you know, you know, their, their choices to do that or maybe, you know, take the more passive route and find it, you know, I want to talk about passive. I want to, I want to break that down. I would love your perspective on it. Cause I, passive is the wrong terminology when it comes to investing in syndication. That just really is. While you might not be out there hunting the deals and finding deals and operating the deals, you know, being in a syndication as LP is, is, is, I’m not gonna say it’s far from passive because like, there’s definitely quite a bit of legwork. There’s a knowledge base that you need to have. You need to educate yourself. You need to have, how to seek out the right sponsors, how to vet them. Right. And so you need to have, how to monitor your deals, how to make, you know, the right decisions, allocate the right amount of capital to the right asset classes, have a really bigger plan already and strategy in place before moving into the passive realm. And so I’d love to get your feedback on that because, again, I think that there’s a little bit of a misnomer there. And I think just looking back over the past five years, and I’m going to harp on the multifamily space a little bit because I can, and it’s okay. And I know a lot of great multifamily syndicators out there, but there were a lot of folks – that just got in, saw an opportunity, became, you know, overnight successes. You know, the, you know, foremost experts in multifamily syndications. And we’re seeing kind of some of that, not just for the reason of bad operators. There’s also a lot of debt challenges that have played out, but ultimately a lot of, would-be LPs or existing LPs lost a lot of money, sometimes all their capital. And a lot of it maybe because maybe it couldn’t have been avoided, but some of it probably could have been avoided by doing a better job of vetting and finding better sponsors with longer term track records, with maybe stronger balance sheets, with, you know, a plan B in the event plan A didn’t work out right. So I would love your feedback there and more so through your lens of, you’ve been at this now a long time. You talk to a lot of folks within the industry. I mean, just being in the realm that you’re in, past the pockets world, and just talking to a lot of other operators. I mean, you, like me, I get to talk to a lot of folks. I get to better understand their business model, ask them a lot of difficult questions. And so that makes me probably better suited to maybe go, you know, comfortably seek out what I feel would be a good syndicator or a good sponsor to put my cap with. You go through that process and how do you guide maybe folks that are looking up to you for advice on how to find the best, you know, quote unquote, passive investments.

Chris Lopez: Wow. We could spend hours on there’s a lot. I know there’s a lot there. That was a, that was a complete, you know, incoherent ramble there, but hopefully we’ve got something out of it that we, now I discussion around. I’m tracking with you, Kevin, and it’s one of those things where it’s like the onion, right? You peel back a layer of the onion, there’s another layer, another layer, another layer, right? I’d say I’m kind of six years in me being an LP focused person. I got capital start deploying and I still have lots of onions or layers of the onion to peel back as I’m going on my journey, right? So a couple of things on there. I think going back to the term passive, right? Like, yeah, yeah, I don’t know if passive is the right word because it’s very active up to the point until you write your check, right? Because once you write your check, you’re kind of like, I have no control rights. I’m along for the ride and Kevin and Brian or whoever, you guys are in charge, right? I always lead it like, hey, if I invest in Apple, I’m not calling Tim Cook and telling Tim Cook what to do with iPhone 18, right? He doesn’t care. And also, I am such a small fraction of that cap table. I’m a nobody, right? So it’s that same thing as like people after life, you’re giving up control, which can be good, can be bad, right? And for a lot of landlords, it’s hard to give up control. So I think it’s, yeah, you have to do such extreme active like diligence until you write that check. And, you know, I think it’s like, you know, for people getting familiar with assets they’re familiar with, and I think for a lot of people, you know, like debt and multifamily are like kind of like the most familiar assets. If I were starting over today where I think the simplest asset class for people to focus on for their first LP investment is. It’s like going into a hard money fund and being an LP, right? And I say this because a lot of landlords have done fix and flip themselves. They’ve used a hard money lender for a bridge loan or a construction loan or rehab loan. So they understand it, right? They understand, hey, the single family can understand the asset class very, very simply versus, hey, I’m going to invest in a data center. I have no idea about data centers, right? But single family homes, I can. The other thing is they can go to their local RIA club or their investment and be like, hey, who have you used for fix and flips around here? And they go out there and find a local sponsor or a local hard money lender. And you can go out there and easily find probably 12 borrowers who work with them. You know, that’s the customer on their side. And you can probably go out there and find a half dozen LPs pretty easily who’ve invested in a hard money fund, right? So I love that. If I were starting over now, I would start there personally. That’s my general guidance for people. Start with the asset class you’re most familiar with. And for me, landlords, that’s, you know, multifamily in debt. And then also I kind of lean towards debt for that, you know, geographic locality reasons. Yeah. And of course, generally speaking, if you’re on that side of the capital stack, it’s lower risk. And I use the term lower risk. We’re all doing private real estate deals. So they’re all still risky, right? But it’s, in theory, less risky on that risky spectrum. So my advice is go out there and find an asset class that you are comfortable with. And then talk to a bunch of people and just make one or two investments. I think a lot of people made too many quick investments. And part of that, too, is, hey… Money was cheap. The party’s going on. We’re all having good times. You get caught up in the euphoria of it. And also people did not write to downside risk. Hey, you’re in floating debt in two years, multifamily syndicator. What happens if rates aren’t in the threes anymore and debt resets, right? Like I think a lot of people did not look past, hey, what’s the five year? What’s the 10 year? And as you said, Kevin, what’s the plan B? Cool. I get the plan A. what’s the plan B in here and how, if the market conditions change, what’s the plan and how are you going to not lose my capital?

Kevin Bupp: You know, another real quick, there’s another piece of that puzzle. You made a comment about, and I forget in what context it was about, well, rents have gone down. That is one storyline that no one would talk about. No one would touch for the past like seven years, eight years. And it’s interesting because, you know, I had a very different perspective. I owned leading into 2008 during the global financial crisis, and I own a big portfolio down in Florida. The west coast of Florida, phenomenal markets, Tampa Bay, all the way down Sarasota, Fort Myers, great markets. And I can promise you that rents went down. Rents went down for a number of years. They rebounded and they came back really strong years thereafter. But there was a period of time that rents did go down. And I would have conversations related to that. And I would always get pushback from other folks within the industry because we had been on such a long run. There had been a period of… 12, 13, 14 years where rents had been steadily increasing. And then ultimately we saw this hyper increase in the COVID world where we saw double digit annual over annual increases. And it was just always interesting to me that that conversation or that consideration that rents could potentially go down in the future. was never taken into account by a lot of would-be investors or LPs or even syndicators, sponsors out there promoting products. And again, I think what we’ve seen now, and hopefully that storyline doesn’t get buried in the future, is that absolutely rents can go down. They can go down in primary markets, secondary markets, tertiary markets. All the big markets across the country where multifamily was incredibly active, Phoenix, all these big markets that literally had the hardest time in 2008 are the same markets, again, that are having that very difficult time. Oversupply, now massive concessions, rents decreased year over year for the last couple of years. And it’s kind of the same. So again, we always say that history repeats itself. But for some reason, we always forget that history repeats itself. So anyway, I just, we all have memory problems, you know, whether you’re new or you’re active, wherever you’re at in your investing journey, just, you got to take all this, all the things that Chris and I are chatting about taking into consideration, whether you’re still in the active stage and looking to go in the passive stage, just take it all in context and just, you know, understand that there’s variables that, that sometimes you can’t control. Um, and that you just have to consider when investing in a deal and it’s not always going to go up, up, up, right. You Have a plan B, have a plan C in place. And so anyway, I’m sorry I hijacked your feedback. I just wanted to point out that one piece that you just quickly had mentioned maybe 10, 15 minutes ago of that rents have gone down over the last couple of years. And I think that’s really hurt a lot of folks as well.

Chris Lopez: Yeah. And a couple of things to like to build off of there. I think as you all get older, we learn, you take your black eyes and you learn from it. And so for me, like I was not in real estate before the GFC. I was in a non-real estate business, but we had some ripple effects from there. And like I ran out of cash and I was young and single at times. I love some credit cards for a while, which was I was like, this sucks. This is not cool. I don’t want to do this again. But like I did not keep sufficient cash reserves. Learn that freaking lesson. Never run out of cash again. Right? Like rule number one, don’t run out of cash. And so I started buying rentals. I was like, I’m going to buy a rental once I have a healthy about six month type cash reserve in that property. Right? Hey, if it’s $2,000 worth a month of, you know, your basic PITI and some things. Cool. Two times six. I went twelve to fifteen thousand dollars in the savings account just so it’s in that property one property to right. Reduce risk because I ran out of cash since I’ve always had that mindset like, well, I ran out of cash. It’ll happen again. Hopefully not to me, but there’ll be other market cycles where you can run out of cash. I don’t want to be in that situation where I can. The other thing is people forget about the law of averages. like the long-term law of averages, everything reverts to law of averages at some point, right? We had that huge ripping and roaring of appreciation rent for years, where we were at least in Denver 8, 9, 10, 11% appreciation or rent increases. Our averages are 4 to 6% a year, historically, generally speaking. Well, at some point, that has to revert to the mean. And right now, we’re at negative 1% or 2% price appreciation. We’re at negative 2% or 3% rent growth, right? The law of averages kicking in. The law of averages will always, always, always come back into play. So plan for it.

Kevin Bupp: I want to ask you a couple more questions, Chris, about the passive side and more as it relates to you vetting. You know, you give some great advice on maybe the best first couple steps to take for someone, you know, looking to invest their money passively, find an asset class they’re comfortable with. You’d mentioned the debt side of things like be a hard money lender or invest in a hard money lending fund. Because if someone came from the single family world, more than likely they’re familiar with hard money products and have probably done a few fix and flips themselves. But I’m. I guess more at a higher level when you’re evaluating a sponsor. What are some of the, I guess, what are some of the questions that you’re asking and maybe some of the immediate red flags or the red flags that you’re looking for that would immediately give you the, you know, the concern that this might not be the right fit or ultimately just, you know, have you hang up the phone and turn the other way?

Chris Lopez: Oh, there’s so many there, and these are in no particular order. One is I don’t like to invest in solo GPs because you got huge key man risk, right? Yeah. Hey, this is just Chris running this fund or Bob running this fund. Well, if Bob gets hit by a truck on the way home, what happens, right? Hey, I think a lot of groups have two, three, four GPs, right? Hey, if unfortunately, one person has a health or family issue and the others out of the picture. You want to have like, you know, and there’s nothing like a founder or partner because those guys like blood, sweat, tears and money and personal guarantees are involved in there. They’re going to like give a lot more than the associate employee will, right? So I don’t like to have funds that are like, you know, solo GPs. I think that just is too much key man risk there for me. Track record is very important, right? Hey, walk me through some projects you’ve done and ideally walk me through some like, you know, full cycle projects, right? You know, hey, walk me through the different market cycles you’ve been in. Walk me through some full cycle ones that you’ve gone through. Like, hey, what was the original plan and how did it end up? I like to see the track record on there as well. And then you got to get a lot into like risk mitigation. Hey, what have you done when a property went sideways or what happened here? Hey, you handled this market. It’s like, you know, what happened? Like, how are you mitigating my risk? And that can be everything from like, hey, what are you using a conservative LTC? Right. And in your in your value ed plays, are you? Oh, you’re 85% LTV. Okay. Very minimal, right? Oh, you’re 60%, 65% LTC. Great. I got some margin on there, right? Where, hey, if things change, we’re not going to be wiped out instantly in equity. So like, you know, conservative numbers on there as well. But it’s really going through like, hey, how can you mitigate risk? And on the equity side, I like to see what are the debt terms, right? Right. Like there was a deal I looked at a few weeks ago and it was a value add, I think a multifamily value add type play. Three-year business plan to buy, stabilize and sell. Three-year debt note. Well, okay. What happens if you have to go in year four or five? Like do you have an automatic extension? Why not get a five-year or a seven-year term but sell in three years? So, hey, if things go bad, we know what the next two or three years look like, right? To ride out the market. And so it comes down to me, it’s like sponsor is the first one because you like, Hey, for example, you know, you, you and Brian, you guys are jockey, right? Like you guys are ultimately like controlling stuff. You’re ultimately doing things. Uh, you’ve got the control, you got the vision. Um, I am entrusting you to be, if I do share with my money, go out there and do plans. I want to know how you guys think, how you handle adversity, how you’re doing all this stuff, how, what black guys have you taken? And you’ve taken no black guys. That’s not intriguing to me. Yeah. Yeah. But I think a black guy learned from it, right? That’s right. So those are a few things. Another thing, and this is like, I think so important. And this boggles my mind. People, they don’t do like independent research, right? Hey, you talk to an IRT member and they’re doing their job. They’re presenting all the great stuff to you. But I’m like, do you ever go on to like, Reddit or go on to like a passive pockets or invest clearly and look at it and also tap in your network for other investors who invested in there. Right. I mean, I can think of just through my past pocket sections. I know like a dozen people at least who invest in Sunrise deals. Right. Hey, Adam. Hey, Christy. Hey, what do you guys think? You’ve invested in, I don’t know, fund three or fund four for a couple years. You know, what’s your experience? Is your communication good? Is your business plan going to plan? You know, have you, have you pausing distributions? Go out there and network with people because LPs are like, dude, these guys are great. I love them. Other people are like, no, I will not invest in them. Right. Go out there and tap your network because, you know, Other LPs, they’re going to be an independent source and the sponsor. And, you know, just you get information from everywhere out there possible. Go talk to them and see what their experience is like.

Kevin Bupp: Yeah, I mean, there’s an endless amount of resources nowadays, which is great. So, I mean, it should not be difficult at all to find somebody. Yeah. you know, that has invested with the syndication that you’re looking at, with the group of the sponsor that you’re looking at. It should be very easy to do. And, you know, you mentioned something about key man risk. That’s, you know, I think that’s something that a lot of folks don’t take into consideration. It’s a topic that Brian and I have discussed for many, many years. We don’t fly together. We very rarely even travel in a car together. I mean, we might be at the same venue together, but we don’t. And we have key man risk insurance. And so we have a policy against us in the, God forbid, in the event that something happens. whatever happened to one of us. But no, we don’t. I mean, I think it’s real. Not that the business couldn’t operate without one of us around, but again, there’s a backfill. We’ve got a great leadership team. We’ve got many folks in the organization on the executive level that are way smarter than Brian and I, right, that have run multi-billion dollar organizations. So it’s not just Brian and I, but But God forbid something would happen, it would be a challenge. And so we try to mitigate that by not traveling. I’m not going to say we’ve never traveled together, but I can’t remember the last time I was on an airplane with Brian. I can remember the last time that we were in the same room together in a different state or a location, but we did not fly together. We flew from different locations or on a different airline and just arrived at the same destination together.

Chris Lopez: I like hearing that, right? Because you’re mitigating risk right there. And then again, that’s something like, I think I’m an entrepreneur. You learn that stuff like, oh, I have key matters for my business. Oh, and I invest in this. The other thing, and this boggles my mind, Kevin, I talked to a lot of LPs through the Passive Pockets platform. and they’re going to ask these questions but i’m afraid to i’m like why the heck are you afraid to ask but what’s your succession plan or or are you personally guaranteeing these debts what this are like afraid to ask i’m like dude it is your money it is your response to ask the question you will not offend them and if they get offended by that question uh that’s probably a red flag right like hey if you can’t give me a straight answer for how do you guys deal with key man risk and what’s your succession plan Okay. But your answer you gave me, okay. I’m not gonna offend you. Right. But this is my hundred thousand dollars, my $250,000. I want to make sure I don’t screw it up. So like LPs out there, don’t be afraid. I mean, be polite, you know, don’t be a jerk, but like ask the hard questions, ask the questions that to him like, oh, I’m worried about this 2. Yeah. And he asked Kevin or whatever. I need to ask this guy this question. Right. Here’s the analogy I have for that one. I think it’s a pretty good one is, you know, LPs, you’re getting into a marriage and it’s a long-term marriage. I mean, it might not be a lifetime marriage, but it’s a long-time marriage, right? It might be three, five, seven, 10 years, maybe longer than that. And so if you’re afraid to ask questions to a sponsor, any question whatsoever, no matter how personal you feel like it might be, it’d be the equivalent of you getting married to a woman and you guys never having the conversation about kids and then bringing it up three years in after you’ve gotten married, after you tied the knot, you bought assets together, house together. And then you, you know, you cry out your bleeding heart of, of how you can’t wait to have kids. And she tells you that she never wants to have kids, right? Like it’s such an important conversation to have and no offense to anyone that hasn’t had that conversation. They found themselves in a similar situation, but you know, it’s like, you’re getting into a marriage. Like these are important things. If, If it’s incredibly important to you and it’s a question or it’s a topic that you think is pertinent and it’s just weighing on you and you really need an answer, otherwise you’re literally losing sleep over it, then you need to ask it, right? Because it’s a long-term investment. You’re not getting out anytime soon. It’s an illiquid investment. Most of them are. And so, yeah, no, that’s great advice. Ask the questions. And I can promise you that. 99% of sponsors are not going to get offended. They’re going to answer the questions. And if those that do get offended are acting like you’re wasting their time or a burden to them, then that’s a quick answer for you. Even if they don’t answer your question, that’s the answer, that they’re not the right ones to invest.

Kevin Bupp: Yeah. No, that’s fantastic. Great advice, Chris. And I guess this has been a fun conversation. There’s so many other directions I’d love to go here before we wrap it up. But again, we’re running out of time. Yeah. One last question about diversification. I would love your perspective here. Once someone has accumulated meaningful wealth, how do you think about concentration versus diversification? So again, is 100% real estate or real estate made you wealthy? Do you just keep it all there? Is there a point in time where you start allocating a certain percentage into other types of investments and investments? maybe breaking it down, maybe the market’s 20%, real estate’s 80%, or again, you name your investment vehicle, your investment type. How do you think about that?

Chris Lopez: I mean, it evolves every single year. So I’ll kind of give you my current one, right? Because this is a question I’m fascinated with. And to start off with, I’m a big believer in like, Ever since day one, I bought real estate. I’ve also purchased stocks, right? I’m a big S&P 500 index fund investor as well, right? Because it’s just, I believe in the US economy. I believe in the apples and the, you know, the, uh, all the companies out there just make up our, our, our great country. And they’re doing really cool things out there. Where some people like real estate people say, oh, stocks, don’t waste your time and money or stocks. People don’t waste. No, they’re, they’re both great assets. I want exposure to both of them. Right. Now, I am weighted heavier towards real estate, like 60, 70% is in real estate, directly on rentals, syndications, funds, all that, just a big real estate umbrella. The other, you know, 30, 35% stocks and bonds, right? Because stocks and bonds, man, it is set and forget it, and I have no influence, and I can’t control it. Now, I think in real estate, I truly believe, you know, if you if you focus on real estate, you can have a competitive insider legal advantage. You can’t do insider trading in stocks. But if I’ve insider knowledge for, hey, this is going over here, or as I have my knowledge in landlords, I go out there and network with more great sponsors and more asset classes. I think I can go out there and get a find a really good deal. and I can underwrite deals and you can find it’s an inefficient market. So you can go out there and find some like really good deals, right? Stocks are efficient. And I tried day trading. I lost money. I am not good at that. But but real estate’s an inefficient market. So I go out there and find, hey, an up and coming sector or, you know, a certain sponsor doing a deal, you can find some really great inefficiencies in there. And those, I think, can lead to great risk adjuster returns. So I am, you know, I said roughly, you know, maybe a third stocks and bonds, two thirds real estate. Now within my real estate portfolio now, what my big focus is last couple of years has been really maximizing cash flow. I up until probably about 2020, I was all equity, you know, in syndications and mostly just directly on rentals at the time. All I knew was common equity. And then I invest my first debt fund in like 2020. I was like, oh, these quarterly checks are nice. And I started talking about capital stacks. So I started diversifying into my capital stack as well and saying, okay, I wanna diversify not just on equity, but give me some debt as well. And then it started going into, Hey, how can I diversify out of like, I am too concentrated in multifame. How can I go out there and diversify into other asset classes? Right. And like mobile home parks is one of the asset classes I’ve been really intrigued in. I haven’t made any significant investments in any of them, but as far as like, um, you know, cashflow, uh, tax efficiency. And a lot of the deals I see, and I think, you know, I think you guys were 60, 65% LTC. Like I might, you know, I might be wrong there, but like. A lot of times I see conservative type debt structure on there, and that’s very attractive to me, right? And so when I go out there and look, hey, I want this much in real estate, but here are my goals. Not to lose money. So how could I either be in debt or in a good LTV type position on equity deals? And then what makes sense of this market right now where things were growing? Yeah. And when I go out there into new asset class, right? Like, hey, next year, I’m going to sell another property and I’ll have significant equity. I’m going to do some lazy 1031 exchanges. And, you know, I might have like $400,000, $500,000 in equity. And I have some, I did a cost sig on there. I got 1031s in there. So I got a very low basis. Good first world, you know, problem to have. Well, hey, I’m going to split, say, half in the debt and half into equity deals. Let’s say I have $200,000 and I like some mobile home park deals like other stuff. Well, I can do $50,000 into mobile home park operator one, $50,000 operator two, and a $50,000 into multifamily deal. And the nice thing about the LPs, I can split my checks. Um, and one thing I know, uh, I say, I said, you know, it’s always worthwhile to have sponsors. Hey, can I do a lower minimum? Right. Cause I’m looking for my check size. Sometimes they say no, but if they say yes, Hey, no harm in asking. Right. And I’d rather do a handful of smaller checks across a couple of deals for diversification. And also if I’m learning new asset class, I’d rather have a, you know, two or three smaller bets than like, like, you know, one larger bet. Now going on as they know operators more and I get to see performance and I’m a big believer in going out there and walking assets or walking the headquarters eventually. Like I want to go out there and see your operation. I’m going to invest a significant portion of my net worth with you guys. Then I start concentrating more into asset classes I like, operators I like. I’m like, oh man, I’ve known you guys for years. I’ve walked your headquarters. I’ve walked to your assets. Like you guys have your stuff together, right? And then I will increase my position up to like 5% per deal of my total net worth or investable net worth. And up to like 10% total into like any one sponsor, right? Those are kind of like my guardrails for then getting into concentration. But I will not get above 10% in any one sponsor, just for pure diversification reasons.

Kevin Bupp: No, that’s great. I appreciate you sharing. That’s great to know how you think about allocation with different sponsors and allocation in different types of markets. You’d kind of ask a question, quasi-question about our leverage. I’d say that’d be one piece of advice I’m going to leave folks with here today. I’ve been at this now 25 years, and I’ve had many mentors over the years that have We’re much older than I. They’ve been through many different cycles. And I really learned this after going through 2008 and then rebuilding after that period of time. You made a statement about Sunrise and my company and what type of leverage we put in place. And we are incredibly conservative when we put debt on a property. Typically, some of our legacy portfolios, they’ve… And one might argue that the return on equity, we’ve got a couple of deals that are ready to be recapped. Like the return on equity might not be as high as it can be today. And every deal has got a different recap strategy in place. But we got some legacy portfolios that are 50% loan to value. But going into the deal, typically we’re not putting any more than 65% loan to value. In fact, some deals will put 60% on, if the economics still makes sense. Because what I’ve found is that, again, over 20 years of doing this and many, many mentors that there’s If you find a good opportunity that’s in a good market and you’re a good operator, then there’s only one thing that can make that deal go sideways. And it’s the debt. It’s the capital stack that you put in place. And so 2020, you know, leading into when was it the middle of 2022 and rates started going up. And then by 2023, like, you know, deals are falling apart. Syndicators were, you know, already starting to lose money. Deals are going sideways. Guess what? We never stopped. We never, never missed the distribution. We slept really good at night knowing that we had a lot of, another thing is a lot of money on the balance sheet. Like we keep a strong balance sheet because you just never know when the rainy day is going to come. Right. I’d rather make lower distributions than what we potentially can, instead of distributing all the available cash and keeping some on the balance sheet, keeping some for a rainy day. It’s still the investor’s capital, but like we’re, we’re keeping it and we’re putting it in a safe place knowing that, the inevitable could happen. It always does happen with properties. No matter how well you budget for capital expenditures or on unforeseen events, inevitably, if you do enough deals, you’re going to have those unknowns pop up. And so we like to be prepared for them. We’ve never done a capital call. Again, we’ve never, I think we’ve had now 30 quarters of on-time distributions. And it all ties back to being a little bit more conservative than the next guy. And the interesting thing, Chris, is that That probably posed more of a challenge to us. That made us maybe less attractive in 2020, 2021, 2022. I mean, we’ve got great investors that have been with us for a very long time. And so I don’t want to make it sound like we had a challenge raising capital. But there were many other competitors out there that might have been putting 75% leverage in place or might even been putting some type of mezzanine debt in place, multiple layers of a capital stack, a very risky capital stack, to where the equity might have been perceived to be a higher return, but ultimately, it was a very risky capital stack. was a lot in a lot riskier spot. And a lot of that money has since been lost. And so anyone can market great returns, projected returns, make something look incredibly sexy. But if you’re not willing to dig into how they’ve arrived at those returns, what their capital stack looks like and how they’re viewing debt and the risk associated with that, You need to dive a little deeper. If you’re an LP looking at a sponsor again, you know, I’m not saying that the way we do it is the right way, but I want to kind of, again, I can tell you that I’ve slept incredibly well with everything we bought over the years and not everything is gone as planned. You know, we’ve had, you know, business plans that might not have played out as expected. Maybe the absorption of new homes we’re bringing in might not have sold as fast as some exceeded expectations, some, you know, maybe missed the mark a little bit, but guess what? We’ve got, we’ve got time on our side and we’ve got a very safe capital stack in place. And so there’s very little risk of ever any investors, you know, losing their dollars within our, within our bonds. Nothing’s a guarantee. So I’m, that is, well, it’s not a guarantee statement, but I, again, I, track record is everything. And again, the capital stack is a very important component of it. And I think a lot of folks got that wrong. Over the past five or six years, a lot of the multifamily folks got that wrong because the debt was available. And they could take that more meaningful risk. And it ultimately, you know, there was no plan B in place. So yeah,

Chris Lopez: And they, I mean, also, you know, the debt rose and the, you know, the rents went down expensive. It was just a trifecta, right? And that’s what happened. And that’s what’s planned for us. One diversification. And then going back, I know we got to wrap up here, Kevin, you’re talking about like, I love that conservative debt principle because when I was starting to buy a lot of rentals, right. I bought a couple, you know, in the teens. It’s like, okay, well, what’s the worst case scenario? And I went back and the GFC has kind of been the biggest drawdown for most residential houses, right? And for a lot of markets, it was a 25 to 35% correction. And we looked at Denver and that’s where my assets were in Denver had a big correction back then. Okay, well, let’s go on the higher end. Let’s see a 35% correction. Well, then if I’m in a 65% LTV-ish, if things drop 35%, I have to liquidate or sell, I should be able to get out of there, break even or make a few bucks, right? And so I always look at the, hey, historically, we’ve seen this type of drawdowns and this type of stuff. Let me kind of buffer my portfolio that way. And so that was my mindset a lot of times in active landlording. That same mindset is carried forward to understand, hey, what’s the, I get it, we’re all talking about the positives, but what’s the worst case scenario? What have we seen historically? How much can it draw down? What can happen here? And if that history repeats itself, how is your deal going to survive? And hopefully you got your plan B or plan C to maintain some distributions and maintain a business plan that gets to the finish line.

Kevin Bupp: No, I agree with that. And man, this has been a great conversation, Chris. I wish we had more time here because I think we could go down many different rabbit holes, but it’s been a great hour together. I appreciate you coming on and just sharing your experiences and your perspective with us on many different topics that we talked about today. But I guess for those that are tuning in here today, for those listeners that will learn more about you, maybe follow what you’re doing on Passive Pockets that we didn’t even touch on that today. But Again, I know you’re very active on Passive Pockets or even connect with you directly. You’ve got a number of different things that you’re working on, projects in the works. And so where is the best place that we can share with folks to connect with you directly?

Chris Lopez: I’ve got two. So one is PropertyLama.com. I did that quick screen share. That’s a software where we built and we put together some lending funds right now. I’m a big fan of that market’s like on there, but that software is free. If you’re a landlord, Analyze your portfolio in today’s numbers. What’s your keep, refi, sell options? The other thing is Passive Pockets is like the bigger pockets brand for accredited LP investors. That’s their education arm for people doing the stuff we do. It’s an amazing resource. Go out there. You can talk to sponsors, but you can also network with all other LPs, get their thoughts, and also network. Hey, have you been in this deal or been with this sponsor? Give me your feedback, right?

Kevin Bupp: fantastic awesome guys we’ll get all that in the show notes for you and again just everyone listening i you know thanks again for for joining us for another episode here of the real estate investing for cash flow podcast and i will say that i say this every week but i’m gonna say it again if you’ve enjoyed today’s conversation hopefully you did i thought we had a great one please do take a moment uh subscribe to the show if you haven’t already leave us a rating and review it really helps us attract amazing guests like chris to the show and um do share the episode with someone that you think might get some value from it and Chris, my friend, again, appreciate you. Thank you for joining us. And everyone, we’ll see you on next week’s episode. You take care.

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