Debt Structure Questions And How To Protect Your Investment From Loan Pitfalls | Ep 67

James: Why did the real estate investor have to go to therapy because he had too many distressed properties? That's right. This is my way of spicing things up because we are talking about real estate finance today on the Furlo Capital Real Estate Podcast where we dive into the intricacies of passive real estate investing.

And our mission is to equip people to invest wisely in both people and residents so that together we can build wealth while improving housing. I'm James, and this is my not laughing wife, Jessi.

Jessi: That was awesome. I like a good joke.

James: Okay.

Jessi: I chuckled.

James: Okay, that's good.

Jessi: You know, I don't know if that was laugh out loud quality, but

James: I'm trying.

It was a chuckle. Okay, okay. It

Jessi: was a good I'm like the cornier dad joke. The better. If I have to think about it, it's not when I was like, I think first. Oh, okay. I got you.

James: Okay.

Jessi: Fair enough. It was good though. That's good. Good. Good. Good. I like the effort. I like it. I

James: gotta, we're talking about finance, right?

It's not that interesting. It could be boring, but it won't be. It won't be. Some people think

Jessi: it's really interesting. This will be super interesting.

James: Yeah. So, okay. I'm going to challenge myself again because this is part of an eight part series. That's right. We are taking our sweet time to get through.

Which is fine. We're essentially, when you are looking into doing a deal, there are eight different things that you want to look at. Mm hmm. Right? And they can go from talking about the sponsor, to the property manager. You can do this. Talking about the market. The property itself. You want to look at the construction plan.

You want to look at the number of my own at the property projections themselves. You care about the legal documents. What we're talking about today is the financing and loan stuff.

Jessi: All right. That was awesome. I would not have been able to do that.

James: Yeah. So, so that's what we're talking about, which is like.

A super critical, I mean, they're all important. Otherwise I wouldn't have included them, but this is, these are like make or break really important ideas here because often just straight up confusing. You know, it's like, I don't know. I,

Jessi: I was, I was briefly glancing at this and was like what is that?

James: Yeah. So there is a download that you can get on our website for low. com. It has all of these questions and all, you know, and more, there's I already lost, I forgot. It's like 160 something. There's a ton of questions and then what we do is we highlight the ones. Like, these are actually the most important ones that you should pay attention to.

Yeah. So, you can have it over the website, play along if you want, but what I've done is I've given you this part of it, the financing and loan, for you to look through.

Jessi: And the context is like, this list of questions is, if I'm interested in investing in something,

James: Yeah.

Jessi: These are the questions I should be asking.

James: Yes. Okay. Yeah. That either the sponsor should pre answer, Sure. Or you want to ask, because you care about it. Right.

Jessi: Yeah.

James: So

Jessi: finance. Yeah. Here we go. Okay. So just before we like dive into specific questions, because this gets very specific, very fast.

James: Yeah.

Jessi: Give me like the 30 second or shorter concept of like, what do you mean when you say financing?

James: Yeah, getting a loan, getting debt.

Jessi: So it's like borrowing money to buy something. Yes. Okay, that's like the most straightforward. And it doesn't matter who it's coming from.

James: Yeah, and if you're part of a syndication, usually you are providing funds, you're an owner, you're an equity partner with it, and then there's often a loan that comes along beside it, or you know, it's part of that capital stack.

From a bank, or from someone else? Yeah, from a bank, exactly. And so you as an equity person, as an equity owner, you want to know, well, what kind of loan are we getting? What's going on here? What are the terms? What are the risks? That kind of stuff. And these, all these questions help to suss it out. And even if you are doing a short term loan and you are one of the lenders, right?

You're saying, yeah, I'm giving you money. It's important to know, well, how is this thing structured just from my standpoint as a lender? And you want to make sure that. Wherever you're giving the loans to, they're not getting themselves in trouble and over levered because then you can't pay you back. Yeah.

Yeah.

Jessi: Okay. So you want to know if the debt matches the business plan and the level of risk the debt creates is something that you can handle. So question one or where this starts is how much leverage 1 53.

James: Yeah. See, there's 152 other awesome questions before we even get to this.

Jessi: Even more. I think there's a hundred and ninety something.

James: Yeah, I think you're right.

Jessi: Yeah. Cause this, this goes 196.

James: Sounds right to me. It's a lot. Dang. It's a lot. It's good. Not even 200. So,

Jessi: how much leverage, aka loan to value, is used to purchase the property?

James: It depends. Often times what you hear is people talk about it being like 70, 75 percent. And that's really just the back of the envelope rule.

The honest answer is it depends on the cash flow of the property. In terms of its income to expense ratio and what the interest rate is on that loan. Because you, you want to make sure you have enough money. You make enough money from a net operating income standpoint to pay back the loan. Plus, have some additional to it.

That makes sense. Typically, you're going to see, if you see, if you see someone saying, Hey, the LTV on this loan is like 50%. You're going to be like, Tell me more. Why are you bringing so much cash to the table? And if they say like it's 90, 95 percent, again, you're gonna be like, tell me more. Why? Why is someone

Jessi: leveraging that much?

A bank letting you get away with that. Yeah, can I have their number? Yeah, exactly. Yeah, okay, so there's a range and that range is If you're, if it's in the

James: 70s, maybe, maybe mid 60s, that's about right, depending on economic stuff.

Jessi: Another question you might need to ask is is there, this is the one that I was like, what is their preferred equity in the deal that would be senior to your investment?

So like walk me through equity and how that all works. Okay.

James: So there's what's called the capital stack. So that's all the money that went into the deal in order to make it happen. And so with syndications, there's, there's multiple different levels with it. So you might have first and foremost. You get a loan, so you have to make loan payments.

That's usually number one in the stack. And then when you're

Jessi: paying people back,

James: yes, when you're paying people back, right, you got to pay the loan first. And then you have all your equity peeps. They get paid essentially last the profits of the property. OK. Well, sometimes there's a middle group in there where you can say, okay, you are technically equity, but we're going to treat you like debt in the sense that we're going to give you a fixed regular amount of interest as an equity holder, as a preferred.

Equity holder and so it allows you to continue to have the loan It doesn't put them in a second position But they also don't get the share in any potential massive upside instead they guarantee returns because you have some people who are like Yeah, man, I would love to invest in this bigger deal and I'd rather get a guaranteed I don't know 9 percent 12 percent which sounds awesome 9 percent and I say, yeah, give me that.

Even if the property overperforms, I want the guaranteed 9 percent for the hold period, those 7 years.

Jessi: Okay.

James: And so, the order is, bank goes first, preferred equity goes second, regular common equity

Jessi: goes

James: last. Now, the bank, they get a fixed interest rate, right? Whatever it is, that's what they get. Yeah. The preferred equity people, they get a fixed interest rate.

Whatever it is, that's what they get. the standard normal equity holders. I don't know, if the deal goes bad, they may not get much, but if it goes gangbusters, maybe they make a ton. Okay, so Things also get super crazy when you sell the property. It can also affect you, but go ahead.

Jessi: That just seems a little weird to me, because it's like, if the sponsor has, like, ran all the numbers and knows how much this property is worth, how much they're putting in, they, they have a projected return.

Like, there's not a ton of risk, like being on the bottom level is like, if you have a good sponsor, like you're gonna get some return on your investment. If you

James: have a good sponsor, which is part one you need to ask about. And again, there's I guess that's my assumption. There's some people who are like, ah, I just want the regular number, I don't want a fluctuating thing, I want the predictable amount.

And so it's just, it's the sponsor trying to be flexible in what they're offering their folks.

Jessi: Do all sponsors offer preferred equity spots? Ah, it

James: depends on the deal. I tend to not do it, to be honest. It seems to me like, like you're kind of like, Ah, this feels like a level of complication that

Jessi: you

James: don't necessarily need.

I suppose if someone came to me, They're like, Hey man, I just want that guaranteed 9 percent I'd be like, okay, cool. Now what I do is I do a hybrid so still can get a loan, but then what I will offer is a preferred return to the regular equity people. So I'll say, Hey, no matter what, I'm going to give you 9 percent you're good.

It's as if you are preferred equity, but then you also get the share in the upside. But the way I'll set it up is there's different hurdles where it's like you get that guaranteed 9 percent and then after that you and I were going to split it. 2080, 3070, whatever, and then if it really overperforms and your return gets to like 15%, now we're going to split it 50 50, because I did awesome, and I get rewarded for that.

That's usually how I set it up because it seems, it seems like a good balance of fair and most straightforward and keeps the cap table from getting crazy.

Jessi: I know the, the bank is the one that determines, you know, percentages and things on, and how much they're willing to loan to you, but are, are you as the sponsor determining?

Like, how much you're willing to give as a return for private investors and equity investors? Or is that kind of a standard number that comes from somewhere?

James: No, I'm the one who determines that. And it's more, like, I mean, Yeah. At the end of the day, the deal determines what You run the numbers. I'm the one who decides, is this good enough for my investors?

Does, is there, have I been conservative enough that this will actually work out for them and they'll be able to get that return? Okay. So that's what I determined.

Jessi: Yeah. I just learned a lot. Just then. Boom. That was amazing. That's

James: why you listen to this. Now I

Jessi: know what preferred equity is and how it fits in the, what did you call it?

The stack.

James: Yeah. The capital stack. When you

Jessi: said capital stack, I just. I thought of like a big stack of pancakes, but I don't know why. And that's what I was envisioning the whole time, and now I want pancakes. Okay, hold on.

James: I've, I've potentially got another one for you. Oh my gosh. Where was it, where was it?

Why did the investor refuse to flip pancakes? They didn't want to over leverage their stack. That's such a dumb joke.

Jessi: You know, because I envision pancakes, it totally makes sense to

James: me. See, I was doing the research trying to find a good show.

Jessi: There's, okay, there's that, but there's also, this is like really tangentially related.

James: Okay.

Jessi: It's one of my favorite SNL sketches ever.

James: Okay.

Jessi: Barb.

James: Oh, Barb Kilner.

Jessi: Well, Barb, Barb Kilner, she comes in and wants a little stack of cash.

James: She does Right. For her pizza business. For

Jessi: pizza. A pizza eater business.

James: Pizza eater business. That's right.

Jessi: Anyways, if you could find that She's leftover pizza.

The pizza eater it, it's fantastic. But she has trying to get a loan and she wants a, she wants it in the form of a little stack of cash.

James: Little stack of cash. Maybe you can just put that, get that from the bank.

Jessi: Can you just, can you just bring it out in a, in a little stack of cash? Yeah.

James: The accent really sells it.

Jessi: Okay. Anyways, that was off track. Back on track. To what extent does the property cashflow from day one? I love this question because I think all properties should cashflow from day one. I realized that's not always the case. There's maybe a longer term investment and you're putting some sweat equity in and increasing value and.

You know,

James: yeah, there's

Jessi: other factors, but it's good to know. It's good to ask.

James: Yeah. You know, what's the

Jessi: cashflow? What does that look like?

James: Yeah. It doesn't necessarily have to be positive. Obviously that's a positive sign if it's positive. Sure. And you really want to make sure like, okay, is this like a three year thing we're going in the hole or is it like a nine month thing where we do the transition?

Yeah.

Jessi: Well, and you're thinking through things like. The debt coverage service ratio. What's the duration of the loan? the loans amortized Amortization schedule so so like the loan versus time You know does it make sense? Yeah,

James: by the way, the debt service coverage ratio very simple math. It's your net operating income divided by your debt payment, your loan payment, and you want that to be typically, it depends on who you talk to, it's either going to be a minimum of 1.

2 or 1. 25, so essentially, the amount of money that you get from the property before any loan payments, you want that to be at least 20 to 25 percent higher than whatever your loan payment is, which kind of makes sense. You want to buffer it. You don't want it to be less. That's oftentimes when I'm trying to figure out Like how much of a loan can I get?

That's the number that I'm targeting because that's what the bank cares about. They don't actually care about the loan to value. What they care about is that other ratio, the debt to coverage ratio. And it just so happens. I guess that kind

Jessi: of makes sense because they're like, exactly how much money are you going to be making?

You know, they won't guarantee that you can make their payment and be good. Have a buffer. Yeah, exactly. Makes sense. Interest rate, is it fixed or floating? Mm hmm. That's kind of a big question because that could affect a lot of different things.

James: Yeah, which impacted a lot of larger investors when our interest rates very quickly rose because they were on floating debt and all of a sudden they went from having 3 percent interest rates to like 6 percent and their debt payments just skyrocketed and they were suddenly underwater.

The cash flow was no longer A good ratio and they had to feed it. And now it's like, okay, now we get a choice. We either a, we, we just, we ask our investors for money. Isn't great. Cause like there's no one in sight B we refinance this thing and hopefully we just lock in a longterm rate, but now it's at the higher rate.

Great. Or, and maybe hopefully by then we've done enough repairs that we're okay. Or you just sell it to someone else and

Jessi: you just take a loss.

James: Yeah. Or not necessarily a loss, but she might just break even on it.

Jessi: Oh. Okay. Yeah. Interesting. Okay, I'm glancing. Is there anything else people should know about?

Fixed rate floating rates.

James: If it is floating rate, ask a lot of questions about it. Oftentimes there's a cap on how high it will go Mm hmm, and so you can you can ask them those questions like hey, what is the cap like? Because it's like a range that you can't go up to infinity like they'll they'll stop it.

So you want to be Terrible. Yeah, so you want to ask what that is and be like what it did you stress test it? What does the investment look like at? Yeah. At the cap.

Jessi: At the cap. Yeah.

James: Yeah. So those are the kind of things, like, you just want to know, and I get it, it's not going to perform well, it's not going to be awesome, but like, are you going to come to me for money?

Or what's the deal? Right. Yeah. What's the plan? Oftentimes too, floating rate debt often goes with what's called a bridge loan. So it's to, it's a short term loan that bridges you to the eventual long term loan. So you might want to ask like, well, how long is that? You know, is it, is it a year, two, three years?

Like what, how long do we got to get this done? Yeah.

Jessi: Yeah. The longer the loan. Yeah. Yeah. Likely the more likely it is that it could it. Well, honestly the longer

James: loan, the better, right? Because well, that gives you time to do whatever it is that you're doing if it's like a one year bridge loan But dude, you better move fast.

You're probably starting the refinance at the same time as you're buying it So that's not good for shopping time. Like three years is pretty quick typical.

Jessi: Okay

James: type of thing And so you want to know like hey, you got a construction plan How long is it gonna take you to do this? How long is it gonna take you to raise all the rents because you got to get to that stabilized position before you can do the refinance Are we going to have time in the loans term to pull all that off?

Jessi: Makes sense. And then there's just some other general questions in there about loans and interest rates and lenders in general. So it's kind of like how is the interest rate set up? Is it assumable? Does the sponsor have a lender term sheet? Or like all those rules that you were talking about and really learning more about it.

Who is the lender and do they have experience with this type of asset? Did they know about the market? Have they, has the sponsor worked with the lender before? So there's there's like a series of questions there. That's like, who is this lender?

James: We got an interesting situation right now where we're selling a piece of property and The buyers came to us with a loan and they told us what the terms were It's a VA loan and they're like, yeah, we can do 6 percent of concessions And I was talking with my partner and he was like, I have never seen a 6 percent and he goes, that doesn't make any sense.

Like I thought the cap was 4%. So we started doing some research and I was like, well, I mean, according to this, like it sounds like it can be depending on the type of expense that it is. And, and he was like, I, maybe I've never seen this. And so that was one where we were just like, Huh weird and actually we actually called up the

Jessi: lender

James: of the buyer like hey, man, what's like what's going on with this?

You know, I don't just being aggressive and like, okay You don't actually know if the underwriter is going to approve this or not Like this feels like a negotiation type of thing, right? Very strange. I'm and so But that was an example where the term just it didn't make sense. Yeah for like we're like, oh we haven't heard this before and The broker who we're working with, she seems new enough that like I don't think she's experienced to know like, Hey, this is a semi red flag.

Yeah. And so it feels like we're doing some like some coaching, some managing across the table, I guess, to be like, Hey, you should really ask about these lender terms. Right. This doesn't seem right. This isn't normal. What do you guys know that we don't? Yeah. And so, so yeah, so you get that kind of stuff where it's like, yeah, you want to ask about it and be like, huh, that's weird.

Jessi: Yeah, because that would, I mean, that might put you in a position where like they're saying one thing but then when it comes down to it, your numbers aren't that percentage and the bank isn't going to loan you, you know, or let you assume that percentage or whatever. Yeah, that's

James: awesome, let's ask, but he doesn't actually make the final decision.

Right. It's some unknown underwriter who's never talked to you, who doesn't know who you are, which they set that up on purpose. That's so weird. They're the ones who are really playing by the rule book. Yeah. And so, again, we're like, huh, this is Which isn't normal.

Jessi: So, this is a slight side tangent, but that's interesting to me that the underwriter could unravel a deal.

Oh yeah. And I've heard that before, but what does that actually look like related to financing? Is it, is it like what you're saying? Like, a lender misquoted something and the underwriter ran all the numbers again and double checked and was like, no, no,

James: no. So, so here's the concern, right? Let's say we're friends.

We just, you know, we get along like instant connexia, connexia, connexion, and And so I as a lender, they don't want us as friends, right? Or people who have that connexion of Helping a brother out, right? Of giving me a solid, by giving me a loan that you really shouldn't give that's not appropriate Oh, and so what they've done is they set it up where there's some Third party

Jessi: who

James: I, like, let's say I'm trying to, I'm the borrower, I've never talked to them.

I don't know who they are. They've, they may not even know what my name is. All they get is a blank sheet that says, yep, here's their, here's their personal financial statement. They're set up. Here's the loan that they're asking for. Does this make sense? Like it's, they're trying to get to a zero bias, like just make a call type of thing.

And. And so it's up to, let's say you're the lending officer. You're kind of, you're the bridge in between, right? You're the go between. So what you're doing is you're saying, well, here's what the underwriters will accept. So we got to make your package look like something they'll like, and then you hand it off to them.

And if they tell you, well, we need this or this, that. Then they come back and say, Hey, we need an updated, whatever. Cause this is now old. And like, they're just the go between. They're the salesperson. Interesting. And, and the whole goal is to try to eliminate that. I like you bias from the lending process.

Is it solely racism or misogynistic bias? Like just get rid of all. So it's

Jessi: solely based on numbers. The underwriting process. They're not looking at your demographics and your backstory and all that other stuff.

James: No, definitely not your backstory. There might be a demographic piece there because that's important to them.

Huh. But now that's like, big banks, definitely the case. There are smaller, regional, more like commercial sized banks. Where it's a similar process where you have a loan officer who then goes and presents it to Again, third party, like a loan board, a group of people, and they go, yeah, this makes sense, da da da.

So you can be a little more creative in that. Like I've gone and I've actually like, I've supplied a business plan. Yeah. Look, I know you guys have asked for all the documentation, personal financial statement. Here's my business plan to go along with it. To try to get them to go like, Oh, wow, this guy's really thought this through.

Oh, you know what you're doing. Cool. Awesome. Big banks don't care. It's all, they're filling out fields in a spreadsheet and they're just looking at it and honestly, it's probably one of those where at this point, they've got computers that are giving the initial thumbs up, thumbs down and you just have a person who's looking at it going, Oh yeah, here's the, you know, it's like, yeah, I mean, banks, like it's all about the numbers for them.

It's all they care about. They don't care about you as an individual. I mean, it kind of makes sense

Jessi: for them. It's a, it's a business decision, so.

James: It's just it's a math equation. Yeah, that's all it is. Yeah, and they've done the math on well What's the risk based on different profile stuff? So they collect all that information and then they're saying yeah What are the probabilities that they pay it back for how often I mean, that's that's all that they're doing.

So that's an underwriter Yeah, they're not your enemy. They're they're just it's neutral

Jessi: He's

James: got an equation that they're plugging all this stuff into.

Jessi: Hmm All right. Just a couple more questions. So this next one, who is signing the loan guarantee? That's important. So walk me through that a little bit.

What does, what does that mean?

James: So oftentimes for bigger properties, they're what's called a non recourse loan. So if you default on the loan, they can't come back and get you because it's, there's no recourse for it. But banks, for obvious reasons, don't like that. They like to have a fallback, a backup plan.

Yeah. So that is the guarantor.

Jessi: Okay.

James: And, and for whatever reason, they've set it up where it's like, you can disconnect the person getting the loan from the person guaranteeing the loan.

Jessi: Huh.

James: Think of it as like a cosigner.

Jessi: Yeah, that's what I was thinking, is like, so this is the person who's gonna pay

James: if you don't.

I'm trying to see if I can remember the ratios off the top of my head. It's like, So, whatever the loan amount is, whatever the loan payment is, I can't remember which one now. You want to make sure you have enough aggregate number of people that equal the loan or at least they can make the loan payment.

I can't remember how it goes now. And so, so oftentimes what will happen is like, you might have a sponsor where like, yeah we're getting this loan, we're getting this 2 million loan, you go, and what we've got is we've got this. This rich friend who's coming in who's saying hey, if they don't pay back the two million dollar loan, I'll be on the hook for it.

Jessi: Wow, people actually do that?

James: Well, you get a percentage of the profits for doing that.

Jessi: You get a larger percentage of the profits.

James: Well, you go from zero to something. Oh. Yeah. So, let's say that maybe they're an investor, right? And they get like, yeah, they get their normal investment share. As a guarantee, or maybe they get another one or two percent of the profits as a result of it.

Jessi: Huh.

James: And so for them, they're like, Eh, it's just worth the, it's worth the price.

Jessi: And I suppose you just, they do their due diligence and they trust the sponsor. Mm

James: hmm.

Jessi: Yeah. Seems like I could make a relationship go sour real fast. Don't mess up the investment.

James: I mean, no matter what, that happens, right? Like, yeah.

If

Jessi: it goes bad, it's

James: Well, if it goes bad and you don't do well at it going bad, I mean, you know, market stuff happens, right? Sure. Like, there's nothing you can do about that. Yeah, things are gonna

Jessi: fluctuate, but If you've done your math, you know Yeah. The worst case scenario, typically, is like you break even.

James: Mm hmm.

Jessi: And

James: Yeah. Yeah, but that's what you want to ask who's actually backing this thing.

Jessi: Okay, and then this last little section is Refinancing. Okay. So be like before we get into the specifics of like what's the assumed LTV at refinance? And what's the assumed interest rate? And what does the NOI need to be for the refinance?

Just give me like The step by step for refinance, the brief version.

James: So, you buy a property, you get a loan on it, you fix it up, you increase the cash flow, right? The NOI goes up, now you have an opportunity to refinance and potentially pull some cash out, repay investors. Or, maybe a lot of time has passed and you can instead, you know, just refinance at that same level and decrease your overall payments.

Jessi: So essentially you're telling the bank, my property is worth more now than it was when I bought it.

James: Or I got a lot of equity in it, whatever. Can we, I want a new loan

Jessi: based on this new value and I'm going to pull out the difference. That's exactly how

James: it works with like your primary home. Huh. It's the same, it's the same idea.

Jessi: And you can do that at any time? Like can you refinance a property whenever? Yeah. Or I guess you can ask the bank. Yeah. And then they, Do the underwriting and then they get

James: paid one or 2 percent loan fees. So like, yeah, please refinance every year. Interesting. I mean, you don't want to cause you have, you have fees.

Yeah.

Jessi: Yeah.

James: Huh. And that's what a lot of people did when, when interest rates were slowly but surely going down, they were just like, yeah, every two, three years, we're going to refinance cause we can get a lower rate for a better payment so we can take more money out. And keep our payments the same. Like, dude, this is win win.

Tax free money without a hit on our overall profitability. Love

Jessi: it! Yeah, it totally makes sense if rates are going down.

James: And now we have the opposite problem, right? When interest rates went up. Now you're like, oh, okay, I guess we're knocking. Like, you might have So, this comes into it, right? You might have had someone who made a plan where they were like, we're going to do a refinance at the end of this project.

And then interest rates shoot up. And now all of a sudden, the loan that they thought they were going to get, they can't do it anymore because the interest rate is too much. It Oh, now we can't refinance. Now we can't refi out any cash to return to our investors. So, if someone

Jessi: is presenting a deal to you that includes a refinance, that's maybe just a question you'd ask of, What would this look like if you couldn't refinance or didn't refinance?

James: As a general rule, that's how I underwrite it. I don't assume that there's a refinance for that exact reason. Cause it's, it's usually it's a tricky way of goosing the returns for investors cause you get them a nice little cash infusion. Right. Three to five years in. Right. And. But you don't know what the rate's gonna be.

Yeah. In three to five years. Yeah, it may not work. And, and so, and it might, you might still plan to do that cause you goose everybody's returns. And it looks awesome. And it is good to give money back. But you maybe don't guarantee that up front. But when you're underwriting it at least initially. Yeah. You know, hey, we looked at this without it.

Here's what it looks like. By the way, would you plan to do this if we are able to pull that off? Here's what your turns will actually look like

Jessi: that's

James: a fair way to do it But oftentimes they'll just and as we find it like they don't run both scenarios But you want to do both because you never know because again that whole situation a couple years ago That's real that happens.

You know, I don't know like rates right now for commercial stuff is sitting at seven and a half percent That's pretty high.

Jessi: Yeah,

James: and you know, but they couldn't go higher Like, that's not unheard of in times of stuff. No one's predicting that right now. Everyone's thinking it'll fall back down throughout the year.

But, who knows? Alright.

Jessi: Well, that is all the questions that are in this section for financing and growth. There you go.

James: Yeah, a little dry, but super helpful. Really important questions to ask. And very pointed. And yeah, it's good to know. So there you are. Thanks for listening. Hopefully you also found that interesting and you laughed with a deep belly laugh on my jokes.

And so, if you would be interested in investing with us, being that lender who gives us awesome terms. Or becoming an equity partner on a bigger deal. We would love to talk with you. And so you can learn more about us and our investing thesis on our website at furlo.com. Thanks for listening. Have a great day.