We had a great talk with Rob Anderson of BV Capital, a company dealing primarily with multifamily, industrial, office, and mixed-use properties in Texas. Rob brought an unparalleled depth of understanding on how to successfully run a broker-dealer.
In this episode we explore Delaware Statutory Trusts, the benefits of leasing property before selling it, and why DST investments might just be the golden goose you've been searching for. We also untangle advanced tax advantages and retirement account strategies for real estate investments. Rob underlines the importance of consulting with an expert when it comes to 1031 exchanges and QIs, and we throw light on the benefits that a Roth conversion can bring to investors.
We also explore economic trends for real estate investing, and the potential power of artificial intelligence in business. Listen to Rob's insight into the dramatic decrease in multi-family construction starts in key Texan cities and what this could mean for the future. This episode is a cornucopia of insights, actionable advice, and intriguing narratives that will surely leave you wanting more!
To contact Rob, email:rob.anderson@bvcapitaltx.com and visit www.bvcapitaltx.com to learn more about his company.
We had a great talk with Rob Anderson of BV Capital, a company dealing primarily with multifamily, industrial, office, and mixed-use properties in Texas. Rob brought an unparalleled depth of understanding on how to successfully run a broker-dealer.
In this episode we explore Delaware Statutory Trusts, the benefits of leasing property before selling it, and why DST investments might just be the golden goose you've been searching for. We also untangle advanced tax advantages and retirement account strategies for real estate investments. Rob underlines the importance of consulting with an expert when it comes to 1031 exchanges and QIs, and we throw light on the benefits that a Roth conversion can bring to investors.
We also explore economic trends for real estate investing, and the potential power of artificial intelligence in business. Listen to Rob's insight into the dramatic decrease in multi-family construction starts in key Texan cities and what this could mean for the future. This episode is a cornucopia of insights, actionable advice, and intriguing narratives that will surely leave you wanting more!
To contact Rob, email:rob.anderson@bvcapitaltx.com and visit www.bvcapitaltx.com to learn more about his company.
Okay, guys, welcome to the show. We have Rob Anderson here. He is raising capital on different types of real estate investments and large real estate investments, and he has some unique opportunities and tax advantages to what he does as well, so we're gonna have a really fun conversation. Rob, can you introduce yourself to the audience in 60 seconds or less?
Rob Anderson:No, I can't. That's really hard to do, but I'll do my best here. So we raise money. We're a development firm in Dallas rather, we do a lot of business in Houston. I'm not sure why I said that, but we're a developer in Dallas. We're investors, just like you guys are, and we're inviting people to come alongside of us in our deals. What we did is we bought a broker dealer about five years ago. That's what I run. So, as opposed to just a typical development shop that raises money to fund their deals, I have to be audited by FINRA every year. So I have a higher level of standard, a higher fiduciary standard, in that we have a full broker dealer and everybody that is in my side of the house a series seven license. It adds a lot more. Frankly, it adds a lot more heading on us, which is why a lot of people don't do it, but we feel it's a better thing to do for our investor base and it's been well received.
Mark Perlberg:Great, and you were in your company's BV Capital, right it is. Tell us about some of the deals that you've closed at your firm.
Rob Anderson:You know what I would tell you. So a lot of folks will do one thing across the entire country. We are open to anything that makes money, but we don't leave Texas. So most of our deals are Houston, dallas, austin, somewhere in that general marketplace. The reason is our networks go so deep there that we can find really good opportunities that we couldn't find in another market, that we don't have those same networks built right, and so we do a lot of multifamily because there's a huge supply and demand imbalance here in local age from a macroeconomic standpoint. We've done a fair amount of industrial, we've done a little bit of office, obviously shied away from the dozen medical. We have a hospital, some medical office. We've done some mixed use, like some land type deals where you have a piece of property and you got multiple property types that interact and help kind of fuel the whole community there. But I would say the majority of what we've done, especially as of late, has been in the class A multifamily space.
Mark Perlberg:Great, and so one thing that's unique about you guys is you will visit every. You will personally visit all of the properties that you guys invest in correct Multiple times and the neighbors, you know, I mean we get to know.
Rob Anderson:I'll give you one example. We're doing a construction deal in a town called New Braunfels right now, which is in between Austin and San Antonio, and so when we got our plat approved by the city, there was four other shops that did as well. Well, not only we've talked to all four of those other shops, because now they can't get financing and they're trying to sell us their dirt. So it's really interesting how you really get to know everything that's around you if you're local and you can go deep.
Mark Perlberg:Great, great.
Mark Perlberg:And so you know we're gonna talk about, you know, profitability and whatnot, but just telling you guys thinking about investing into these types of deals, you're mostly gonna get a year one loss from the cost aggregation study on the properties and what we've seen is around 30 to 40% of your capital contribution in that amount will go down over time as opposed to pre-siation phases down. And then the following year is you're gonna get your share of passive income, which you know and Rocky tell you more than I on on what that amount would look like. But basically you know you're gonna get some passive. You know your share whatever your share is of the rail and it will be flowed through to you on a K1. And you're also gonna have distributions at some point in time and each investment has a different strategy and timing for when you get those distributions.
Mark Perlberg:Now, if you have the real estate professional tax status, you could use those losses to offset your active income, potentially use those losses to offset other sources of passive income or use those losses to offset real estate capital gains. So lots of unique nuances in the tax treatment of this type of investing. But there's also opportunities here. We'll talk a little bit about profitability. If you want to show, tell us now you obviously there's. Every deal is different, but I'm interested first to tell me about for you could tell me about some of the profitability that one can expect in different types of deals like this, and also let's talk about so where are some of the tax advantages you've been able to create for some of your investors?
Rob Anderson:Sure Mark, one of the interesting thing that's happened down here in the South, and every market's different. But in Texas what we used to do is what was called the value add play, where we would buy something, renovate it and then raise rents and try to drive net operating income and sell it for a profit. That's really really hard to do nowadays because valuations have gotten so high that you can only raise the value so much when you sell for the risk you're taking. So we've shifted entirely to ground up construction. We feel it's the exact same risk, but you can still get that low 20s IRR that we've all been chasing for the last several decades. You can't find that in the value add space or the renovation space, at least in Texas. It's really really hard to find. We've got friends that only do that business and they're settling for high single digits to low teens in their IRRs. We don't know that's just what they do. So if you can't pivot and do something different when the macroeconomic environment changes, what are you going to do? So we have our own construction company. So we've shifted entirely to ground up construction. Why? Because we can hit that metric. If we can't get a 20 or better, then it's not worth the risk that we take is how we look at it.
Rob Anderson:Now. What does that do to an investor? You should be able to double your money in a three to five year period, depending on the deal, on average. So I guess from a return metric, I like to talk in you give me a dollar, what do you give back? Because sometimes the IRR conversation gets a little confusing because of the time waiting, of the calculation. But typically what these construction do? You get no income until we sell it. So back to your point on distributions. If we buy dirt and break around and start building an apartment complex, that dirt's not going to pay us any rent, so there's no distributions. So because of that illiquidity and lack of distribution, you should get a pretty high return in exchange for that. So every time that we modeled it, if we're going to move forward on a project, it'll generally get close or exceed a double in about a three to four year period. I said three to five. That's what we underwrite, but the construction deals a lot of times can be done in three years.
Mark Perlberg:Right, one of the things I just want to touch on a little more here is helping people understand what an internal rate of return is. So it's similar to an ROI return on investment, but this is accounting for your profitability If there's profitability in the cash flow rental combined with what you expect the appreciation to be, which you'll eventually reap the rewards with when the property is sold. I would say that's about the simplest definition I can give to IRR. What are your thoughts?
Rob Anderson:Yeah, I mean it's the time waiting of returns which gets a little confusing, but the idea is it's the return Right, how do?
Mark Perlberg:I compare it. Have you ever considered now it looks like you're have you considered refinancing the property instead of exiting on a capital gain, or what's that decision process looking like?
Rob Anderson:Not today's market. When you get 7-8 percent debt, that's really not a good way to do it. Back when you could get 3 percent debt all day long, absolutely. Then you pull money out. The only time we would do that today, mark is in an Opportunity Zone Fund where we've got one of those coming up where you go ground up and then you can obviously revalue it and pull some equity out to help people pay their capital gains. Outside of that scenario, we would rather sell it or sell it into the DST space or sell it to another buyer and let our investors get that return of capital so that they can then see proof of concept and then recycle it elsewhere or do what they want to do with it.
Mark Perlberg:Great, Great. Now this is a whole other conversation and you can look through. I've done some talks on capital gains planning. If you are to receive those capital gains, you can look at my other YouTube or podcast episodes on just capital gains planning. But there's a whole variety of strategies. The first step you want to do here, when you're going to have a capital gains event like this, is first figure out if you're actually going to pay taxes on the capital gains, Because some of you guys may have suspended losses that can be used from other properties or current year losses that will offset the real estate capital gains. Before you start calling, thinking about all sorts of fancy strategies, you may find that there are no necessary strategies because there's no tax implications on certain cap game events. Now, that's not always the case, which is why you really want to collaborate with your account and be aware of these capital gain events when they're going to occur or you expect them to occur. So, for your project, how long does it take to do the from beginning to end with the construction?
Rob Anderson:Well, we kind of do it in three phases, so you have a couple of exit points. If you start at the very beginning with us, which is a little unique, we do things a little differently. We will actually do a land raise right up front, and so folks who are looking for a shorter term deal can get into the pre-development phase. And what that is is we it's kind of like a bridge loan, if you will, mark we're just giving people a pretty nice return to borrow their money to buy the land and do all the pre-development work. Pre-development takes anywhere from nine to 18 months to get raw land ready to shovel, ready right, ready to break ground, permit and zone, all the different things that need to happen, all the architectural engineering. So that's one phase. And then what we'll do is we'll do the development phase, where we break ground and actually build the property, and that's ballpark.
Rob Anderson:It takes about two years to build a class A property and then about a year to lease it up, and so that's where the three year period comes from, okay, and so when we move from land to development, that's an opportunity for people to exit if they wanna just get out of the deal, or they can move into the second phase of the deal and attacks deferred basis.
Rob Anderson:That's completely up to them if they want to. So the second phase of the project, or if you didn't wanna start at the land phase, you could start at the construction phase, if that makes sense, and then you could just participate in that phase. Three years later we're built, we're leased, we're ready to sell and then say we either sell it or we convert it into a Delaware State Story Trust which is a DST for 1031 investors. You can stay in it at that time and then get the tax deferred treatment of the DST or you can exit at that point. So over the life of a property there's multiple ways to kind of come in and out is how we have it structured today.
Mark Perlberg:Great. Now one of the things I'm thinking to myself here is there's a reason why you wanna lease this up before you sell it. Now, with my accounting hat on, is I'm thinking to myself you wanna lease this up so you don't get triggered as having that broker dealer status and you get the more favorable long-term capital gains treatment on this endeavor, as opposed to if you were just a developer. You would be paying income at the ordinary income tax bracket, but I imagine there's also some economic benefits of filling up these properties with tenants before you sell it as well. What are your thoughts on that process?
Rob Anderson:The simplest way to think about it is if you look at a stock and how does the stock trade? It trades on multiple of EBITDA right or any kind of private company or public company. Usually you're gonna look at the PE ratio, which is really a function of the price compared to its earnings right. So in the real estate world our net operating income is our EBITDA right. So the net operating income is how these properties will trade, and the higher the NOI, the higher the sales price is the simplest way to put it. So we want that fully leased because we want the maximum number of income for at least a quarter or two. So when we take it to the market, to either an institution or if we're gonna DST it, we wanna be able to show the cash flow is at a certain level and that justifies the valuation on the exit.
Mark Perlberg:Great, great, great, yeah, and I imagine that the buyers here in the type of buyers you're trying to attract, or once we wanna have something that's already gonna have some guaranteed cash flow as soon as they get into the deal.
Rob Anderson:That's exactly what they're doing. The biggest investors will buy real estate as a bond alternative because they feel it's a safer place to park their money. It's really interesting when you talk to these folks.
Mark Perlberg:Are you still doing cost tags on the properties?
Rob Anderson:If we hold it long enough, we will.
Mark Perlberg:So over a year.
Rob Anderson:Well, a construction deal you really can, it's gotta be done. Typically, what we've seen is it's gotta be, you know, four or five years plus for the cost seg benefits to offset the cost of the cost seg. You're welcome to disagree with me, that's just what we've noticed. Our 1031 vehicles, the DSTs, those generally are five to seven year holds. We cost seg all of those.
Mark Perlberg:Great. So let's talk about DSTs because we've considered them for a handful of clients. One of the challenges with DSTs is we find that the our clients have found more profitable ways to invest or we've seen our. Why is it around 3% for the DSTs and it's just not enough to get our clients mood on that vehicle, although we're looking at it even then because of the future capital gains events, the appreciation and also the opportunity to move boot into a DST to mitigate taxes and then make it roll into other stuff. But can you tell me about some of the work you've done with DSTs and how you've made it appealing for investors?
Rob Anderson:Sure, we view DSTs as a piece or a part of the solution. It's not the full solution is what I would tell you. First off, and the reason we got into the DST space is we were selling our construction projects to other shops that would turn around in DST, and so we said, well, we could do that. And so when we target something, we're targeting roughly about an 8% to 10% total return annualized for investors, which is top of the market in the DST space, as you just mentioned. The other reason we got into it is it there's a term out there pigs get fat, the hogs get slaughtered. Right, and the DST space. When valuations went so high a couple of years ago and the cost of debt was still so low, everybody started selling their homes. Because they could sell in a day, they get max sales price, and then they had to exchange it. Well, they needed a place to go, and if they couldn't find something in that 45 day ID period, they would go to the DSTs. And so these shops started throwing DSTs on the market. That really weren't that exciting, but it didn't matter, because they filled in a couple of months or weeks or days, and so that's what happened. Those days are over, and so you have to have quality product again. So folks like us jumped into it and said, well, we can easily outperform that and give somebody something that they're not getting and steal some market share. And that's what we're doing, and we're not the only ones, but that's what you're seeing. You're seeing some new names or new entrants into that space.
Rob Anderson:So the DST does a few things for you when you do a 1031 exchange. First off, like you said earlier, it's all about the tax. We're talking to people that have owned a ranch for the entire life of them and their parents or something of that nature, and they sell it and they've got a negative basis, and so every dollar is taxable. And then some, well, you're going to exchange that property, and there's a lot of that that's going on right now. So what we're seeing people do is diversify that exchange depending on the size of it.
Rob Anderson:And when I say you diversify by time frames, they may want to be active on something, they may want to be passive on something. So, just to clarify, a DST is the passive way to invest in a 1031, right? And so let's say, you sell something for a million dollars worth of taxable gain. What do you do with it? Well, you can go buy something else and own it and then rent it out or do whatever you want, but you're an active owner. Even if it's triple net, you still have to keep an eye on it right. And so how active do you want to be in that real estate?
Rob Anderson:Some people will do both, and so they'll go buy something for 700 grand worth of equity, but they got 300 grand left over and it's too small to do anything with. What do I do with it? They throw it in the DST to your point earlier. That way they don't have the boot, and so a lot of the DST business we get is not 100% of somebody's exchange. It's just a part of somebody's exchange, right?
Rob Anderson:The other thing that we're seeing is investors will want to go find their own deal because they can make more money, right, and they don't mind being active. But what if they don't find anything that they want to own at the price they want to own it or get the financing they want in 45 days of selling their prior property? That's a challenge. You're under the gun for that, and so the DST a lot of times is kind of the fallback option, and we've done really well there for folks. This way they can have the comfort of knowing they have their exchange while they go chase a better kind of more fun deal if they can find it.
Mark Perlberg:Yeah, another thing I would think about the DSTs is you get additional basis in the leverage and that's really important if you have a property where you're deferring a ton of gain in the sale, because let's say we have a property with a $200,000 basis to be sell for a million dollars and we want to get that depreciation deduction Now. And then let's say, the replacement property that we're finding here is only half a million dollars. Well, our basis is first off. We can't do a 1031.
Rob Anderson:We can't have a successful 1031 here. But let me give a very example.
Mark Perlberg:Let's say the replacement property here is like a million dollars. Now your basis in the new property is only $200,000. So you've got minimal depreciation tax benefits. So perhaps what you can do is when you combine this with the DST, you're going to have additional debt basis to give you more access to depreciation here, and when those costs are done, either through the DST and we're spreading out the new basis, it's going to be less reduced by that deferred gain because you're adding basis with the debt that you're tacking on and additional replacement property.
Rob Anderson:Yeah, the other thing too is on our DST is that we have a fully amortizing loan. So one of the problems that we see in the DST space is their interest-only loans and they'll have an interest rate cap that's going to expire at some point in the future and we don't know what interest rates are going to look like when that cap expires. And so what we've got is extremely long-term debt. I think I was telling you before the show I had 36 years of term left on my current one. Not one. Never hold it that long. It's a five to seven-year hold typically, but all that does is give you the freedom of knowing.
Rob Anderson:When I get out of this, it's not because I had to, it's because we got a really good sales price. That's an important thing in a DST partner. But to your point on the debt or the leverage, you have to replace the debt as well as the equity when you sell something in a 1031. And a lot of people miss that. So if you still have debt on the property and you sold it, you can't just go buy something with the equity. You've got to replace that debt as well. So most of our DSTs will have somewhere between 40% and 50% debt on them, purely to allow people not only the leverage, but it allows people to replace the debt that they have on the prior property.
Mark Perlberg:Yeah, so we've had clients and we've met people who've been a little bit misadvised on this concept.
Mark Perlberg:So one instance where it was when a client sold three properties to roll into one property in a 1031. And then we did the cost tag and we found out that one of the three had been 1031 from another property. So the basis was so low, the deferred gain was so high, that there was minimal basis in the replacement property. So when we did this cost tag on a $1.5 million property there's only maybe like a very, very small amount of actual bonus appreciation because the basis was reduced by all that deferred gain. Meanwhile I wish they talked to me beforehand because I would have said hey, just sell one of these properties in 1031 and use leverage for this replacement so we can have a higher basis and get more bonus appreciation on it. And then we had another instance where a client did a 1031 into land with oil and gas and mineral rights and the proceeds went first to pay off a loan and the rest went into the land and you can probably see where this is going.
Mark Perlberg:They didn't realize that there was no debt basis to be added back into this new investment, so it was the 1031 failed. So these topics here, which are complex, and this is a profession, or why, if you're going to do a 1031 exchange or any of these things, you really want to consult with an expert and specialist before going forward to make sure it's done properly.
Rob Anderson:Yeah, then the QI, and so what's interesting about that mark is the QI. The qualified intermediaries should have caught that.
Mark Perlberg:Yes, yeah, we were a little bit surprised by it. I think that it was such a unique example that I think there was. Maybe the intermediary had never seen a deal like that, or just think something got dropped, but no one realized that the replacement property value to simply put it, the replacement value has to be equal or greater. So once you pay out the mortgage, you've got to find a way to bring up that replacement value.
Rob Anderson:You know, one thing that's interesting is there's zero oversight on qualified intermediaries. You know that there's no regulation on them whatsoever. We could just go set up our own shop and be one. So I always caution people you know. By all means reach out to somebody like me or somebody else and ask for a qualified QI, because there is a difference there and we've learned who the good ones are. I always offer to share with your audience or anybody else who they can trust, because you know there's big professional shops out there that I've seen do incredibly good work for you for very little cost, versus some of the cheap ones out there will end up costing you a lot more money in the long run.
Mark Perlberg:Yeah, especially when we get into more complex areas. You got to make sure you're considering the impact of debt, debt paid down and how all that comes together and making sure that you're doing things properly. So now I know that you're doing some other things here to create tax advantages for your investors. So fill us in on what's going on here.
Rob Anderson:Now my favorite one right now is the Roth conversion. So you know, as you know, if you make too much money, you're limited in what you can do on the Roth side, with one exception is that you know what they used to call it a backdoor conversion. I don't know what they call it now, but just a Roth conversion where you pay the tax on a traditional IRA. This way, the government gets their tax today and then you can go into a Roth and any gain going forward is tax free, right. So the beauty of a ground up construction investment with a traditional IRA is my new favorite thing. And what we are doing is we're getting a third party valuation from a company that does this for a living, because what will happen is, if you'll follow this it's kind of a you chart. If you were to chart this your value starts here and then, as you do construction, it goes down a little bit right, and then, as you go and the construction is done, you sell it for way up here. So, instead of just going from here to here, we want to take advantage of that dip, and as we start construction, the value of those units theoretically fall, and so we're doing a valuation for investors in their traditional IRA accounts that will show the lower valuation. So what makes the valuation fall? Right off the bat? You get a 15% discount for an illiquidity premium the fact that you can't just click a button on your computer and get your money back right. You also get to pull out any capital raise expenses or anything that went into getting securing the financing to get the construction kicked off.
Rob Anderson:There's a lot of things that you can use that these firms use and these professional valuation companies will get the value of those units down to somewhere between 65% to 70% of what you invested. And you still invested the same amount, but we have a valuation that says it's worth a lot less. So why would that be good? You then take that valuation and submit it to your custodian, your self-directed IRA shop. They then lower the value of your investment to that new valuation, and that's when you do your Roth conversion. So, for example, if you put 100 grand in a deal, you get a valuation that says that 100 grand is now worth 70 grand. You do a Roth conversion on 70 grand, so you pay tax on a lot less, even though you've put 100 grand into this deal. Theoretically, obviously, there's no guarantee on any return. But theoretically in three years we sell it at a profit of a 2x. That 100 grand became a 200 grand, but you only pay tax on 70 of it to convert.
Mark Perlberg:Beautiful, beautiful, and you know, we've also seen instances where people are having been doing this with oil and gas investments where, after the lane has been utilized, they're able to do a revaluation and combining this with qualified opportunity zone funds to minimize the amount of tax that is recognized when that deferred tax is going to become due in December of 2026. So lots of really cool strategies and opportunities with these revaluations that a lot of people are missing, and when we combine that with investing with your retirement accounts, it can really do some impactful stuff.
Rob Anderson:Yeah, even better is if you do it at the end of the year and then you can spread it over two years.
Mark Perlberg:Right.
Rob Anderson:So, depending on the timing of the raise, you convert some in December and then you convert the rest in January. Cool Right. So the lower valuation of this, call it the 70% or whatever the valuation comes to. If that 100 grand went down to 70, well, instead of converting all 70 in one calendar year, you can split it out into two. If, like right now, if we're coming to the end of the year and this way you're converting 35 in one year calendar year and 35 in another calendar year, for example.
Mark Perlberg:Now, does that impact you if you're not investing through a retirement account and you're just getting into it?
Rob Anderson:Yeah, it really does it not, unless you're with a third party custodian. Most people invest with us direct, and so their value is their capital that they invested. Worst case scenario you come in through a third party custodian and you decide to give them the valuation, which there's no reason for you to do that. Well, they're going to lower your basis because of that, but it's going to come right back when the deal sells. So it's really about just what the number looks like on a statement, not what the actual numbers invested are.
Mark Perlberg:Josh, great, great. So this was a lot of really unique things that always. I always love the opportunities to talk about some of these areas that are, yeah, dig a little deeper, to talk about concepts like revaluation and timing this and using this to take the advantage of Roth conversions and most of the time when we see our clients consider syndications and investing as LPs, a lot of times they don't want to invest through their 401ks because they want to have those losses flow through onto their 1040. They just don't see the advance here. But here's an opportunity here where you can double your funds and only pay the taxes on a fraction of the conversion when you move the IRA to the Roth. So this is one example of where it's really appealing to invest with your retirement account, because when you combine it with this strategy, with the Roth conversion, you can really do some amazing things.
Rob Anderson:It's long-term wealth creation. Yeah, normally, after tax, investments get the biggest benefit, unless you're going to do something like what we just talked about.
Mark Perlberg:Yeah, very cool, so I would agree with you there. Any other buying changes or anything else that you're really excited about right now, and all the tax opportunities that you've created with your clients.
Rob Anderson:Well, I'm going to step back from tax. I'll share one last thing with you, from a macroeconomic thing. This is important for your audience to realize. With the current capital markets and the cost of financing, business is slowing dramatically and this is going to provide an opportunity for investors, if they're aware of it. So what do I mean by that? So we do a lot of multi-family class A type multi-family stuff.
Rob Anderson:Right, ground up construction starts are falling off a cliff. What does that mean? New product that's coming to market. So think about it. Mortgages are what? 7%, 8% right now, if you can find somebody to give you one. So a lot of folks are not getting out of those apartments into their first house or, if it's happening, at a much higher age. I feel really bad for the folks that would normally bought a house when I bought my first house. It's just really hard to do right. So people are renting for longer. Then you have migration trends. We're in Texas, the whole world. It feels like the whole world's moving here. I'm sure there's other parts of the country that feel that way, but we're definitely having that happen.
Rob Anderson:But here's what's interesting. So I live here in Dallas. Dallas-fort Worth. New multi-family construction starts are down 64% over the prior two-year average. The city of Austin is down 74%. The city of Houston is down 79%.
Rob Anderson:I'm sure I just know Texas because that's my markets. Right, if you go to other places you'll have to look. But when you have that dramatic of a drop in new supply but yet the demand is still coming, we're going to have an incredible supply and demand imbalance here in a couple of years. So when our projects are coming out of the ground, we may be all by ourselves. But what does that mean? That means rent growth. If you just look at pure supply and demand, you're going to have more people coming to an area that doesn't have supply to meet the additional need. Right, because it's not like you throw these things up overnight. They take two years to build, and so that's what we're excited about is just the opportunity. There's always opportunity. You just got to be able to find it and look for it. And this is the opportunity. We're going to have a significant supply and demand imbalance for housing.
Mark Perlberg:Yeah, and if you just Google top fastest growing cities in the United States, you're always going to see in the top 10, three of them are going to be in taxes. So to see that the construction amount is plummeting should be alerting to some of the folks. But also it's a huge opportunity, as you described. Now I think you also did something where you did a HUD loan takeover on one of the properties.
Rob Anderson:Yeah, we did so. People think HUD is low income. It's not. They fund class A properties all the time Because, if you think about it, it's more of affordable housing as opposed to a million dollar homes, right. And so HUD is a pain, it's just hard, but they have the most advantageous rates at certain times. We took over a HUD loan that was 3.1% fixed for 36 more years. Try to find that somewhere. So there is some really neat ways to get into favorable financing the way that we did it. I'll just go ahead and give you my secret sauce. You have to have a property manager that's HUD approved. The buyers are relevant. It's all about the property manager, right? And so the property manager is HUD approved and you can assume an existing HUD loan, because those are by far and away the best financing terms that you're going to find out there.
Mark Perlberg:Awesome.
Rob Anderson:So why does that matter? If you're a 1031 investor, you don't want to worry about getting exited out of a deal at the absolute wrong time when interest rates are sky high. That's why that matters.
Mark Perlberg:Absolutely so. Tell me. So now we're going to transition out of talking about real estate taxes a little bit and tell me how, if at all, have you used artificial intelligence in your business?
Rob Anderson:At least you can't love this. We have a property we're building in New Braunfels, which is a city in between Austin and San Antonio. Austin and San Antonio is going to be the next Metroplex in Texas. By the way, if you look at Dallas-Fort Worth, they're an hour apart and if you drive from one downtown to the next, there's no break. Austin San Antonio is going to be that here in about five, 10 years. I mean it is exploding down. So, yeah, we're building a property down there. It's a beautiful property. We couldn't figure out the name, mark. We were struggling about all this stuff and we're trying to figure out. It was founded by German immigrants like 200 years ago and it's got rivers that run through it. It's just like pretty area. We're trying to figure out all these different things. We went to chat GPT and had a 20 minute conversation and came up with the name.
Mark Perlberg:Awesome.
Rob Anderson:What's the name? The Landhouse at Green, because there's Green is a city. G-r-u-e-n-e is the name of a city that is a mile from our property and it's where the oldest country music concert venue is in the state of Texas. Like Willie Nelson's played there, like everybody you've ever heard of has played there right. So it's kind of known and Landhouse is basically German for a country home, so this is kind of in the hill country area of Texas. So just kind of fit and we went with it right there.
Mark Perlberg:Awesome. Yeah, I've been using it to help me out too, with we're rebranding the firm and renaming it and I was doing some brainstorming with them. I eventually hired the soul to give me the name, but a lot of times when we're looking for ideas and titles, and they helped me out with maybe some social media postings and putting emojis and things. It's been really helpful with just coming up with ideas.
Rob Anderson:Yeah, the speed at which it gives you ideas is really fascinating. I don't think it can do the work for you, but it gets you where you want to go rather fast.
Mark Perlberg:Yeah, we're testing it out with doing some tax projections and estimates versus the estimates of tax savings with an S corporation right now and we're making it provide work papers that support its calculations and see how it compares with a lot of fun stuff.
Rob Anderson:Oh, that's interesting.
Mark Perlberg:Yeah.
Rob Anderson:So can it do your taxes for you too.
Mark Perlberg:No, not yet, but there will be eventually elements of AI that will, and I think it's fine. I'm not worried about losing my job, so it'll only help us be more efficient and off board, as well as some of our grower.
Rob Anderson:All right. As long as it doesn't spawn Skynet, I'm good with it.
Mark Perlberg:All right, yep. Well, you know, if we're going to have Skynet, the very least they can do is take care of pulling in 1040s Nice.
Rob Anderson:That's funny.
Mark Perlberg:So if anyone's interested in investing in some of your projects or learning more about what you're doing, where can they learn more and find you?
Rob Anderson:Our website is the best way. It's bvcapitaltxcom. We play up that Texas thing. You got to forgive us, but B is in boy. B is in victory. It stands for Bridgeview. Bridgeview is the real estate arm. So, bvcapitaltxcom, just go in there, take a look around at what we've done. If you have some interest to talk about anything, or be more than happy to visit, when you just fill out a form, we'll call you right away.
Mark Perlberg:Oh, wonderful. And is there any other ask of the audience or anything else before we sign off?
Rob Anderson:Let us know If this is something that you're looking for from a diversification or a tax standpoint, let us visit with you. I will tell you this right now. If this isn't a good fit for you, I will tell you. I've told folks hey, this isn't right for you. We would love to grow our investor base. We're not going to take your money unless this is suitable and unless I can pass a FINRA audit frankly and say, yeah, this was a great thing for this individual. So I guess that's what I would tell you is we are at a different level. We're looking for partners. We're not looking for just somebody to throw money in a deal.
Mark Perlberg:Okay, great Rob. Thank you so much for coming on the show and sharing your wisdom and insight and strategies with us. I think our audience is really going to appreciate it and if you guys want to learn more, make sure you like, share and subscribe, and if you want to be a client or no solar, you can join the team. Email info at markproverscpacom.