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Cashflow based financing for Airbnb hosts (Ep 599)

Ep 599

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In this episode of “Get Paid for Your Pad,” I had the pleasure of welcoming back Derrick Barker, a returning guest and one of the founders of Nectar. Derrick, who boasts a diverse background in finance, football, and entrepreneurship, shared his journey from starting his first business at Harvard to becoming a real estate mogul with over $450 million in assets. He detailed his experience at Goldman Sachs as a bond trader and how he, alongside his wife and business partner Brittany, successfully managed a portfolio of 125 short-term rentals and over 4,500 apartment units.

The focus of our discussion was Nectar, a company Derrick co-founded that provides working capital loans to professional real estate owners and operators. He explained how Nectar works with existing mortgages to offer flexible loans for various purposes, emphasizing their non-traditional approach of lending against net cash flow rather than the traditional mortgage model.

Derrick shared insights into the current economic landscape, particularly the impact of rising interest rates on real estate and asset values. He explained the intricacies of how higher interest rates lead to decreased asset prices and discussed historical economic patterns, including recessions and the Federal Reserve's role in them. Derrick opined that the recent halt in rate hikes by the Fed doesn't necessarily signal an immediate economic upturn and that a typical recession might follow within about ten months of such actions.

We delved into the challenges and opportunities in the current lending climate, with Derrick highlighting Nectar's role in providing liquidity to real estate owners in this environment. He also touched on the potential for buying opportunities during economic downturns, encouraging listeners to be prepared with liquidity to capitalize on such situations.

Towards the end of our conversation, Derrick outlined the process for obtaining a loan from Nectar, emphasizing their focus on evaluating the actual cash flows and financial health of potential borrowers. He concluded by offering VIP treatment to listeners of “Get Paid for Your Pad” who reach out to Nectar for their lending needs, ensuring a speedy and favorable loan process.

Overall, this episode provided valuable insights into the world of real estate financing and the broader economic landscape, offering listeners practical advice on navigating these challenging times.

Before we wrap up today's episode, remember to connect with us on Instagram @getpaidforyourpad for exclusive content and behind-the-scenes moments, and don't forget to hit that ‘Subscribe' button on our YouTube channel. We appreciate your support. Stay tuned, and keep being awesome!

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Jasper Ribbers (00:01.366)
Welcome back to Gap Aid for your pad. My guest today is Mr. Derek Barker. He's been on the podcast a couple of times, I think. He is one of the founders of Nectar, which is a, well, I'll let you explain what Nectar is. Derek, welcome to the show.

Derrick Barker (00:16.322)
Thanks. Thanks Jasper. Great to be back. Great to be back on the show. It's been, I don't know, it's like a year and a half maybe since we, since I was last on and lots happened. So thanks for having me back.

Jasper Ribbers (00:27.818)
Yeah, 100% man. 100% I can't believe it's, yeah, we connected shortly before we had that mastermind in Mexico, right in Oaxaca.

Derrick Barker (00:37.122)
which is probably one of the best masterminds I've ever been to. Not one of these, like top two best masterminds across anything, any industry. And for listeners in my background, so I was in finance, I played football, I did a lot of stuff, a lot of different masterminds. These guys, y'all was the best.

Jasper Ribbers (00:46.519)
Ha ha ha!

Jasper Ribbers (00:59.646)
Ah, I love hearing that. And I, I'm not paying Derek to say that by the way, just so you know.

Derrick Barker (01:06.924)
Oh no.

Jasper Ribbers (01:08.302)
Awesome man. Well, give us a quick update dude. Tell us for the people that don't know what Nectar is, give us a quick intro and tell us what's going on in the last year and a half. Things have changed a little bit when it comes to interest rates and stuff. So we have a lot of interesting stuff to talk about.

Derrick Barker (01:23.242)
Yeah. So I love to do that. I'll start with like a quick background of me and then like a little bit about what Necker does and then love to talk about interest rates because that's what everybody's thinking about. At least everybody in my world. So you know my background is I'm a entrepreneur. I started my first business when I was a freshman at Harvard University. It ended up doing really well and I started buying real estate. So I built a bought, built,

rehab, asset manage, property manage, over $450 million in assets, mostly in the multifamily space, so over 4,500 units of apartments, but also had a short-term rental portfolio, so I had 125 short-term rentals that my partner, Brittany, who's also my wife and also the co-founder of Nectar, she built and ran that portfolio. And so that's my background, entrepreneur and real estate guy at one real job.

I traded bonds at Goldman Sachs, so I was a bond trader too, but I was a past life, you know, but it was also really interesting and fun. I started Nectar a couple years ago, you know, really as a, and we provide basically working capital loans to professional real estate owners and operators. We started out in the short-term real estate space primarily, you know, because we're looking at people's cash flow, net cash flow.

and we'll lend against that. So we're not a mortgage, we work with your mortgage. So if you have a mortgage already and you have a stabilized cash flowing asset, that's like, you know, that's low leverage. So if you're 90% leverage, there's nothing we can do with, you know, but if you have like a stable assets, we can provide a working capital loan that you can use for any purposes, similar to a cash out refi. So you can, people have used our funds to buy management companies or…

to do renovations by, you know, put in pools or hot tubs or buy additional properties or just finish rehabs. It's super flexible, buy a boat, one guy bought a boat. So that's what we got, we're flexible capital for people with low leverage cash flowing assets.

Jasper Ribbers (03:32.818)
Tell me about the guy who bought a boat. That's interesting.

Derrick Barker (03:36.106)
Uh, yeah. So, I mean, he was, uh, he was in, he was on some lake, is it Lake Placid? Maybe, uh, he was using, had some properties, uh, a bunch of properties in the lake and he wants to have a boat to run out to them. So he wasn't buying a boat to just chill.

Jasper Ribbers (03:55.597)
I was going to say, imagine you're not going to lend, I want a boat. Can you give me some cash? I'll buy a boat right now.

Derrick Barker (04:02.302)
Yeah, it was an income generating vote.

Jasper Ribbers (04:07.18)
Okay. Cool, dude. And we talked about a year and a half ago, the lending climate has, I feel like, has completely changed. I mean, you know a lot more about this stuff than I do. I just see the interest rates and they've been going up. I think they're at the highest since early 2000s, maybe. Right? What does that mean for… Does that mean it's just way more expensive now to…

you know, to borrow money, essentially.

Derrick Barker (04:38.614)
Yes, but it means more than just that. We live in a world where asset prices are valued based off of discounted cash flows. What does that mean? That means that when you look at the value of a property, people use in the real estate space, cap rates. All a cap rate is, is a rate that you discount future cash flows. That's why I used to, you know, you're in the higher,

Like, and when interest rates are, and that's how all assets are valued, that you know, stocks, bonds, startups, oil fields, you know, like that's how, that's just the world that we live in. When interest rates are higher, the value of future cash flows go down mathematically. So not, so interest rates make it harder to lend, but it also means that asset prices mathematically have to go down. And if we look at,

Jasper Ribbers (05:27.389)
Mm. Mm-hmm.

Derrick Barker (05:38.43)
If we look at what's happened in the past recessions over history, just going back to the 1800s, typically what happens is there's some kind of, I mean, you can call it a bubble or run up, you know, there are good times. Uh, then there's some amount of worry about inflation and the fact raises interest rates. Uh, it raises interest rates because, you know, to, to tame inflation. And the first thing that happens is, um, you know, lending gets more expensive for, you know, for banks. Then.

When lending is more expensive for banks, they pass that on to their customers by making loans more expensive. And then for customers that are operating the economy as regular businesses, they have less access to capital. You have less access to capital, you're less likely to pay people those higher wages or invest in that new thing. And then that investment or that spending, that's someone's income. So incomes go down.

Jasper Ribbers (06:21.842)

Derrick Barker (06:33.242)
It takes a long time for that whole process. And then when incomes go down, people spend less, which make incomes go down more, which means that asset prices go down. But it takes a long time for that to all play out. On average, from the time the FIT stops raising interest rates to the time a recession starts is typically 10 months. 10 on average, going back to looking at the last few sessions. Because it just takes a long time. We have a big economy with a lot of people doing a lot of things. It takes a lot, like the FIT doesn't directly impact things, it's indirect.

Jasper Ribbers (06:53.008)

Derrick Barker (07:02.846)
And so that's where we are right now. The Fed has stopped raising interest rates in July, was it? 10 months is May. We're not there yet. So we're in this period where you can see, banks have pulled back, lending is more expensive. A lot of lenders, even though they're not even focused on lending, even if they do have the money available and they can loan at higher rates, they're just not doing it. They're lower leverage, because they think asset prices are going down. Rightfully so.

Jasper Ribbers (07:31.261)

Derrick Barker (07:31.958)
So credit's not as available. It's harder to get money. Money is harder to come by. So that's where we are today. That's where we step in. So it's a great environment to be a non-bank lender for many reasons. And specifically, you have people, you got a 3% mortgage on that property that you got four years ago.

Jasper Ribbers (07:37.158)
So that's where you step in.

Jasper Ribbers (07:47.418)

Derrick Barker (08:00.782)
and you have a ton of equity in that property because the past four years have been good and you need liquidity. Well, you don't wanna refi out of that 3% rate, you know? And that's where we come in. We'll give you the liquidity you need without having to give up your mortgage, without having to get up that low rate or without having to go to a bank who doesn't wanna lend, like banks don't wanna lend right now anyway.

Jasper Ribbers (08:10.916)

Jasper Ribbers (08:17.231)

Jasper Ribbers (08:23.278)
Yeah, I just, I, you know, I have a bank account in, you know, I just recently moved to the state, so, you know, I don't, they don't know me for that long. And, you know, I'm a foreigner and everything. And, and I just, just for, for fun, I asked them like, uh, because for, you know, for free wild, like we're, we're doing, we just finished our renovations. We're, we're planning to build more units and we have private investors, but just for fun, I was wondering, like, what if we, what if we didn't, didn't have like private investors and we had to, we had to, you know, loan money from bank, right? So I just told my bank.

I was like, uh, Hey, you know, this is what we're doing. This is what we're planning. Like how much, you know, what would the process be like if we want to get like a construction loan or something? And, you know, he asked me a couple of questions and he was like, yeah, it's going to be difficult, man, like, you know, right now that's like, it's, you know, it's very, very difficult to get these loans, like

Your company has to be established and showing profit for like multiple years. Like we really got to know you. Like we're, you know, the bank is not willing to take much risk right now. So I was like, okay, well, that's good to know.

Derrick Barker (09:26.91)
Yeah, and multiply that times every single capital allocator in the country. You know, uh, but in equity too, like debt and equity, it's just like, cash is hard. It's like liquidity is hard to come by now. And that's not something that like people go and talk to people like, oh, we're just going to hold off for now until rates go back down. I don't think that that's happening in the near term. Uh, but it might happen, but just let's talk about the FED a little bit. And I'm

Jasper Ribbers (09:32.794)

Derrick Barker (09:56.054)
Do you mind if I get a little nerdy and go down to, you know, rabbit hole in this.

Jasper Ribbers (10:01.256)
I'm with you there in Nerdland.

Derrick Barker (10:03.566)
All right, so the Fed is an institution, like any institution, and they have their heroes, and they have their villains. Inflation's one villain, but their hero is Paul Volcker. He tamed inflation in the 70s by keeping interest rates high and holding it high, even when there was stagflation, and there was political pressure, and there was all the things that happened. He said, nope, I'm keeping interest rate high. And he ended up beating inflation. Inflation came down, and you've had a…

after that 30 year bull running race, the 30 years of low inflation. The guy before him.

faced the economy that there was inflation and he raised rates. And then the economy came into recession and inflation went down a little bit. And then he cut rates quickly. I'm forgetting his name. I don't know why I'm forgetting his name, but we can look it up, the guy before Paul Volcker. And then when he cut rates, inflation came back and he is the villain of the Fed. Like everybody remembers that. Every, if you work in the Fed, you remember both those two guys, hero, villain. What Jerome Powell is not gonna do

Jasper Ribbers (11:04.742)

Derrick Barker (11:10.954)
is he's not gonna be a villain who, like it's already happened in the 70s, where there was inflation, they raised rates, then they cut rates too early and inflation came back. Like he's not gonna do that. Like no one at the Fed wants to do that. They look like they're paying attention, like they're an institution that has a culture and their culture is we're not doing that. So they're not gonna cut rates until people are begging, until the economy is crashing and stocks are down 40%. And yo,

There's political pressure and there's economic pressure and there are people protesting saying, hey, the Fed is terrible and the world is falling apart. And then J-Powell say, okay, I guess things are bad enough for our lower rates. That's what we need to see happen in order to see rates going back down. That's what I'm with now. People disagree and people out there can disagree, no, I'm just gonna hold out. I don't think that holding out is gonna be something that makes sense.

if you're waiting for rates to go down. But I do think because of that, because of that history, because of that perspective at the Fed, like we're gonna hold rates higher and we're gonna see pain. He says it, just listen to the words he says. There will be pain in the economy. He's not kidding. That's what he wants to see to lower rates. Because of that, they're gonna be buying opportunities. But the buying opportunities are gonna come when people are, like when the headlines are scary headlines and the stock market is a scary place and things are going down.

Jasper Ribbers (12:24.327)

Derrick Barker (12:36.074)
and nobody wants to buy because everybody's scared. That's when the opportunities are gonna come. So if you're holding out, I'd hold out for that.

Jasper Ribbers (12:42.842)
Got it. I got two questions for you. Number one is, so Paul Volcker in the 70s raised the interest rates, I think all the way up to like almost 20%. Isn't that right? And I hear you saying that the Fed has now stopped. Did they really stop or did they just kind of pause?

Derrick Barker (12:53.782)
Something like that, yeah.

Derrick Barker (13:03.198)
I know that they are going to do what they think is best and that I don't know. I know for a fact that I don't know. And the guy was, I think it was Will Miller. I'm sorry.

Jasper Ribbers (13:12.671)
Wait, are you telling me you can't predict the future?

Oh, I was going to say, are you telling me you can't predict the future?

Derrick Barker (13:22.45)
I'm telling you that, yeah, you know, my future prediction capabilities are not great. The past, and I can tell you what happened then, and even though time changed, human beings don't change that much. Like human nature stays the same. And that's why we have economic cycles, because people are still the same people they were a thousand years ago. Same human nature, just different clothes. And…

Jasper Ribbers (13:40.933)

Jasper Ribbers (13:44.386)
Yeah. So basically what's happening is we have these higher interest rates. It's harder to borrow money, right? But at the same time, 70% of mortgages are below 4% or something like that. So no one wants to sell the house because then they're going to lose their mortgage, essentially, right? So are we seeing just a slowdown in sales in the real estate market? Is that what's happening?

Derrick Barker (14:06.414)
You hear that?

Derrick Barker (14:14.71)
That's what's happening. That's what's happening now. Like single family sales of like, and multifamily across the board in real estate, transaction volume is cratered, it's down. Because the people who don't have to sell, they know it's not a great time to sell. And the people, and people don't have to buy and they want, they're putting their performer, they want prices to be lower. So like that's, so volumes have gone down. And in the single family market, I don't feel convicted that the prices are going to go down a lot.

Jasper Ribbers (14:37.808)

Derrick Barker (14:43.862)
Because yeah, you have this lock-in effect where they're 30-year mortgages, and most mortgages are long-term, so people don't have to sell. You have developers, but that's not that much supply. The multifamily space, though, other places in commercial real estate, there's just shorter-term debt. And there's a lot more supply. There's a lot of things that are currently being built that are gonna deliver, and they're gonna price. And those developers…

Once they finish building, they don't want to hold these assets. They have short-term construction loans, and they're going to sell. They're going to find where the market is, and they're going to sell. And that's going to change prices. That's going to change rents. It's going to impact the market. Single-family is not clear. I don't know. I can't predict the future. But you have this 30-year lock-in effect that might. Yeah.

Jasper Ribbers (15:34.195)
Right. So you're saying for the multifamily, like the developers, basically they finished their project. They got to sell these units. But because the interest rate is so high now, people can't afford very high prices, right? Because if the interest rate is like, let's say 3% versus 6%, well, that means it's only a difference of 3%, but that means your monthly payment doubles.

Right? So like people can't afford to pay a lot for these things. So they're going to sell them at lower prices. So I guess there's a buying opportunity potentially, right? If you have cash, right? If you don't have to borrow.

Derrick Barker (16:10.658)
Potentially, yeah. I mean, if you have cash, yeah. And these developers who are building these properties, I mean, for all my people out there doing like, you know, fix and flips and developing properties, how often do your projects go over budget? Like, it's a common thing. And if you, once you get finished and you have an over budget project that you've had to fund, you haven't made any income in a while and you have a longcoming due, there's a lot of pressure to sell. Like, you can get that cash back in your pocket.

Jasper Ribbers (16:38.481)

Derrick Barker (16:40.402)
And if the market is not the perfect time, like there are gonna be some people that are like, I'm just gonna hold, I'm gonna refi, I just have to, but there are a lot of people who just they don't have the liquidity. Even big developers and small developers and medium sized developers, they're all playing the same game or similar games. They're playing the same, they're gonna have the same factors. It's gonna cause supply. Supply is gonna hit the market. It's gonna push prices down. It's just gonna happen.

Jasper Ribbers (16:57.67)
Hmm. Yeah.

Derrick Barker (17:09.31)
Again, single family is hard to know. You have so much of the stock of housing that's just locked in to 30 year mortgages. Developers, they still, you know, people develop single family properties too, but I don't know, it's harder to tell. It's harder to see like a straight forcing function.

Jasper Ribbers (17:31.135)
Yeah. So you're saying the Fed has just stopped raising the interest rates now. And you're saying like, typically, obviously we can't predict the future, but typically it takes about 10 months for that to work through the economy and for the effects to be visible in terms of like, some people might lose their jobs and like, consumer spending.

goes down and everything and then we're talking, I think officially talk about recession when there's two consecutive quarters of negative GDP growth. Is that right? So then like, would the federal reserve, because they also worry about the economy, right? Like you think they might just bring interest rates back down a little bit if unemployment starts to rise?

Derrick Barker (18:04.667)
Mm-hmm. Yep.

Derrick Barker (18:23.35)
The Fed has what they call a dual mandate, but there's one reason the Fed exists, and that is inflation. That is their primary goal. And they say it, and it's like, I don't know. Again, it's an institution with customs and norms, and their big thing is inflation. Inflation is the boogeyman. That's the thing that they wake up at night and are worried about. And they're worried less about, and they know in their mind, the way that you stop inflation is getting people

fired so that they don't have the money to spend on goods. That is how it works. They do the things that it takes to bring unemployment higher. And when there's higher unemployment, then people don't have money because they don't have jobs. And people don't have money because they don't have jobs. They spend less money because they don't have a job. That's the way it works. How do they get people to lose their jobs? They raise interest rates. And eventually, raising interest rates turns into job loss. That is the way that it works.

Jasper Ribbers (19:04.142)

Jasper Ribbers (19:13.957)

Derrick Barker (19:23.158)
Are they worried about a recession? Like they're specifically doing this to cause a recession. They're specifically doing this to cause unemployment to go up. That's the game. That's what they're trying to do. So are they worried about it? They're worried about it getting too bad, but they want it to happen.

Jasper Ribbers (19:34.895)
Man, that…

Jasper Ribbers (19:40.629)
Right. I imagine like this, being the president of the Fed, especially in a situation like this, might not be the most popular person in the world if your goal is to cross the recession.

Derrick Barker (19:54.859)
No. Paul Boker wasn't either, but he's their hero. He was not a popular person. But he is, he's their hero. He became popular later on. But it took a long time.

Jasper Ribbers (19:56.37)
I'm out.

Jasper Ribbers (19:59.666)
All right. Right.

Jasper Ribbers (20:05.234)
Right. Yeah. Like looking back, because looking back, because when you're in the heat of the moment, like I'm sure like everybody that, you know, if you lose your job or something, you're going to look at that fat guy and be like, what the hell, you know, but then like looking back 10 years later, you see like, okay, well, if inflation would have gotten out of control, that probably like more people would have lost their jobs, right? You can, I mean, look at what happened in Germany in the 1920s and then look at countries like, you know,

Zimbabwe, Argentina, I mean, there's a lot of examples where that actually happens, where they don't, where they didn't raise those, those rates. Cause they're like, Oh, well, we don't want to cause a recession. So that's, you know, whatever, let the inflation just be, let it be. And then, uh, before you know it, it's, it gets out of control and then that's even worse for, for the country, right?

Derrick Barker (20:51.138)
So Zimbabwe, I mean, some of these countries, they're very different. Like, they're very different because they, ultimately they, there, we, there was a world war. We won it because we had an atom bomb where you like, we're saying, hey, we'll just blow up your whole city if you mess with us. And so we won that world war, right? That's what happened. We destroyed the economic base of like, the rest of the developed world through the war, right? The war was over in Europe. We had oceans between us. They only attacked us once in Hawaii.

because it takes a long time to get from where the war was, which is Asian and Europe to here. So we had an economy, and everyone else was blown up. So that happened. Because of that, the world uses our money. The world still uses our money. If you want to buy some oil, you use a dollar. You know, if you want to buy, like, so because of that, you can't really compare us to these other places. However, we can still screw it up, and we're doing our best to screw it up. You know, you can still do it, and you do that by…

Jasper Ribbers (21:32.372)

Derrick Barker (21:50.978)
you know, having $2 trillion deficits by having instability. But the fundamentals are you have more demand for, you have more dollars chasing not enough goods. So consistently under investing in productivity for a generation and consistently like creating more dollars than you're creating.

like actual goods and services. That's how you get inflation. And we've done it. That's what we've done. We've consistently under invested in, you know, I don't know, in our capacity to produce. We're trying to reverse some of that. We have these huge deficits. Our tax receipts are going down. We've like cut taxes. So our tax receipts are going down. Our economy is growing, it's helping. So yeah, we have the conditions for recession, but it's not gonna be Zimbabwe just because we don't have.

Jasper Ribbers (22:49.51)

Derrick Barker (22:49.698)
Because we have, the economy is based on our dollar, because we've like, you know, because of the historical events that have happened. But we can still have, you know.

Jasper Ribbers (22:54.788)

Jasper Ribbers (22:59.054)
Well, it's interesting you mentioned that, you know, I lived in Panama for two years. And I remember when I first moved to Panama, I was like, I go to cash machine in the airport and it's like dollars, you know, and I'm like, wait, where, where can I get like the local currency? And then turns out that was the local currency. So they're basically using dollars. It's funny. Like the country just says like, Hey, let's, you know, let's lose another country's money.

Derrick Barker (23:20.644)

Jasper Ribbers (23:28.815)
Um, it was funny because I was thinking like, where did it get the oldies dollars in the first place? Like, they just like go to the Fed and said like, Hey, can you guys give us a, you know, give us a bunch of dollars so that we could use dollars as our currencies and we don't have to make our own.

Derrick Barker (23:43.522)
Yeah, I mean, or if you want to, if you need American assets, you need to bring dollars in, in order to spend them on those American assets. And America is still a great place to invest safe. You know, our economy grows. So people want dollars to invest in dollar assets. And I don't know that that's still the case even to this day. And that's not that's not going to change in this cycle. But what can happen is our economy

Jasper Ribbers (24:09.14)

Derrick Barker (24:12.77)
can still go down. Asset prices can still go down. Even if we don't have Zimbabwe-like inflation, we can have asset prices going down. Raising rates is the opposite. It literally is the opposite of inflation, right? Inflation is the dollars being worth less. If you raise interest rates, then you get paid more to own dollars. You get paid more to own treasuries, right? You used to get paid nothing, now you get paid 5%. So it's like making it more valuable to have dollars, because you have a dollar, you can buy a treasury.

Jasper Ribbers (24:21.701)

Jasper Ribbers (24:34.412)

Derrick Barker (24:41.707)
So for that, the dollar value should go up. But asset prices should go down. If dollars go up, the assets that you buy with those dollars go down relatively.

Jasper Ribbers (24:55.978)
Also, I noticed that the third quarter, the US GDP grew at 4.9%, which is pretty, that's a solid number, right? So it's kind of interesting. I mean, you look at that number, you think, wow, that's very solid growth. Like, what are we talking about with sessions? 5% like GDP growth.

Derrick Barker (25:02.67)
Crazy. That's a crazy number.

Derrick Barker (25:16.298)
Yeah, it's great. It's great. To be honest, you know what I hope like it firstly, yeah, that's just a lot. It's just nothing other than that's a lot. Our economy is resilient. You know, it's this resilient economy. We still have like a pretty strong economy. No matter people try to beat up on the US we still have a strong economy. We have a lot of people doing a lot of cool things. It is growing. You know, and maybe the recession isn't going to be that bad. But asset prices are going to like, you know, go down just because you got to make the math work.

Jasper Ribbers (25:17.754)
That's a lot.

Jasper Ribbers (25:44.998)

Derrick Barker (25:45.09)
When you're going to buy a deal and you underwrite the deal with the same, it's the same numbers as last year, except for the interest rate is twice as high, something has to give is gonna be prices.

Jasper Ribbers (25:56.158)
Yeah. You know what? Let me share my screen real quick here. I'm going to show you this because I'm looking at the graph of the US GDP growth over the last few years. You see that? You see this graph over here?

Derrick Barker (26:13.454)
Ah, okay. Yeah, yeah, yeah.

Jasper Ribbers (26:16.171)
Can you see it? So for those who are listening and we're not watching on YouTube, let me explain what we're looking at. So we're actually looking at the US real gross domestic product, the percentage change from starting in 2021, all the way down to the third quarter of 2023. And what we're looking at is that, the GDP growth was very solid in 2021. It was like five, six,

3.3, 7% even. Then we had two quarters of negative economic growth. So technically that was a recession, I guess, Q1 of 2022. And then the second quarter of 2022, we had a small negative GDP growth. And then we kind of hovered around like the two to two and a half percent. And now suddenly it's like 4.9. So when I look at this, when I look at this, I feel like, oh, we already had the recession. Now we're out of it. That's what it looks like. Right?

Derrick Barker (27:11.254)
Yeah, that's what it looks like. I don't know, but what you had in Q2, 2022, or no, sorry, what you had at the beginning of this year is you had like banks failing, right? When a bank fails, like the people that they would lend to in the future are now not getting loans. And it takes time for those people who would have gotten loans from these banks that failed to not get the loans. And then it takes time for them to like not have the money and for it to…

result in them not hiring and That not hiring to result in less income that less income to result in layoffs. It just takes time I don't know like in like that Q1 Q2 like that At that point the fit hadn't stopped raising the fit was continuing to raise So like maybe if you would go back, I don't have this chart, but if you can go back and show the chart of like Fit like you know fit funds rate

Jasper Ribbers (28:01.524)

Derrick Barker (28:09.714)
and GDP growth, first it goes up, and then there's recession later. It's not that there's recession, and then it goes up, and then things are fine. That chart that you showed is like, there is maybe a little recession, but the rate kept going up. And like when the rate keeps, like, I don't know. I have not seen it happen where the FIT funds rate goes up, it stops, and then everything keeps going up, and then like it goes back down. Maybe it will happen this time.

though, it might happen this time. I hope so. It makes my life a little bit easier. But maybe in the short term, but in the long term, we want recessions. It's good for the long term viability. It washes out some of the businesses that, some of the excesses, and then it resets asset prices at a level where people can buy. And for a lot of people in the short term rental space are young, youngish. I call myself young. I'm still young, right? 30s accounts.

Jasper Ribbers (29:00.139)
Mm. Mm-hmm.

Derrick Barker (29:08.126)
And we haven't had a chance to go and really get the good deals that are around when there are recessions, when asset prices reset. And yeah, we're getting our shot. So just be ready. Like you see it. So just like prepare yourself, have liquidity, like, you know, just have liquidity. And if things are bad, then you'll have the liquidity to take advantage, to make it through and take advantage of the upswing. And if things aren't bad, then, you know, then you'll still have liquidity. And then you'll look around and be like, oh, well, you know.

Jasper Ribbers (29:23.686)

Jasper Ribbers (29:31.126)

Derrick Barker (29:38.898)
It's December, 2024, there was no recession, and then you can invest at that time, and things will be fine. So, I don't know.

Jasper Ribbers (29:49.394)
All right, well, I'm gonna have to schedule a podcast with you in December 2024 and see if your predictions came true. All right, well, listen, let…

Derrick Barker (29:57.827)
Let's do it. Let's do it. What we at Nectar, even though, even though Nectar specifically, you know, circle back, we started this business to give people with low leverage cash flowing assets access to liquidity in any environment. Like, what I believe is that in no matter what happens, if the economy is good or the economy is bad,

you have people that are prudent and you have people that are reaching and that are doing things that are not prudent. The people who win out in recessions are people who are prudent before the recession. The people who have low leverage make it. The people who have high leverage don't. That's the way it works. The people who have liquidity make it. The people who have assets that are cash flowing and that are stabilized, they make it because they don't need to sell. They can just sit around like, oh, I'll just sit on my cash flow. Maybe my cash flow is a little bit less, but you're going to make it.

and they're going to be around. And what Nectar is here to do, we've created Nectar to give people who have low leverage cash flowing assets the liquidity they need to do whatever it is they need to do in any environment. Because those are going to be the people who make it. And they're going to be the people that dominate when we come out of the recession. The good thing about recessions is you come out of them and then there's long runway to take less risk and have big upside. The people who have low leverage.

the people have liquidity, the people have assets that are cash flowing, they're gonna be in the best position to take advantage of the mishaps that happen in a recession. I'm super excited because we've been able to find a lot of these people and I'm even more excited to continue to lend through this environment and help people dominate and come out of this stronger than ever with assets that they got and get deals and that they underwrite prudently because they were tougher times.

Jasper Ribbers (31:40.282)

Jasper Ribbers (31:45.104)

Jasper Ribbers (31:49.199)
and buy boats.

Derrick Barker (31:50.602)
Yeah. And short-term rentals are gonna be like, maybe there might be a short-term rental recession, maybe. If consumer spending is down and people are getting fired from their jobs, there's gonna be. But afterwards, if you think that there was like revenge travel after the COVID, there's gonna be revenge travel once the recession's over and people are back in their jobs and people are like, and they don't have this overhang. And the people who are prepared and still own their assets and have low leverage, they're gonna benefit.

Jasper Ribbers (32:08.859)

Jasper Ribbers (32:14.607)

Jasper Ribbers (32:19.974)
But also, if incomes come down a little bit and we do get a slowdown in the economy, right? It doesn't, not necessarily a threat to demand in every market because imagine, we're close to LA and San Diego and I'm thinking, if I have a lot of cash, I might go to the Maldives or something for two weeks. My wife would like that. The romantic.

You know, little cabin on the ocean, watch the sharks and stuff like that. But if like things are a little tight, I might just go to I'd about two hour drive, you know? So yeah, you know, it's going to, it's not necessarily going to bad for every Marcos that was what we saw during COVID, right? Like everyone's freaking out during COVID like, Oh, the old, you know, it's the big bust and like everyone's everyone, everyone's going to lose their business and everything. And a couple of months later, like people are like, Oh,

damn like we've never seen this high demand because people stop flying. So now they drive up and, you know, stay close to home.

Derrick Barker (33:24.31)
Yeah, I mean, COVID was just a very specific thing that this is not going to be. In COVID, there was like, yeah, there was a pandemic, you know, so like people couldn't work traveling, work flying. They were staying in. They weren't at work. And the government like stimulated the economy in a historic way. The government is doing the exact opposite. They're taking stimulus out of the economy. So, yeah, everything's not going to be doom and gloom, but the aggregate demand is going to go down.

aggregate demand. So that means that like, you know, even if yeah, there are going to be some people who that would go to the Maldives now they're going to go to Free Wild. There's some people who would go to Free Wild now they're going to the best Western and there are people that would go to the best Western that are going to be saying at home job hunting and like, you know, you know, I don't know that was that was kind of trite so I didn't mean I didn't mean to be offensive in any way but like that's um, you know, the aggregate if the unemployment rate goes from 3% to 5%

then that's 2% of people who are gonna take a vacation who are maybe 3% of people. So it's not gonna be huge, but just that 3% means you're probably not growing. And the people who are the weakest hands are gonna be hurt the worst. The people who underwrote, oh, I have to get this 3% rent growth every month or every year, or else I'm not gonna be able to cover my, refinance my mortgage, they're gonna be hurt. And the people who have some capacity and have some slack and have a little leverage, they're gonna be like, oh, okay, well, it's not that bad. You know, it's a 3%.

Instead of the rear end going up 3%, 80 yards went down 3%, okay, I'm fine. That's how some people is gonna be that.

Jasper Ribbers (35:02.206)
Right. So let's talk a little bit more about Nectar and like your process. So if somebody's listening now and thinking, okay, you know what? I just did some market research and I decided that investing in a hot tub is going to raise my ADR by so much that I'll make my investment back in a year, right? Which is actually probably a pretty good idea.

But yeah, so like, okay, you know, I want to invest like 15K in the hot up, right? I don't have that cash line around. So I called Derek and I'm like, Derek, I want to buy the hot up. Well, like, what, how's, uh, what do I do? What are the next steps?

Derrick Barker (35:45.318)
So we're not looking at your hop-tub investment and what it does to ADRs. That's not a part of our process in any way. We're looking at, we wanna see your portfolio. We're looking at the entity. So if you have every property in the different entities, we can look at it entity by entity. If you have one property, one entity with a ton of properties, we're looking at all the properties in that entity. So we attach that to the entity level. We're looking at what are the actual cash flows that you have made in the past 12 months.

What are the actual numbers of your net income after debt service? That's what we're looking at. And we'll say, okay, we'll take that. We'll say, okay, we'll do a stress test. What happens if you're down 15%? What does that look like? To make sure that you could have the margin to survive whatever might come. And then we lend against debt. And so if you can still pay us back, even like, not based off of any projections, but based off of what you're currently doing.

Jasper Ribbers (36:28.474)

Derrick Barker (36:46.667)
then we'll lend. And our typical deal size is probably 250,000 or 300,000. So typically we're looking at like, bigger properties or multiple properties, portfolios of properties or like multi-family. So we'll do smaller deals, $50,000 or the like. So a few hot tubs. And that's it. Yeah, and you give us your P&L, we look at the net.

Jasper Ribbers (37:09.37)
haha a really fancy one

Derrick Barker (37:13.878)
or really fancy one, yeah. So we'll look at the net cashflow, we'll look at your loan docs, all your debt, we'll wanna see all your debt and all those docs. Connects to your bank account, really we just make, connects to your bank account to make sure that it matches your P&L and that you pay your bills. You know, you'd be surprised. We've gotten a lot of people who's like, barring from us, it's like, but you have like 70 NSFs, like you're not paying your bills, we're not gonna lend to you. And that's it, that's it. You know, we're just trying to still see, are you making cashflow?

What is your current debt picture look like? Are you over levered and do you pay your bills? And if the answer is yes to those things, then we'll lend and you can do whatever you want with the money.

Jasper Ribbers (37:54.042)
Got it. And then how do we pay back?

Derrick Barker (37:57.99)
over time, like over time. So typically we do one to five year terms and it's just monthly payments out of cashflow. So it's no balloon, typically there are no balloon payments at the end, although we can structure it so that there's a balloon payment in certain cases. But there's, you have equal monthly payments for one to five years, depending on kind of what you wanna do. And that's it, then we go away. And that's it. That's how it works.

Jasper Ribbers (38:28.61)
Awesome. Awesome, dude. Anything you wanna discuss that we haven't talked about yet because we've been talking for 40 minutes, like tongue flies.

Derrick Barker (38:39.114)
Yeah, yeah. I don't know. I don't know. I think we, you know, we got a bunch of things, you know, I got to talk about my favorite thing, which interest and sorry if I'm kind of bearish here, but no, there are people out there. I guess the last thing is like, realistic. And look, in these environments is when the people who have been prudent, the people who have strong business, businesses who have invested in their operations.

Jasper Ribbers (38:55.151)

Derrick Barker (39:07.982)
who've invested in their capital sack and having low leverage and high cash flow. And have just done things the right way. This is your time to shine. For a long time, it's like, it's just whoever can get the flashiest thing, whoever can just be buying the most stuff and who's just scaling fastest. The economy has benefited people who are just moving fast and growing fast. And you can do that, but now…

Jasper Ribbers (39:34.351)

Derrick Barker (39:36.534)
the emphasis is going to go away from that and the core of what the fundamentals of your business. Do you have strong operations? Do you have a strong brand that stands out in the market? Do you have a strong property that stands out in the market that people love? Have you been, do you have strong financial operations? Are you low leverage? Those are the people who are going to stand out and be able to take advantage of this environment. We're looking for those people and we want to be a capital partner to those people to provide liquidity to dominate.

And now it's the time to dominate.

Jasper Ribbers (40:10.118)
Now is the time to dominate. I like that. Let's wrap it up with that. And for the people who are interested in working with Nectar, people are interested in finding out how to get a loan from you guys. What's the best step?

Derrick Barker (40:25.75)
best step is to reach out to us. You know, Jasper would drop a link in the show notes or wherever the notes are. But like, one is, I don't know, what was the, oh, use nectar.com slash overnight success. And then, sorry, I don't know the links.

Jasper Ribbers (40:46.27)
I'll create a link for people. Okay, I'll create a link for people. I know how to do that. We can just have a link, getpayforyourpad.com slash nectar. And then that will redirect to the best place. And then obviously you're gonna have to give people from GetPayForYourPad, you have to give them a VIP treatment.

Derrick Barker (40:56.426)
Yes, yes, there we go.

Derrick Barker (41:06.386)
Oh yeah, VIP treatment, anyone who comes through, get paid for your pet. So we typically have like a wait list of like people who are like looking for funds. Sometimes we get backed up. Usually we can process through very quickly, but sometimes we get backed up. Anyone who comes through, get paid for your pet, we'll put at the front of the line. So it's VIP treatment, there's a line around the corner, the bouncers will see the get paid for your pet and they'll let you to the front of the line. We'll get back to you immediately, our underwriters will put your files first.

both in the beginning for the quote phase and then all the way through until you get the dollars in your account.

Jasper Ribbers (41:38.318)
Boom, that's what I like to hear. And it's pretty fast anyway, because a typical turnaround is like, I'm just seeing on your website, right? But I know from the people that I know that worked with you, like a bunch of our people in our mastermind and LegendsX have worked with you. So I know it's a fast turnaround anyway. But yeah, we'll just go to getpayfreepat.com slash nectar. And then we'll, so it's N-E-C-T-A-R?

And then you'll be directed to the right page where they're gonna treat you like a king or queen.

Derrick Barker (42:13.834)
Yes, exactly, exactly. And we'll give you our best rates. So we have rates that are tiered. I can't tell you what those rates are because it depends on what your portfolio looks like. But we'll give you the get paid for your pet boost to take you to that next tier.

Jasper Ribbers (42:32.37)
Boom, love it. All right, Derek, always a pleasure to talk with you. I'm gonna sit in a corner and cry a little bit because I'm worried about the recession now, but you know. Just kidding.

Derrick Barker (42:45.888)
Cry a little bit, but then just get like 10 months. We have some time. Get ready, weather through it, and then we'll have the best money-making opportunities of our generation.

Jasper Ribbers (42:57.098)
That's right. There's more millionaires are made during recessions and then in the good times, actually. Because what you mentioned is like, there's opportunities, right? There's opportunities that will come. So be ready, and everything will be fine. Everything will be fine. Don't worry about it. OK, cool. Derek?

Derrick Barker (43:14.742)
Yep. Everything would be fine. Just stay alive. Keep kicking. And then even if even if they even have bad things happen, you know, that's fine. They're plenty. One of my investors lost a ton of money in the recession happened 87 or 88. I was I was busy being born. But you know, and then he said he lost everything. You know what he built a portfolio that was way bigger and way better.

Right? Because there's opportunity after recession. So, you know, keep living, keep working. It's a grind.

Jasper Ribbers (43:47.734)
All right, let's do it. Thanks, Derek. I appreciate you jumping on here and for the listeners. I hope you enjoyed this episode. Hope you're not feeling depressed right now. And, you know, make sure the next episode is going to be like a very positive one. You know, balance it out.

Derrick Barker (43:59.406)
Thanks for watching!

Derrick Barker (44:05.97)
All right, man. Thanks for having me on Jasper.

Jasper Ribbers (44:08.594)
All right, thanks for listening everybody. We'll be back next time. Have a great week or weekend and we'll see you soon.

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