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- Interest rates are now above 7%.

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What effect is this having on
the work you guys are doing,

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and what do you see is next

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in the real estate industry? A lot of

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- Crying.

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That's what's happening. Even
the tough thing is anybody

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who's looking to, you know, refi

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or anybody who's looking to
pull equity outta their home,

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it's a tough time because you're
not getting what you wanted

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with the high rates.

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Granted, it looks like things
are coming down a little bit,

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but this has been forcing people to try

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and find other ways to
create more opportunity

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to get access to money.

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Like converting a garage into an ADU,

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having a renter in there.

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A lot of people are becoming landlords

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for the first time in their lives,

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and in reality it's just,
there's still huge opportunity

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for people if they're looking to invest.

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They're looking to, you know,

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pull a little bit of money out.

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7% is not bad. It's not
great, but it's not bad.

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But it is sort of at that
tipping point where you want

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to be a little more cautious with

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what you're putting your money toward

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and how much money, how much
leveraging you're doing.

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And so that's what we
say. There's, there's

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opportunity to do well.

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There's opportunity to
make money in real estate.

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You just have to be careful.
I just cry for those people

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who had locked in at like 3%
and now they're coming back out

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and they're like, oh God,
it's over doubling right now.

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Yeah. But you know, c'est la vie,

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you just gotta be
careful with real estate.

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- Yeah. So for the folks that
bought at 3%, they're saying

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that they're not selling, that
these people aren't selling.

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How will this or how
is this affecting them?

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- Well, that's the thing.

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The people that can't afford a seven

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or 8% interest rate, they're gonna have

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to sell if they can't afford it.

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Because you can't just be
like, no, my term is up

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and I refuse to get a
higher interest rate loan.

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You have to finance somehow,
unless you, you have cash to,

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or a money tree in your backyard.

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A money tree in your backyard.
Yeah. But it's, it is,

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that's, we saw that happen back in 2008.

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We saw that happen. There are some people

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who just over leverage

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and they don't realize

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that this is when it becomes a
problem when your mortgage is

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up for real and your rate is going up.

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And so you have to always
give yourself that little bit

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of a pad to make sure that you're covered.

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That that's what our whole new show Backed

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By the Bros, it's all about this.

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It's all about people
who have wanted to try

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and get into real estate
a little bit more.

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They want to invest, they want to try

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and provide more for their family.

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And they get in over their heads

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because they thought real estate

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investment is pretty straightforward.

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I watched it on HGTV, I can do it.

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And so they jump in

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and all of a sudden they're over leveraged

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and they need a, they
need help to get out.

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One of the clients put a hundred
grand on their credit card

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so that they could service the death they

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needed to for this property.

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And we're like, at what rate?

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And it was like insane double digits.

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I'm like, you're, you were
gonna lose everything.

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And and literally it
was one of the couples,

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they had already spent their
kids' college fund their

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own personal savings.

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They were totally beeped. Yeah.

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And so we had to come in

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and we really, we put our
reputation on the line.

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We use all our resources

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and we get the project done

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so they can start having
that money come back

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- In.

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Yeah. Backed by the bros on HGTV June 5th.

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Oh, wow. Yes. You've

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- Done research.

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You know that off the top of your head.

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June 5th, 9:00 PM HGTV.

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But it's, it's fun for us just

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to find different ways to inspire people.

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And I love that people want
to get into real estate.

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I love that people want to try

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and create more
opportunity for themselves.

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And I also like the idea, you
know, with the housing crisis

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that, you know, if you're
looking whatever city you're in,

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there are usually incentives
that are helping people get

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into additional revenue through an ADU

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through an auxiliary dwelling unit.

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Having tenants, it's,
it's a great way to sort

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of offset the crisis as well
as help people earn more money.

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And there's a way to have a hell of

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a lot of fun while you're doing it.

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Like we we're not in this business

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to use complicated design terms

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and just bore people that,
look, we wanna have fun.

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We wanna show people

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that you can really find
passion in real estate,

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but you also have to make
sure you're being smart.

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Wait, is ADU a complicated
design term? Yeah.

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- What's that mean?
- Marginal.

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It's like a rental suite
if you have like a,

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like a auxiliary dwelling unit.

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Oh yeah. But it's a fancy way

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of saying having a renter turn your

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garage into something you can rent out.

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- Gotcha. You guys are seeing people

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turn in their garages into,

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- So there's apartments,
there's a huge housing crisis

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all across the country,

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particularly in the
major metropolis cities.

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And so I do believe that the
solution beside finding ways

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to build new projects,
multi-family projects

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and affordable housing,
converting your ADUs

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so people putting in
basement rental units,

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people putting in garage
conversions, building

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above their garage for a rental unit.

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All of these things are, they're

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incredibly helpful when it comes

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to solving the housing crisis.

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Sure. And you also like a lot of people,

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'cause real estate is so expensive today,

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especially in places like New York

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and Los Angeles, imagine having

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that additional income coming in for you,

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how it can offset your costs, your bills,

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your taxes, everything.

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It's pretty incredible.

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- So, in Backed By the Bros,
you guys are looking at a lot

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of troubled investments.

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Is that right? Oh yeah. So you
mentioned credit cards being

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one of the mistakes you can make.

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What's another mistake you
guys are seeing over and

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- Over again?

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Well, we constantly, with a
lot of the different episodes

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that we have of different families

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and investors that we worked
with, they're jumping in

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before they have any sort of a plan.

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You know, one homeowner, she
bought all of the appliances

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and cabinets and everything
she could use for a project

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before she even had the

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house and knew what she was doing with it.

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So in the end, she had
stuff that was not ideal

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and she just tried to make it work.

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Well, you're not gonna get
your optimal rent if you have a

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suboptimal place for somebody to rent.

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So, and also whenever I hear somebody say,

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I'm gonna run my own construction project,

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I'll GC myself instantly,
I'm like, red flag.

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Yeah. Because if you have never GC'd

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before, you have no
clue what you're doing.

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And as soon as one of your subs falls out,

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everything slows down,
comes to a crashing halt.

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And so you got, you gotta be realistic

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hire professionals to come in.

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You're gonna pay a little bit
more for some of this stuff,

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but it's worth it in the end
because you will save money.

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We're Drew and Jonathan Scott,
and we're here with Quartz.

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And you can catch our
show Backed By the Bros,

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June 5th on HGTV at 9:00
PM You better not miss it.

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I'll be mad at you if you do.