Why Interest Rates Don’t Scare This Real Estate Investor | Costas Themistocleous

Costas Themistocleous (00:00)

I’m not afraid of the interest rate because it’s temporary. It’s something you can correct down the line when they drop. They will drop at some point, but I just saw something a week ago that it’s being discussed that there might be another interest rate hike in December. And it’s like, okay, well, if I’m buying at 8.2 now, those properties are going to be worth a little more when that rate hits 9 or 10. And that property is going to skyrocket in value when we get back down to 6 or 5.

Issa Hanna (01:05)

Welcome back to another episode of the Real Estate Pros Show. I’m your host, Issa Hanna, and today we have Costas Themistocleous with us. Costas, welcome.

Costas Themistocleous (01:13)

Thank you.

Issa Hanna (01:15)

Super excited to have you, man. You started, you climbed the natural investor ladder, I always call it, right? You started in the wholesale game, you picked up investments for yourself, you got into the long-term game, and now you’re expanding. So with that, I want to have you kind of give my viewers a rundown of a day-to-day in Costas’s work.

Costas Themistocleous (01:35)

A day-to-day is very different, but when I’m home or at the office, my day involves talking to the property managers who manage properties across my portfolios, talking to people on my team. How are we marketing things? How are we running numbers? Are we crunching deals the right way? We have some VAs that I keep in good contact with who bring some pretty good creative deals, and I just give them info to feed back to see if we could get better terms or make this work in a way that’s better for both me as the buyer and the seller. And then I do a lot of traveling. I own properties across the country, so I’m constantly doing a lot of traveling. I just got back from Broken Bow, Oklahoma yesterday, where I finally got to see a property I bought in August, and I also checked out a six-plex that I’m under contract for in Dallas while I was there.

Issa Hanna (02:34)

Amazing, man. Yeah, you know what? You’re at the top, and when you’re at the top, you’ve got to do that. You got to wear many hats. You got to make sure that the machine is running smoothly. You got to make sure everything, like you said earlier, is in the green zone. I always say if it makes dollars, it makes sense, right? So you’ve got to make sure everything is making sense for you. Crazy that you brought up Broken Bow, Oklahoma, because I actually just bought a little ranch right in Broken Bow, Oklahoma. It’s definitely a good little tourist area. So me being from Texas, always looking at the map, I kind of looked at it and I’m like, “Man, why is this—you can get a pretty good deal.” And then you kind of look into the city and you’re like, “Wow, this is kind of a little tourist destination.” So crazy that you brought it up. I said that we’re kind of like mirrors in our philosophy or in our philosophy on investing, and that kind of further proves it. Crazy, man. I wanna rewind back a little bit, though. I want to get your origin story, right? You said that you had a business in 2015. What made you want to get into real estate? What made you start wholesaling?

Costas Themistocleous (03:34)

I was always interested in real estate. I would see those ads, you’d see those things on the TV, and it was always something of interest to me. My parents were property owners, and God rest their souls, they weren’t very great at it, very slumlord-like. So there’s always been things that I noticed that, if I was in this position, how could I do this better? And I always was interested in wholesaling and whatnot. It took a while for me to actually sit down and say, “Okay, I’m going to learn this and I’m going to do this.” It came at a point where I was not tired of my day-to-day with the other business; I just wanted something new. I wanted something a little more exciting. I wanted to challenge myself. So I sat down and I started learning wholesaling, and it clicked. Within 30 days of really sitting down full-time educating myself, within my first 10 phone calls, I was able to lock up a property on wholesale terms, and it just so happened the seller had another property he was looking to get rid of. So my first deal, I ended up wholesaling two duplexes for a total profit of $26,000. And it was off to the races from there. It was just clicking. I was firing. I think my first seven, eight months wholesaling, going four to six hours a day, I did 32 wholesales and I was just firing. And it’s: how can I make this bigger? How can I do this better? And that’s how I got started.

Issa Hanna (05:09)

Definitely. And you know what? We always say you get bit by the bug, right, in real estate. That bug is usually the check. So you’re like, “Man, I can make some money doing this.” You started wholesaling, you started assigning deals to people, and like all wholesalers, you end up, “Hey, this is a good deal. I’m gonna take this one for myself,” and you sit on it, and you accumulated a lot of long-term rentals. Recently you’ve shifted into short-term rentals and you’ve got some plans on the horizon for midterm. Can you kind of tell us more about the short-term, midterm rental game and why you see a good opportunity in that?

Costas Themistocleous (05:41)

Yeah, a few years ago actually, I tried an Airbnb in Palm Harbor, Florida, and I had an awful experience with it. A couple of months ago, a few short-terms came my way and I was hesitant at first, but my partner was like, “Well, let’s look at the numbers. Let’s see.” And so I started looking at financials, and due to my bad experience a few years ago, I was really analyzing everything. And I was blown away by how these were cash flowing. I was blown away by the numbers, and I was like, “You know what, this is worth the risk again. Let me try this.” And then I started incorporating these short-terms into my firm in the sense of, “Okay, I’m gonna bring—now I have something more to offer investors where it’s you invest with my company, you have access to a three, four-day stay at one of my short-terms.” So I started bringing in that incentive perk into my business. But the short-terms was something that I was blown away by what they’re doing. It’s not my main strategy, but as a side strategy, as long as the numbers are right and it’s cash flowing, it makes sense to me. The midterms, I recently started really looking into this more. Somebody on my team—somebody I trust very much—she brought up looking into the midterms, and she linked me with a broker for a property I’m actually closing on Friday in Clearwater to start trying the midterms. Well, once we started talking with this broker and seeing the numbers and seeing what we could do rent-wise and how much more after expenses we’re going to make, it’s like, this is definitely something I want to utilize in my strategy and give a shot with. So I can’t talk too much about midterms because I’m just getting my feet wet with it, but it is very interesting and it is looking to be very lucrative.

Issa Hanna (08:20)

Definitely. And you know what? I actually hold a few midterms, and in some instances, you can double your rent. And I love it, right? You’re basically bringing what I always say on the show into your whole buying philosophy: that makes dollars, it makes sense, don’t be scared by it, right? Yeah, and with that, I wanted to pivot into opportunities you’re seeing when people are scared, right? You’re seeing an inventory increase. You’re not scared to buy. The reason for the increase is the interest rates. People are scared. So tell us why you’re not afraid of interest rates.

Costas Themistocleous (08:53)

At the end of the day, it’s math. I’ve never been good at math, but dollars do make sense to me. And seeing that, it doesn’t matter if it’s a 12, 13 interest rate, like most commercials are, as long as the cash flow is there, as long as at the end of your math it’s green and there’s no negative, it works. Who cares about the interest rate? It’s going to change at some point. Why are you going to wait for it to lower? Because you look at history—when interest rates lower, home values go up. And one thing people complain about, and it is true, it’s hard to get a mortgage, it’s hard to get approved, and a lower interest rate is not going to help you do that because it’s gonna balance itself out with a higher home purchase price now. So I’m not afraid of the interest rate because it’s temporary. It’s something you can correct down the line when they drop. They will drop at some point, but I just saw something a week ago that it’s being discussed that there might be another interest rate hike in December. And it’s like, okay, well, if I’m buying at 8.2 now, you know those properties are going to be worth a little more when that rate hits 9 or 10. And that property is going to skyrocket in value when we get back down to 6 or 5. And it’s going to happen. Nobody knows when, but you look at the data and you look at the history, it shows it’s gonna happen again.

Issa Hanna (10:30)

Definitely. We talked about it earlier—like a 2008, like maybe not as catastrophic, but definitely a major reset in the market. When that reset happens and those interest rates drop, you’re buying in. It could be years down the line. It’s proven property over time, over years, five, ten years, always gonna go up. So, unbelievable. And I also say the same thing, man. Interest rates are temporary. They drop, I’ll refi. If it’s still making me money right now at the higher interest rate, I’m still gonna do it. And then interest rates drop, my property value just went up, and I make some more money if I decide to keep holding it. So, man, amazing knowledge you’re bringing to the viewers today, Costas. So I’m loving this today. I wanna get a time now—we’re gonna turn it down, and we’re gonna go into a nightmare scenario, right? We all have that investment, that real estate nightmare. So if you could give my viewers one story about a time where something went south, you had to pivot, you had to get through that problem.

Costas Themistocleous (12:02)

Well, let’s see. We had a scenario where we thought we worked it all out with the DSCR. As you know, you need an 80% occupancy to even qualify for the DSCR. And we had something worked out on preleases, and we closed on the property, and out of nowhere, all these preleases disappeared. So, fortunately, we were able to ride out the deposits for a month, but it was a smaller market, it was a more rural type market, so it was harder to rent. And it was a bigger unit, so we were losing money every month. It took us about five, six months to even that out. But we have a large portfolio in Pennsylvania, and we had six rehab projects going on at once. And that was very constricting to what we were able to do. And we were navigating it. We didn’t take a seat back, but we were a little more conservative. But it opened the door for me to look into, study, and start pursuing more creative strategies—sub-2s and takeovers, and ways to, “Okay, how could we stop the bleeding?”

That was one nightmare scenario for this company. And when I took over my childhood home, my mother—I didn’t know this, but she pulled a second mortgage out on that home to pay for her dream home. And when I took that home over, she was bringing in just under $3,000 a month in rent, and the mortgages came out to $4,600 before taxes and insurance. The house was very old and they did not take care of it, so I was hemorrhaging money with that house. I was hemorrhaging money. I did everything right by those tenants, too. I was like, “Listen, I gotta sell this house. I can’t do this anymore. I tried.” And in that process of selling the house, the tenant on the first floor filled first—they put washcloths, they flushed washcloths and flooded the whole basement out. That was a nightmare. Luckily, SERVPRO—my local SERVPRO, I’m very good friends with the owner—he owed me a few favors. He did it pretty cheap. The night before closing, I went to go and check the house to make sure everything was good before final walkthrough. They somehow got back into the house, poured concrete down the toilet, and whatever happened with the pipes, the heat was still on. The pipes bursted and there was a flood on the first floor. So that was a nightmare scenario. That house was a hex. It was very heavy on-loaded, but I was hemorrhaging money with that. But I had to navigate through it, and we did. And I want to say conservative approach, but we are very—we want to make sure everything is right before going in. We look at the best-case scenarios, we look at the worst-case scenarios, and we say, “What do we think unexpected could happen?” So we try to have as many fail-safes in as possible.

Issa Hanna (15:13)

A hundred percent. And when you do go through stuff like that, you know, these are things that a lot of landlords could be in the game for ten years, they don’t deal with it, right? So when you deal with it, A, you know how to get it fixed, so you know the process to get through it when you’re on the other side. And then, you just learn so much. You learn to account for the unaccounted for, right? How many people have heard concrete going down the drains? This is something a lot of people might not even think about being a scenario, but it is a scenario. A tenant’s mad—long-term tenant—you’re selling the property, they want to stay, you want to sabotage the sale or they just want to spite you. Things like that can happen, and it costs you big bucks. But I always say, right, you lose the money, you get to the other side—it’s horrible while it’s happening. When you get to the other side, you’re kind of thankful that you did go through it because you didn’t lose, you learned, right? You know the exit strategy for the problem. You know now some new creative ways how to stop bleeding in case you encounter that problem again. And God forbid you do encounter the problem again, like I said, you know the process to get through it. So man, I always ask that question, and I love that you were so honest and blunt about—you gave us a really good one, because that’s definitely a landlord nightmare. I’ve encountered something similar. So something our viewers do if they want to invest: pay attention for it. Let’s talk about the future, though. I Google you in five years, right? You’re doing so much. Where am I going to see you at in five years? What’s the five-year plan?

Costas Themistocleous (16:42)

My plan and my goal and my vision is to build something that outlives me. I want to leave a legacy. And this is a newer company, and I am very proud of the strides we have taken. I’m very proud of everything we have accomplished. And in five years, I would at least hope to have that 10x multiplied, figure double each year until then. More properties, more people on the team. I’ve been working on a CRM; I’m looking to incorporate as much as possible. And that’s the inner work. I think on the outer work, putting people on to creative strategies. And if I could change one person’s life showing them, “Hey, listen, you can do this. You can buy real estate, you can get your dream home, you can get paid to buy your dream home. You can become an investor.” If I can change one person’s life, I think I’ve done my job. But the goal is to reach as many as possible. And I have a different approach to things. Some people might not like my approach; everybody’s different, everybody has a different cup of tea. My goal is to find the people who my message—it’s working with them. They understand it, they believe in it, and they’re willing to give me a chance. So in five years, I want to be where I am now, just in a bigger playing field, with more people listening and more people investing and more people understanding that you could beat the banks and you can become the homeowner or investor that you want to be.

Issa Hanna (18:24)

I love that, man. You know, you’ve basically forged your own philosophy, your own way in the game. It’s working for you, and you’re growing exponentially. So the 10x in five years, I can definitely see that happening. And like everybody who conquers the real estate game or their niche in real estate, you want to give back. You know, you want to teach people, like you said, it is possible to become the homeowner. We talked about it earlier. That’s one of your strengths, is knowing how to work a deal, knowing how to tell people, “Hey, you can be that homeowner.” And you’re in one of the toughest markets to become a homeowner—that’s Long Island. So you’re helping people already. Amazing, amazing journey, amazing story, a lot of inspiration I know the viewers are gonna get from you. If people wanted to get a hold of you now, they wanted to deal with your company because they do believe in your philosophy and you are clicking with them, where could they reach you at?

Costas Themistocleous (19:17)

You could reach me directly on Instagram. I’m very active on Instagram. My name is Costas; that’s that. You could also reach XeniaGroupLLC.com or Xenia Group LLC on Instagram. I recently just hired a branding company who has been helping me build that up, so it is a newer thing we’re doing, but it’s working. And then if you want to follow along or if you think you’re interested in investing or want to know more, ineedyoutosee.com—that is getting ready to launch, and the basis of that platform is: do you want to play Monopoly? Let’s do this. And I’ll never spam your email or text. I hate that. You’ll probably get one or two updates a month from me until launch. And if this is something you’re looking to pursue, I would love to help you achieve your goals and your dreams.

Issa Hanna (20:17)

Wow. So ineedyoutosee.com—that thing sounds revolutionary. So I’m excited. I’m gonna go probably go check it out. And then Xenia Group on Insta, on all the socials, the .com. And then Costas’s personal Instagram. Go slide in, go ask him some questions, get familiar with him. He has a system, it works, it’s proven. He’s here to show you how to do it. So amazing. Go get involved with him, you guys, because he does bring a wealth of knowledge to this game. And I want to leave out on one piece of advice for our new investors, right? For people that are just getting into the game. Most important thing in our business is building business relationships, growing your network. Super important, right? So if you had to give these people one piece of advice on starting, getting the ball rolling, what would you say?

Costas Themistocleous (21:10)

Just be yourself. Be yourself. Don’t put on that fake sales voice. Talk to people, and be yourself. People know when you’re being authentic; people know when you’re being fake. Don’t be afraid. Just go in, just do it. What’s the worst that can happen, especially if you’re getting started in wholesaling? This is the place to make the mistakes, because you’re not hurting anybody. You’re gonna learn, and a deal falls apart if worse comes to worst. And that’s okay. You lost a little time, but you learned something valuable. But if you’re being yourself and you’re being authentic and true to yourself, you will find the right people. The right people will find you, and you will close more deals, you will find your footing. I’ve learned that in my 10, 15 years in business. I’ve learned just that the more I’m myself, for better or for worse, it works. When I try to be someone or something I’m not, or when I have tried that, things fall apart because it’s just not sustainable. So just be yourself, be authentic to yourself, and do everything honestly, transparently, and with integrity. If you do that, you’re going to win.

Issa Hanna (22:23)

Amazing advice. Guys who watch my show, girls who watch my show a lot, you know that is a consistent theme: honesty, integrity. I always say you’re sprinkling seeds that will grow into money trees later just by doing the best thing possible for your client, being authentically yourself, right? Unapologetically, even sometimes yourself, because like Costas said, he might rub some people the wrong way, right? And then he might not be somebody’s cup of tea for the investment thing. But for the people that do believe in him, my God. And man, it projects right through on the screen: the knowledge, the honesty, the integrity, the realness. You could just tell. So Costas, thank you so much for coming on the show. It was a true honor to host you, brother.

Costas Themistocleous (23:09)

Thank you for having me. I truly appreciate this.

Issa Hanna (23:13)

Thank you. And to the viewers at home, if you enjoyed my conversation with Costas and want to see more like it, make sure to hit like and subscribe. I talk to people every day that can give us different knowledge on every aspect of the real estate industry. Until next time, the Real Estate Pros are out.