Welcome to the 5 Minute Prime Podcast. Quick actionable tips to master personal finance and real estate investing. In just five minutes a day, we'll help you build wealth and achieve financial freedom. Hey Prime Investors, Martin Maxwell here. Welcome back to the 5-Minute Prime Podcast. Back in June, you did the thing everybody tells you to do. You sat down and wrote your buy box. Maximum price, $250,000, 20% down, a cap rate floor of 9.4%, rent to price of 1.567% a month, has to cash flow on day one, not after some refinance you haven't done yet. Sensible list. And it worked. Through July, that save search handed you eight or nine properties a week worth a second look, and you passed on every single one of them. Which is exactly what a screen is for. Three weeks ago it started coming back empty, and you have not changed one line of it. So you go looking for what moved. And this is where it gets interesting, because the first thing you check is the obvious one. The 30-year fixed. On the 25th of June, it was 6.49%. As of September 3rd, 6.71. Run that through a $200,000 loan. The payment goes from $1,263 a month to $12.92. $29. About $350 a year. That is the entire rate move translated into your actual life. And I want to be honest with you about something, because this is where a lot of shows would inflate it. $29 a month did not empty your search results. It couldn't. If the payment were the only thing that changed since June, you'd still be looking at eight properties a week. Something else moved. And it moved further. Here's the piece almost nobody has straight. His cap rate floor, the 9.4%, is not built on the mortgage rate. It never was. It's built on the 10-year treasury, a set number of points above it. And the reason is simple. The treasury is the risk-free thing your money could be doing instead. Every hurdle you set has to clear that first, or you are taking on tenants and toilets and roofs to earn what a bond would have paid you. So, the 10-year, same two dates. June 25th, 4.40%. September 3rd, 4.77. 37 basis points. Against the mortgages, 22. Your floor moved from 9.4 to 9.77. Push that through a 50% expense assumption, and your rent to price bar goes from 1.567% to 1.628%. Read that back. The number that repriced your entire screen moved almost twice as far as the number you were actually watching. And the spread between the two? It narrowed. So you were tracking the one that told you the least. And that gap between them is not noise, it's a thing you can watch on purpose. The mortgage rate is the treasury plus a spread, and that spread has its own weather. It can widen while the treasury sits still and hand you a worse mortgage for no macro reason at all. It can compress and hand you a better one, which means a person watching only the headline mortgage number is reading a sum without ever seeing either of the two things being added together. For you, the practical version is smaller and sharper than that. Your payment is downstream of the mortgage rate. Your floor is downstream of the treasury. Two different inputs, two different sizes of move, and only one of them was on your screen. The one that mattered less. Now, three options on the table, and I want to do the wrong ones first, because the wrong ones are more interesting. Option B is leave the criteria alone and wait for rates to come back down. No, underwrite the rate you have. A future cut is upside if it shows up. It is never the thesis. And notice what waiting actually costs you. You are not standing still, you are getting three months further from a first deal while your criteria keep going out of date, because that document does not update itself. Option C is the one that catches people, and it's the reason I wanted to do this episode. Keep every criterion, just raise the max price from 250 to say 280. The list refills. Nothing was abandoned. You just widened the aperture a little. Except a 1.628% bar on a $280,000 property demands $45.58 a month in rent. On a $250, it demanded $40,000. So unless rents in your market went up 12% this summer, and they did not, you didn't widen anything. You lowered the bar and left the number on the page untouched, so it still looks like the bar you wrote in June. And that is the thing worth naming out loud. Criteria almost never get abandoned. They get adjusted around. One input at a time, every adjustment defensible on its own, until the search returns a comfortable number of houses again, and nobody can point to the moment the standard dropped. And if you're listening to this, having already done exactly that, you raised a ceiling in July, or you nudged a floor down a tenth of a point to keep things moving, I'm not calling that a character flaw. It is the single most reasonable feeling decision in this entire business. The only thing I'd ask is that you go write down what the number is now and what it was when you started. Not to feel bad about the gap, to know whether there is one. Which leaves a recalculate the floor off today's 10 year and live with whatever clears it. The uncomfortable part is that the list gets shorter, and a short list feels like a broken screen. It's the opposite. A screen returning nine properties a week in a market where almost nothing pencils isn't a good screen. It's a permissive one. An empty result is a finding. It says, at today's cost of money, in your price band, in your market, deals that clear your own floor are rare. That's worth knowing. It is not the same as needing to try harder. And what you do with that finding is a real choice, with honest versions. Change the market. A metro whose rent to price is structurally higher clears the same bar without you lowering it. Change the strategy. Something with a value add path can clear a floor a stabilized property can't, because you're underwriting a rent you're going to create instead of one you inherit. Or change the timeline. Keep the criteria, keep saving, and let a bigger down payment do the work the rate used to do. All three of those keep the number on the page honest. That's the whole test. There's a version of this I've made before on the show about a screen not being a ranking. This is the sibling of it. A threshold that came out of a rate is a function, not a constant. It moves when its inputs move, whether or not anybody rewrites the document, which is also incidentally why the 1% rule keeps surviving every round of mockery it gets. The principle is fine. Rent against price, that works. What people actually got wrong was treating the threshold as a fixed number instead of an output. So here's the challenge, and it's four minutes, not an evening. Open whatever document your criteria live in. Find the number you'd call your floor, your cap rate, your rent to price, whichever one you actually screen on. Now write three things next to it. The 10-year treasury you used, the date you used it, and the expense ratio you assumed. If you can't fill in all three, that number is not a criterion, it's a memory. And then set yourself a repeating reminder. First Monday of the month, pull the 10-year, recompute the floor, four minutes. That is the entire difference between a screen that protects you and a document that agrees with you. The full write up, all three options side by side with the arithmetic, is linked right there in the show notes. I'm Martin Maxwell. This has been the Five Minute Prime Podcast. I'll see you next episode.