On today show, we are looking at how human behaviour can vary predictably damage to global banking system. There are many examples and many repeated opportunities in history to see this phenomenon at work. But on today show, we are going to look at a very recent example that most of us can easily relate to. In the early days of the pandemic, we started to experience shortages of every day staples. Households emptied the grocery store, shelves of non-perishable food items Like canned soup, pasta and rice, prepared foods like frozen pizza, and everyone’s favourite toilet paper. The human response to the risk of a shortage was to start hoarding. Paradoxically, it was the hoarding behaviour that created the shortage. I’ll make sure there is enough toilet paper for me and enough chicken soup for me even if it means that somebody else will not have access to toilet paper or chicken soup.  That was 2020. That was the pandemic. This is now. We are not experiencing shortages any longer. Why are we even talking about shortages? Well that is actually incorrect. We are experiencing shortages and we are seeing the exact same behaviour that we saw with toilet paper.  We are seeing people starting to hoard their cash, out of of a sense of anxiety about the banking system.  -------------- Host: Victor Menasce email: [email protected]

On today’s show we’re talking about another missing piece in the puzzle over the evolution of money.  Crypto-currencies were launched with the promise of replacing FIAT currency with a crowd sourced anti-establishment, off-grid alternative. The technology is rooted in the need for a system that would enable online micro-transactions where the transaction cost could be virtually zero.  If you want to make an online purchase within a game that costs only a few pennies, or perhaps a few tenths of a penny, there is no payment processing system that caters to these micro-transactions. Some of the early movers were looking for a light-weight system that would make it possible to create a low overhead transaction. Rather than charge users for the transaction, the would require each computer to do a small amount of work. That work in exchange for money was called hash cash and would take the place of a centralized infrastructure required to process a transaction. After all, data centres are expensive to build and to maintain. They consume a lot of power and required air conditioning. If instead of a datacenter, you harnessed the distributed computing power of all the users, you could get the work of managing and maintaining the database for free and require no data center at all.  This concept was the early days of what later became known as mining for bitcoin. If you do a small amount of work, you get some micro financial credit for the work.   Since the early days of bitcoin the notion of free work has been at the core of the distributed database that makes up the distributed blockchain.  The agenda behind these technologies was simple and pure. Create a low overhead financial transaction system. Later on, blockchain technologies took on the agenda of becoming a crypto currency. The notion of a store of value and an ever increasing value came much later.  It is this quality that has raised the ire of the financial regulators.  Governments generally don’t want competition for the nation’s currency. The US doesn’t want it, China doesn’t want it and have already outlawed crypto currencies.  --------------- Host: Victor Menasce email: [email protected]

On today’s show we are looking at some currents that are underneath the surface which to me are very concerning. We have a history as a society of taking quantum steps to relinquish our individual rights in response to a crisis or even in some cases for convenience.  In the wake of the terrorist attacks of Sept 11, 2001 many people in the West allowed for governments to collect much more information about each of us in the name of safety. Winston Churchill said, “Never let a good crisis go to waste.” Today, payments are increasingly becoming electronic, which means that your banker knows when you bought pizza from Dominos at 2AM. So far the government doesn’t know that you ordered pizza at 2AM. But if they did, what value judgement would be applied to that transaction? Would it impact your credit score? At what point will government become enmeshed in your financial world? What will be the trigger? ----------------- Host: Victor Menasce email: [email protected]

Today's show is coming to you live from the Secrets of Successful Syndication Conference in Dallas. We're talking about the current market reality. ------------ Host: Victor Menasce email: [email protected]

Will Matheson is based in Charleston South Carolina. On today's show we are talking about student housing and the strategies that make for successful investment in that specific segment. To connect with Will and to learn more, visit his company website at mathcap.com ------------------- Host: Victor Menasce email: [email protected]

On today's show, Roland asks: I listen to your podcast daily. Thank you for sharing your insights and bringing together a depth of knowledgeable people to share their real estate insights. George Ross is my favourite! I am writing to you because I am in a predicament with a recent acquisition. Recently I purchased a number of small, run down lake side properties in a small Quebec community about 1h15min from downtown Ottawa, with the intention of renovating and renting them out as short term rentals. I was given what I consider to be a really good deal on seller financing. The properties had been sitting on the market for some time and I befriended the seller. Before moving forward with the purchases I’d done my research - because I own a cottage in the community i knew of its potential revenue and I did my due diligence with the municipality to ensure short term rental was allowed. But recently I was informed by city officials that they will not permit me to run a STR after all, citing their stance on STR has changed. So with that background I was wondering what you would consider doing in this situation if you were in my shoes. The properties are located on a sizeable lake, the area has a a rich history of tourism specifically anglers from the United States… this is because prior to the pandemic the properties were used by a fishing and hunting business operator. Some of these customers have been coming back and I have a relationship with the retired operator  Despite the city’s u turn I remain positive and bullish on the area and the future property value. There is no major attraction in the area other than its proximity to Lac st Marie (about 20 minutes south) but I know the area has members of some of Ottawa’s prominent families who own cottages in the area. So I am forced to make the space available as a medium to long term rental. I am hesitant to go long term given the rental profile of the community. Then I had a thought I thought maybe you might have some perspective on  given your experience in the Ottawa medium term real estate rental space. What would you do if you found yourself in this situation?

On today’s show we are answering a simple but important question: Is the market ignoring the Fed?  What does the yield curve tell us about the recent 0.25% rate increase  announced by the Federal Reserve on Wednesday.  The shape of the yield curve can tell us a lot about the market sentiment in response to the Federal Funds rate. We have been inverted for much of the past year.  The yield curve has flattened a lot in the past two weeks as a result of the banking crisis. We have seen demand for short term T-Bills spike which has pushed prices up and yields down. Over the course of the day we have continued to see yields fall despite the rate increase announcement.  The banks have a choice to put cash on deposit at the fed for a rate of 4.75%. Reverse repo is incredibly flexible and secure.  But for some reason, they’re choosing not to put those funds on deposit at the Fed, which offers the highest interest rate in the market and is risk free). We see all of the Treasury offerings, except the 6 month T-Bill pricing below the federal funds rate.  The two year is down 36 basis points over the day at 3.882%. The 4 week T-bill is at 3.91%, down 28 basis points over the day. The 8 week is at 3.98, roughly flat for the day. The 10 year is yielding 3.462, roughly flat for the day The 30 year is yielding 3.68, down six basis points from the day before.  All of these rates except for the 6 month are below the Fed funds rate. I don’t believe there is anything magical about the 6 month T Blll other than market inefficiency at play. We will continue to monitor the 6 month to see if the trend we are seeing in the other maturities.  So what does this all mean? Should we be happy and calm or terrified? 

 On today show, we are looking at why we might be experiencing a global debt crisis. So far virtually nobody in a position of authority is admitting that we have a debt crisis. As I said, on the show a couple of days ago, when a balloon bursts, it’s very often the case that the pin gets the blame and it’s almost never the pins fault. Before we can understand the problem, we first need to go back to a basic definition. Debt is a claim on future earnings. The only way to liquidate a debt is for those future earnings to be equal or larger than the debt service. The problem we have globally is that debt has been growing at a much faster rate than the economy. Why is it that the house of cards has not come crashing down yet?  As recently as two weeks ago, Jerome Powell admitted in the congressional hearings that our current path of exponentially, growing debt is clearly not sustainable.  The answer can be found in the silent tax. The devaluation of the currency, what we commonly call inflation is the magic through which we pay back every penny and still cheat the lender out of their money.  On today’s show we are going to do some math to see the impact of inflation on the value of a loan.  ------------ Host: Victor Menasce email: [email protected]

We have had several investors ask us how we launch a new investment offering. On today’s show we are going to take a look under the covers for what it takes to launch a webinar to inform investors of a new investment opportunity.  When we have an investment opportunity in our company, we inform those who are already connected with us by email. We may also get new people inquiring about our offering as a result of referrals from friends. The primary means of communicating is as simple as sending out an email. Sounds simple so far.  But whenever the conversation is between our team and potentially dozens if not hundreds of investors, we need to be extremely organized. Many weeks of work goes on behind the scenes before the webinar can happen, and before the first email goes out. ------------ Host: Victor Menasce email: [email protected]

 On today’s show, we are looking at the difference between acute pain and chronic pain. With acute pain, such as you might experience when you hit your thumb with a hammer can be all consuming. You can think of nothing else. Acute pain is usually temporary. But while you are experiencing it, dealing with acute pain, takes priority and crowds out virtually anything else. Chronic pain on the other hand, is something that you deal with on a daily basis. It’s a little bit like having a rock in your shoe. It’s enough to be annoying. It slows you down. Often times the pain is not bad enough to motivate you to take off your shoe and get the rock out. You grumble, you complain, but rarely do anything about it.  Our financial system is experiencing both of these types of pain simultaneously. Inflation is analogous to chronic pain and bank failures definitely fall into the acute pain category. We have been hearing from federal reserve chairman Jerome Powell for months now about the importance of taming inflation. ----------- Host: Victor Menasce email: [email protected]

Dan Lazar is coming to us from Melbourne Australia. He started his journey as a tennis player and eventually became Romanian national champion. Today, he's building homes in Melbourne. On today's show we get an update on what is happening in real estate in Australia since the pandemic. To connect with Dan, visit herox.com.au or reach out to him on LinkedIn. ---------------- Host: Victor Menasce email: [email protected]

On today's show I'm speaking with George Ross about the current volatility in the banking system. His perspective is extremely helpful for those trying to make sense out of what's happening. If you would be interested in participating in my monthly conversations with George, send me an email to [email protected] to learn how you can join. -------------- Host: Victor Menasce email: [email protected]

Today’s email comes from Adam in Riverside, Ca. Victor!  Your podcasts are the best!  I continue to be a proud, loyal listener.  Thank you for continuing to deliver fresh and relevant content. Back in October, several of your podcasts foreshadowed concerning activity you noticed in the global credit markets/ banking system. With the recent bank failures I can’t help but wonder if they are somehow related to what you were noticing several months ago. --------------- Host: Victor Menasce email: [email protected]

Today's question comes from Zach who writes: First, I love your podcast and get great value from it. I really appreciate your straight forward analytical approach and using data to back your conclusions, not just opinion as is so prevalent in todays media. My question is about a parking lot lease. My company is redeveloping a historic building in a small town tertiary market in middle Georgia. We are converting the building to 7 apartments and 2 commercial units while taking advantage of historic tax credits and other state incentives. At the hearing for the zoning variance (which was approved) the city councils number one concern was the 7 new units taking up parking in the downtown area. In order to mitigate this I received agreement from a local bank you owns a large parking lot across the street to lease 6 parking spaces. This satisfied the city council. As we are nearing the end of construction, the bank has reached out to me asking what I thought the parking spaces were worth. I assume they are trying to set a rental rate. If I were buying them, I would use the income approach determining the income the spaces could bring and applying a relevant cap rate. I plan on billing the tenants $50 per month for “reserved parking”. However, I don’t know what is a good number to negotiate with the bank for the lease of the six spaces. With no comps there is no way to know if $50 is even a market rate. No tenants may be willing to pay that after which I may need to lower the rate. Currently there is no charge to park in the city. While the city has and ordnance requiring a parking pass for downtown, it is not enforced.  There is no where in town that currently charges for parking. In my opinion (having lived in Boston) there is plenty of parking downtown. I hope to lease the spots as cheap as possibly as I set up the agreement mainly to appease the city council and pass zoning. Do you have any idea what I should recommend to the bank as a lease amount? ------------- Host: Victor Menasce email: [email protected]

On today’s show we are asking the question, “Why do we need smaller banks?” After all, other countries seem to be dominated by a smaller number of very large banks. Why not rely on big banks and get rid of all the small banks altogether? In the wake of the great financial crisis that started in 2007 and 2008, lending in real estate virtually dried up. Part of the reason that prices fell so much is that the only buyers left in the market were cash buyers. In a market with a surplus of sellers and zero lending, the number of buyers evaporated. It was not a real estate crisis at all. It was a lending crisis that cascaded and became a real estate crisis. In those days I was building new apartments in Philadelphia with my partners. These were smaller buildings, student housing, duplexes, triplexes, 10 unit buildings and so on. There was no way that we would have walked into Wells Fargo or Bank of America and asked for a commercial real estate loan. The policies being set by these lenders were national in nature and the same criteria applied regardless of location. There was no room for local special situations. No lenders would even talk to us, except about four local lenders. These were smaller regional banks with about a dozen branches. At first the terms seemed very difficult. In fact, we went down the financing path with one lender and at the end of 90 days, the lender declined the loan. We started a second time with another lenders and this time after 60 days, the lender declined the loan. The third lender offered a 6% interest rate and a 20 year amortization with a five year term and a pre-payment penalty that would start at 5% in year 1 of the loan, 4% in year 2, 3% in year three and so on. That small bank was Meridian Bank. Today Meridian Bank is in five states and they’re still a small regional bank. The loan terms were not great. We were left with little residual cash flow at the end of each month. That first loan was a blanket commercial loan across four buildings. In those days, the availability of a loan was more important than the rate or the terms. We were able to return capital to our investors and ultimately we held those buildings for a decade and eventually sold them at a handsome profit. At the time, we grumbled over the loan terms. Today my partners and I are very grateful to Meridian Bank for affording us the opportunity to get any financing when nobody else would. As real estate investors, we depend upon lenders who have intimate knowledge of the local market. Having a major bank swallow up a small bank will force assimilation. The new parent companies don’t have a history of expanding their product offering to include the newly acquired banks in their offering. The products become homogenized. If you fit within the neat and tidy box of an hourly employee buying a single family home, with three years of income history you are a potential client. ------------------- Host: Victor Menasce email: [email protected]

On today’s show we’re taking another look at what is happening in banking and at some of the risks that are inherent. The leaders at SVB made a strategic error. They failed to hedge their interest rate portfolio. After years of low interest rate policy and continued guidance from the Federal Reserve of another two years of low interest rates, the bank felt confident in buying long term bonds. These long bonds made up 89% of their securities portfolio, which ultimately left the bank in an illiquid situation where they could not convert bonds to cash without a financial impact. Last week the bank declared a $2B loss on the sale of securities. But In total, the value of their securities portfolio was down $17B on paper if they had to liquidate it all today. Over the weekend, the Fed put an emergency tool in place to help similarly affected banks, regardless of size. If a lender has a bond that is in their “hold to maturity” category on their balance sheet, the Fed will allow the bank to borrow against that collateral at full face value. Under the current rules, the banks are allowed to treat US treasuries as good as cash when calculating their reserves on deposit. Clearly a long bond that is trading at a discount in the market is not the same as cash as the folks at SVB found out. It’s too bad that it’s too late for SVB. The Fed’s actions over the weekend should be enough to restore the confidence in the banking system and prevent another similar run on mid-sized banks. In aggregate, the entire US banking system is sitting on a huge pile of bonds that have fallen in value at a time when the Federal Reserve is reducing its balance sheet. It is an issue that isn’t just concentrated in one or two banks: The FDIC has said that across all banks, there were about $620 billion in unrealized losses as of the end of last year. That number has likely increased since the start of the year. So the big question on everyone’s mind is, “Is the banking system safe?” The answer is, “We don’t know”. If we see depositors withdrawing cash on a large scale, the banking system could still fail, even with the measures introduced by the Fed this past weekend. The logical mind says that the Fed has backstopped the banks and there should be no further concern. But we have continued to see panic buying of Treasuries and T-Bills. The yield on the 6m TBill fell by 50 basis points on Monday morning and the 1 year TBill fell 63 basis points. The buying frenzy continued throughout the day on Monday. So much for logic prevailing. It seems that depositors are responding emotionally and pulling cash out of the bank and putting excess cash in short term Tbills. Back in 2008, the toxic debt was subprime loans that were of low quality. This time, the toxic debt is supposedly the highest quality US Treasuries. If SVB is in trouble, then so is everyone else. If the Fed thinks they can wallpaper over it, they are extremely naive. --------------- Host: Victor Menasce email: [email protected]

On today show we’re taking a deeper look at the Silicon Valley Bank failure that occurred on Friday of last week. This spectacular bang failure has been making headlines and I am not going to merely repeat the types of things you might be reading on the front page of the Wall Street Journal. That would not be adding any value to you. I’m going to go out on a limb and state categorically that the federal reserve indeed accidentally engineered the failure of Silicon Valley Bank. That might sound like a bold statement. We all know what happened. The bank failed in spectacular fashion in what seemed like 48 hours. Clearly the Banks leader ship understood the gravity of the situation in the weeks leading up to the failure. It is alleged that the CEO sold shares in the weeks leading up to the collapse. But that’s a discussion for another day. As of the close of business on Thursday, a little more than 20 billion of the 175 billion still on deposit at the bank, were FDIC insured. Warnings from VCs to their clients is what caused the run on the bank. So the question is how many other banks are carrying assets that in the open marketplace are clearly worth far less than book value? If depositors were to withdraw funds on a moderate scale, and start putting them into US T-bills or German bonds or some other higher quality paper, how many other banks would suffer the same fee to Silicon Valley Bank? Last June when we met with Danielle DiMartino Booth in person at the Investor summit on send she said some thing which I remember to this day. She said the federal reserve will continue to raise interest rates until something breaks. We just did not know what would break. Well now we do. The member banks that on the federal reserve are likely to be the biggest casualties of the banks rapid increase in interest rates. I predict that on Monday morning, one of the consequences of the Silicon Valley Bank failure will be a complete freeze of new loan origination’s nationwide. Businesses with more than $250,000 in bank balances will move their excess funds into 60 day T-bills. We are going to see a panic wave of buying on Monday and the yield for the 60 day T-bills is going to fall. We have already seen panic buying in Asian markets overnight. So it’s not hard to predict the human behaviour. --------- Host: Victor Menasce email: [email protected]

Marco Santarelli is based in Laguna Beach California. From there he manages portfolios of turnkey rentals across more than 20 markets in the US. On today's show we are talking about the current market conditions. To connect with Marco, visit noradarealestate.com. ---------------- Host: Victor Menasce email: [email protected]

Richard Canfield is based in British Columbia and specializes in a concept called "Infinite Banking". This involves using funds borrowed from an insurance policy to help fund your real estate projects. He has a white paper that can be downloaded at 7steps.ca which outlines the steps in the infinite banking concept. --------------- Host: Victor Menasce email: [email protected]

This short segment is an invitation to an upcoming webinar scheduled for Wednesday, March 15 at 6PM Pacific Time, 9PM Eastern. Our team at Y Street Capital has been investing and developing storage product for some time.  Webinar Invitation Link:  https://bit.ly/YSC_StorageFundWebinar_RegisterHere We have a number of new storage projects in the pipeline and launching a fund just seemed to make sense. Storage is a wonderful and recession resistant asset class that performs well in any economic conditions. The storage industry has attracted a lot of attention in recent years and larger institutional players are entering the market. That means the storage industry is changing. Most primary markets are saturated and over-supplied. Even with all the institutional investment, the industry is still 75% dominated by smaller mom and pop operators. The opportunity is located in secondary markets and in specific vertical segments within storage. For example, boat and RV storage is vastly under-supplied in many markets. If you’d like to learn more, sign up for the Webinar using the link in show notes. Even if you can’t make the live session due to a schedule conflict, we will be recording the session. Registering will give you access to the recording. This opportunity is not for everyone. Investment is limited to accredited investors, residing in the US and would be by prospectus only in compliance with US SEC regulations. Whether you invest or not, attending the webinar will educated you on the opportunity that exists in storage and more importantly, where the industry is heading. Again, the link to register is in the show notes and we look forward to talking with you live on Wednesday March 15. ---------------- Host: Victor Menasce email: [email protected]

Today I had a realization. Amidst all of the confusion, all of a sudden the economic picture came clear. I was driving in the car this morning and a certain calm came over me. I’ve been wondering for weeks why there is conflicting economic data and I was unable to make sense out of it. I know what you’re thinking, Victor you need to get a life. When a moment of clarity about the economy is exciting to you , you need therapy. So without any apologies, I can hardly contain my excitement. We are hearing that the US economy is strong, that the economy in Europe is unexpectedly strong. Even in Canada the economy is strong. Employment is strong and we have 50 year low unemployment. But there is one thing I know about the economy. I treat it like a law of physics. We all learned about Newton’s second law of physics back in high school. An object at rest will stay at rest and an object in motion will remain in motion. This speaks to the law of conservation of momentum. We don’t have a corresponding law in economics, but I think the world needs it. That law simply stated is For every unit of economic output, there is an equivalent unit of energy consumed somewhere in the world. ------------- Host: Victor Menasce email: [email protected]

On today’s show we are talking about the fallout of Chairman Powell’s testimony to the House Financial Services Committee on Wednesday and the corresponding Senate committee on Tuesday. In his remarks, he reiterated that the Fed sees raising rates further in response to the unexpectedly strong employment, GDP and inflation numbers. On Tuesday, he said the central bank would consider raising the federal funds rate by a half-percentage-point later this month, leading investors to anticipate the larger rate rise. All of this analysis is based on the famous Phillips Curve that forms the basis of so much of Fed policy. Every time the Phillips curve is shown to have fundamental flaws, they tweak the model to try and take some new factor into account. But the same fundamental flaws exist. The basic premise that a tight labor market automatically puts too much negotiating power in the hands of employees is at the core of the financial model. But if we go back through history there is example after example where a tight labor market did not result in inflation. The conclusions drawn by Fed officials using the Phillips curve each and every time has been shown to be incorrect. ------------- Host: Victor Menasce email: [email protected]

On today’s show we are looking at where companies are making major investments. This is happening at time when economic uncertainty and higher cost of capital would suggest that it is not a great time to make major investments in new plant or equipment. There are two main drivers for investment in new manufacturing in today’s environment. Expansion of capacity for new and emerging technologies Global Security of Supply In my opinion, these two reasons driving investment in new manufacturing. On today’s show we are going to look at six new factories planned in the United States to see why these factories are being built.

On today’s show we are talking about the theory behind economic cycles and how the theory completely fails to take into account the reality of our world. If you want to learn more about projects that we have underway at Y Street Capital, visit https://ystreetcapital.com/investors/ -------------- Host: Victor Menasce email: [email protected]

On today’s show we’re looking at the impact of black markets on the quality of data in today’s data rich environment. In particular, we are going to be looking at energy and trying to make sense out of numbers that just don’t add up. We have experienced one year since the start of the war in the Ukraine. At the start of the war oil prices shot through the roof as energy supply chains around the world were disrupted. Part of the increase in price was caused by fear that economic sanctions would mean oil shortages. Now One year later oil prices have reverted to levels that reflect a new stability. Western governments have imposed supposedly crippling sanctions on the Russian government. They have imposed a price cap on exports of Russian oil. Yet it seems that the crisis of oil supply in Europe has failed to materialize. The shortage of oil was temporary. The fact is Russia has been able to avoid sanctions on a very large scale by effectively laundering oil in many places around the world. Many countries with excess refining capacity have been purchasing oil from Russia, and then reselling refined products to those very same markets that were previously refusing to purchase Russian oil. there is no shortage at the gas pumps in Europe one of the consequences of this massive black market in oil is a degradation in the quality of the data. If you track the number of barrels of refined product and compare them to the official numbers for crude oil imports, it is obvious that the numbers do not add up. ---------------- Host: Victor Menasce email: [email protected]

Neal Bawa is based in Silicon Valley and he invests in multi-family apartments mainly in Texas. On today's show we are talking about the market conditions and the impact of loan interest rates and terms on multi-family projects. To connect with Neal, visit multifamilyu.com. He hosts live webinars on a wide range of topics every two weeks.  ----------------- Host: Victor Menasce email: [email protected]

Brent Bowers is based in Vero Beach Florida. Formerly from Colorado Springs, he now invests in land nation wide. On today's show we are talking about land investment strategy.  To learn more or to connect with Brent you can find him as Brent L Bowers on TicTok or at his company https://www.thelandsharks.com/ --------------- Host: Victor Menasce email: [email protected]

Today's question comes from Zoe who asks: I purchased my first investment property, a mix-use triplex (commercial main floor and two 2bed/1bath residential above) downtown Hamilton on October 1, 2021 - At the time, we paid $1,100,000, put 25% down, and started a $825,000 mortgage at 2% for 1 year fixed rate. Prior to closing, my lawyer hadn't received the zoning verification back from the City in time for the requisition date.  He told me, the zoning should be fine for the barber, they've been there for 2 years.  He didn't advise me to ask for an extension, or to not move forward without having the verification.  After closing, the verification came back, indicating that indeed, personal services were not allowed due to the number of residential units in the building (less than three).  We figured, since the barber was already in place, and had just renewed her lease, that we would cross our fingers and hope for the best, not sure what else to do. Initially we were generating $1200 a month in positive cash flow. In February of 2022, the barber in our commercial unit stopped paying.  We ultimately evicted the barber. We put the unit up for lease, however, due to the zoning, we could only advertise for office space, which during the pandemic was not in demand and rents were extremely depressed and they continue to be depressed even to this day. An idea to convert the commercial unit to a 2 bed/2bath residential unit was investigated, and it seemed like a value add option to increase rents and value of the property.  There would be a tax consequence to the change of use, but In October 2022, the mortgage renewed.  We thought we were pivoting to a residential loan once the project was completed, so we did not take a lower fixed rate option.  The open variable rate increased the rate to 8.2% and we are now experiencing extremely high negative cash flow. Now, 6 months later, at the end of February 2023, the permit for the residential conversion is finally in hand, New quotes for the conversion are now double the original quote. At this time, my question to you is:  What do you recommend in this situation? ------------ Host: Victor Menasce email: [email protected]

On today’s show we are looking at an absolute housing crisis in Canada. For many people this translates into a crisis of pricing. But in truth, this is rapidly emerging as a crisis of availability at any cost. Canada is a relatively small country in terms of population of 38.6M. That’s up from 37.7M in 2020. You might be wondering, how can that be? Most mature western economies are experiencing an aging population, declining birth rates, and people are starting families later in life than ever before. The fertility rate in Canada dropped to 1.53, the lowest on record. That’s down from an average of 1.59 for the period from 2015-2020. In 1970, Canada’s fertility rate was 2.61 and has been dropping steadily ever since. What is fueling all that demand for housing? That’s what we are going to look at today and discuss what the data is telling us, and where the data is actually misleading. ---------------- Host: Victor Menasce email: [email protected]

Our book this month is definitely worthy of the book of the month. Our book is Daily Rituals: How Artists Work by Mason Currey. I was put onto this book by Tim Ferris who has been recommending it for some time. Daily Rituals is a fascinating book by Mason Currey that delves into the daily habits and routines of some of the most creative minds in history. From writers and painters to composers and scientists, the book provides a captivating look at how these artists structured their lives to maximize their creativity and productivity. If you are involved in a creative endeavor in your work, you are an artist. The author has compiled a wealth of information on the daily habits of creative geniuses, providing a unique perspective on how they managed to accomplish so much in their lives. --------------- Host: Victor Menasce email: [email protected]

It’s no secret that home buyer activity has shrunk significantly over the past year. But which parts of the market have cooled the most? On today’s show we’re taking a look at which segments have cooled the fasted. ------------- Host: Victor Menasce email: [email protected]

Today's question comes from Martin who writes: I thoroughly enjoy the invaluable resource that you provide on the RE espresso podcast. I would like to get your opinion on a project that has come across my desk. Many aspects of the project are subject to the normal DD process. However, having done some research on the special permit that was approved to entitle a 6 unit commercial site to a 56 unit mixed use site, with the addition of 50 residential units (24 Studio, 20 one bed and 6 two bed units) to the existing 6 commercial. There is a restrictive covenant as it pertains to parking. There are 24 designated parking spaces on the site. The planning board approval had an allocation of 12 spaces (2 each) to the 6 commercial units. It seems the remaining 12 are to be allocated to commercial customer parking. They also incorporated a specific condition that none of the residential tenants can own a vehicle. They specifically have tied this to the excise tax bills paid to the City for all vehicles,  as proof that  tenants of this building do not own a car. This concerns me, as in all of our units, there is at least one vehicle per lease. There is access to the metro train system close by (walking distance) However the site is not a downtown urban development, and is actually situated within 5 miles of the main downtown of a major city. The metro would have one downtown in 12-15 mins. The proforma rents are in line with other class A building comps within a 2-5 mile radius. I have three questions: 1. How does one account for the qualitative impact of not being able to own a vehicle. 2. Having answered the first question, how to quantify and discount rent comps with other similar class A buildings, that are not encumbered by the aforementioned restrictive covenant. 3. As part of an exit strategy what impact on the cap rate should one contemplate for potential buyers. Or, taking the contrarian position, are we moving in the direction of reduced carbon footprint with more people buying into 100% dependency on public transportation in conjunction with Uber /ride sharing, in which case the building valuation would suffer no undue financial degradation. As always, I appreciate your opinion and keep up the great work on the espresso podcast! ------------ Host: Victor Menasce email: [email protected]

On today's show I'm having a conversation with George Ross about separation of mineral rights on one of our properties located in Colorado Springs and whether the separate mineral rights could represent a risk to any activities taking place on the property.  ------------------ Host: Victor Menasce email: [email protected]

Mike Kaeding is based in the Twin Cities in Minnesota. On today's show we are talking about cost effective construction techniques. To connect with Mike or to learn more, visit Norhart.com.  ------------- Host: Victor Menasce email: [email protected]

Many of you know me as the host of the Real Estate Espresso Podcast. By day, I’m the senior partner at Y Street Capital. We have several projects underway that are open to accredited investors residing in the United States. If you’d like to learn more, you can visit ystreetcapital.com/investors. The information is not publicly available. But you can register to join our portal and learn more about the projects we currently have underway. This is not a solicitation. Any investment would be by prospectus only in compliance with US securities regulations ------------- On today’s show we are talking about seeing into the future. Having a successful business relies upon seeing into the future and solving the needs of that future before the rest of the world does. Many of the things we can see are hidden in plain sight if you choose to look. But you have to be willing to look. If you look at history, you will see that wars are very hard to contain. Even the current conflict in the Ukraine is not limited to two countries. We have the entire European Union involved, the US is involved, Iran is involved. It looks like China might become involved. We are seeing more defence startup companies and defence incubators than ever before. You would have thought traditionally of startup incubators as being focused on technology, or blockchain or biotech. We don’t typically think of defence incubators. But I’m here to tell you that this is a growing industrial complex. If you knew that defence spending was going to increase in a specific geographic area, what would you do to help serve that need. If your philosophically opposed to the notion of defence spending, you might choose to do nothing. And that’s a perfectly acceptable answer. But at least it’s a considered response. Most people by default do nothing because they don’t even think that there might be something to do. We don’t know if the current war is going to erupt into a hot war on a large scale involving superpowers. Maybe it will remain confined to a proxy war. We can only hope that the conflict doesn’t escalate and that is comes to a speedy end. In war there are no real winners. But again, wars often last a lot longer than people expect them to. Thats what history tells us. Even if we put a hot war aside, What is clear is that globalization as we knew it has changed and will probably not revert to the open borders we have experienced over the past two decades. The huge beneficiary of this shift is Mexico. There are now 28 Chinese companies who have opened large scale manufacturing plants in Mexico to serve North American customers. The cost of labor in Mexico is higher than the cost of labor in China. But the lower cost and time for transportation offsets the higher labor costs making Mexico every bit as competitive as China. This means that global trade routes are about to change. They won’t change entirely. But some traffic destined for the port of Long Beach, might be coming over land through Texas. Texas may become the next transportation gateway to the rest of North America. If you could see into the future and imagine a few dozen more major manufacturing facilities in Mexico, how would that change the demand for transportation and for warehousing in Texas? If you could see into the future and fulfill the needs of those supply chains, what would you do as a real estate investor? --------------- Host: Victor Menasce email: [email protected]

On today’s show we are taking a closer look at the impact of the earthquake in Turkey and Syria. We’ve all seen the images of collapsed buildings, of piles of rubble. The impact on those whose lives were lost and those whose lives were disrupted is staggering. We’re now hearing reports of developers being arrested. Let’s be clear, this was a powerful earthquake. A 7.8 magnitude quake is 10x more powerful than the 6.9 magnitude earthquake that hit San Francisco in 1989. I remember that quake very well. 63 people died in that quake, many related to the collapse of the Bay Bridge. In Turkey and Syria, the death toll continues to rise and is expected to top the 47,000 already estimated to have died. The investigations will take months to complete. Some collapsed buildings that are missing structural elements will be easier to investigate. But the problems appear to be more systemic. In 2007, the government passed new regulations aimed at cleaning up the construction sector, seeking to make new buildings earthquake-proof and shore up the old ones. Planning rules have been further tightened since, most recently in 2018, requiring more steel columns and beams to absorb the impact of earthquakes. But during the same year, the government issued an amnesty for existing buildings that had broken the rules - for a fee. More than 10 million people applied, netting the state more than $3 billion in registration fees. More than half of Turkey's 13 million buildings contravene regulations, according to official data, making amnesties popular among property owners, as well as a lucrative source of government revenue. Another amnesty was proposed last year and was making its way through parliament, despite criticism, even before the latest quake. At the end of the day, the laws of physics don’t care whether you had paid a fee to the government to gain an exemption from structural violations. The building will either stand or fall. Turkey is one of the most active seismic zones in the world and has a history of severe earthquakes. Buildings need to be designed to handle these severe events. ------------- Host: Victor Menasce email: [email protected]

On today’s show we are taking a look at how some changes to the building code are driving significant new costs. Buildings are becoming healthier than they once were. It’s desirable to insulate a property in order to maximize efficiency. However, these highly sealed homes and offices can also build up toxins or behave in unexpected ways. If you like to cook, then chances are you want to have an effective exhaust fan above your stove in order to prevent both grease and smells from permeating all over your home. A high capacity range hood is key. But if the range hood is going to pull kitchen smells effectively out of your home, you need a high capacity fan and a large duct to the outside. In the old days, homes were leaky enough that the range hood did not pull enough air to cause a fall in air pressure inside the home. The numerous gaps and leaks around windows, doors, electrical outlets and so on enabled fresh air to seep into the house without creating a problem. Where problems do arise is when a home is very tightly sealed. At that moment, there are only a few remaining openings for air to enter the house. There are the bathroom exhaust fans which have a gravity damper that lets only a small amount of air to backdraft into the home. There is the dryer vent which would allow air to be sucked back into the house. But the problem is that many houses have appliances that burn fuel. Specifically, a natural gas furnace, a natural gas water heater, and a fireplace or wood stove. The exhaust vent for each of these fuel burning systems is another hole in the house. These perforations are designed to exhaust the fumes from the combustion process. But the laws of physics says that air will flow from the location of highest pressure to a lower pressure area. The problem is that if the fuel burning appliance is having air sucked through the chimney back into the house, you could have carbon dioxide and carbon monoxide being sucked into the house. The larger the fan, and the more sealed your house, the greater the risk. As a result, the building code is being amended in many communities to introduce an active solution to this problem. Back drafting of fuel burning appliances like furnaces water heaters and fireplaces can be amplified by the wind created areas of high pressure or low pressure on one side of the house or another depending on wind direction. In many parts of the US, if an exhaust fan has a capacity of more than 400 CFM, then a makeup air system is required. Some building codes require a makeup air system regardless of the exhaust fan capacity. This requires the addition of a blower of equivalent strength as the exhaust blower to restore balanced air pressure in the house. A passive system is not enough to meet the new code. The makeup air system must have several components that are all interlocked with the kitchen exhaust fan. It must have a damper, a blower, a temperature sensor and a heater. This heater is going to be pretty strong. We’re talking a 10kw heater to warm the air. You might be thinking that you’re going to go out and spend a few hundred dollars on a nice shiny stainless steel range hood to put above your brand new stove. Then surprise you’re now facing a bill of an additional $3,000 for the makeup air system to balance the air pressure for the range hood. ----------------- Host: Victor Menasce email: [email protected]

Federal Reserve officials like to call their decisions “data dependent.” Business leaders say it a little differently, often “data driven.” All well and good but does anyone really say otherwise? “To say you prefer seat-of-the-pants guesswork” doesn’t typically impress investors. So of course, people claim to be data-driven, even when they aren’t. Even worse, you can sincerely think you are data-driven while looking at data that’s incomplete, distorted, or just plain wrong. We live in a complex world. So How Do You Stay Data Driven? -------------- Host: Victor Menasce email: [email protected]

On today’s show we’re talking about diversification. You’ve all heard the conventional wisdom. Diversify your investments and you’ll be safe. But if we look at today’s environment, the traditional diversification doesn’t seem to be delivering the safety that investors are looking for. If you have a percentage of your funds in the stock market, and a percentage in real estate, a percentage in bonds, some in cash, some in gold, you should be fine. But here we are in 2023. There is stock market volatility, there is no safety to be found in the bond market, real estate prices are falling, cash is clearly devaluing given the high rate of inflation, gold makes some occasional moves, but going sideways. On today’s show we’re going to examine the question as to whether diversification truly exists in the manner that was originally intended. --------------- Host: Victor Menasce email: [email protected]

Pete Reese is based in San Diego California where he specializes in flipping land on a national basis. On today's show we are talking about this niche where many parcels of rural land are neglected, unwanted, inherited, and otherwise under-utilized or under-valued. To connect with Pete or to learn more, visit turningprofit.com ------------------ Host: Victor Menasce email: [email protected]

Sean Caulfeild is a lawyer with the law firm LMSLaw where he practices real estate and corporate law. On today's show we're talking about several different types of property fraud and how to avoid them. If you have an experience with property fraud, we'd love to hear about it. Send an email to [email protected] and share your story.  ------------ Host: Victor Menasce email: [email protected]

There are government studies like the census which show migration patterns. These are comprehensive studies that focus on completeness. But there are other studies from moving companies and from U-Haul which illustrate migration patterns in a statistically significant way. The numbers might not be comprehensive, but they show the trends. Allied Van Lines issued their migration report for 2022 which shows some distinct patterns. But Allied Van Lines is a premium moving service. Would the more budget conscious movers that use U-Haul mirror the same trends or would the data be different for U-haul and Allied Van Lines. On today’s show we’re going to look at both and compare. The top outbound states according to the Allied Van Lines study showed California, Pennsylvania, Michigan and Illinois topping the list. New York has traditionally been thought of as an outbound state and historically has topped the list. New York had 45% inbound and 55% outbound, so they too lost population, but didn’t make the top five list. Arizona, Texas, Florida, Tennessee and N Carolina and S Carolina made the top inbound state list. Other states that boast strong inbound numbers include Idaho with 69.2% inbound and 30.8% outbound, Montana with 93% inbound and 7% outbound. When we look at the Uhaul data, there are some similarities, and some differences. The Uhaul data confirmed the same top states. So we have looked at both Uhaul and Allied Van Lines and have been able to draw the same conclusion about which states are growing the fastest and shrinking the fastest. Even though a full service move and a DYI move are different, there is strong correlation between the two types of moves. ------------- Host: Victor Menasce email: [email protected]

On today’s show we are talking about two different construction costs in the same location. We are vacationing in Mexico for a few weeks and naturally the topic of real estate comes up in conversation as it does. Our waitress by the pool is in the process of building a new house for herself and her husband in Playa Del Carmen. She shared what she spent for the land and the cost of constructing her new home. On today’s show we are going to compare what she is paying versus what a foreigner would pay. There are restrictions on what foreigners can buy in Mexico. Within the restricted zones—50 kilometers (about 31 miles) from shorelines and 100 kilometers (about 62 miles) from international borders— foreigners can only hold property in a land trust. Typically, the trustee is a bank. Outside these zones, foreigners can hold direct deed to property with the same rights and responsibilities as Mexican nationals. Apart form the legal title, there are other differences as well. We have seen properties for sale to foreigners at prices that rival US prices. Condos having 1300 SF in Playa Del Carmen that are close to the beach are selling for $600,000 USD with a $515 per month condo fee. This comes to a sale price of $461 per SF. Our waitress purchased a plot of land that measures approximately 40 feet wide by 80 feet deep, fronting on a street. The purchase price for the land was $10,000. Her home will have approximately 1,200 SF on a single level. Her home will have two bedrooms, a single bathroom, a kitchen and a living room. It will also have a covered porch at the front of the house which is included in the square footage calculation. In the US or Canada we would probably exclude the square footage of the porch in the area calculation. Our waitress will not connect to city services initially and will rely on well water that comes from a newly drilled well having a depth of 45 feet. Her total cost of construction is $30,000. So her house will cost her a total cost of $40,000. Maybe she’s not including appliances in that cost estimate. So perhaps her total cost is being slightly understated. But the two bedroom condo near the beach having the same square footage and no land is selling for more than 15x the cost of the detached home. ------------- Host: Victor Menasce email: [email protected]

On today’s show we are taking another look at energy markets. Many of you might know that my professional training is an electrical engineer. I understand physics, and energy in particular at a deep level. This is an area of such importance that I continue to study it deeply. When we look at the economy, there is a direct correlation between every unit of economic output that forms our gross domestic product, and an equivalent consumption of energy somewhere in the world. The food we eat is correlated directly with energy. Energy is required to manufacture fertilizer. Energy is required to transport food from production to your dinner table. Energy is required to manufacture the clothes we wear, the houses we live in, the trip to that sun destination. Virtually everything we do, eat, buy, consume and experience, has energy consumption at its core. Today, 85% of global energy production involves the burning of some kind of carbon based fuel. It could be wood, coal, oil, natural gas. 85% of our energy production is based on burning something. We clearly need to reduce this and replace it with more sustainable sources of energy production. On today’s show I’m here to tell you that this decade we will experience another global energy crisis that is unavoidable. That energy crisis will translate into higher energy costs for everyone which will have an inflationary impact. It will also directly impact everyone’s quality of life. So why is this important? We are after all real estate investors, not oil and gas investors. Well, since energy cost in a major input variable to anything we do, we need to perform sensitivity analysis on energy costs as we develop our real estate projects. You might perform a sensitivity analysis that says it will take 10 years to break even on an investment in solar panels on your house. But what if electricity prices double? Now your time to break even is five years instead of 10. Would that change your decision? Would you rather make that investment now so that you are ahead of the curve, rather than having to make a crisis decision? You can bet that those panels will be more expensive in the middle of a global energy crisis. There is a window, a small window in my opinion for you to take advantage of incentives and subsidies that will make an investment in solar infrastructure seem like a genius move. ------------ Host: Victor Menasce email: [email protected]

You can't make this stuff up. On today's show we are taking a deeper look at the incredibly strong January jobs report that 517,000 jobs were created in the month of January in the US.  The report was at odds with the daily reports of layoffs in multiple industries across the nation. So why do we care about this? After all, we’re real estate investors. Well, the Federal Reserve is setting interest rate policy in large part to cool the jobs market so that we don’t experience a 1970’s style wage price spiral. Since interest costs are front and center for us real estate investors, the employment numbers could be a leading indicator of what the Fed might do with interest rate policy based on employment statistics. The press have a bad habit of only focusing on one of the two surveys that are conducted on a monthly basis. The household survey tells a very different story than the employment report. It’s a bit like selective truth. The employment report is not the whole truth. It’s a half truth. The other half of the truth is the household survey which continues to show falling work force participation. The narrative is that a strong jobs market will feed the narrative that central bankers will need to raise interest rates even further to combat inflation. A strong jobs market puts too much negotiating leverage in the hands of employees and that will ultimately fuel a wage price spiral. The question is, what could be behind this incredibly strong employment report? ------------- Host: Victor Menasce email: [email protected]

On today’s show we are examining a legal case involving Nick Sirianni, head coach of the Philadelphia Eagles. Nick is best known for leading the team to this year’s Super Bowl. The Eagles did not win the Super Bowl in as a result of a field goal by the Chiefs in the final seconds of the game. But no matter what happens on the field, Sirianni has already made a huge impact in the world of real estate, winning a court case that could have national implications for sellers of property. This precedent setting case could affect disclosures of all types affecting the quality of a deed. ----------------- Host: Victor Menasce email: [email protected]

Fernando Angelucci is focused on the world of self storage. We're talking about winning strategies in today's environment. To connect or to learn more visit  www.ssse.com  or call Fernando directly at (630) 408-8090. ---------------- Host: Victor Menasce email: [email protected]

George Bravante is based in the Central Valley in California. After spending a career in accounting and private equity, he moved to California to complete an acquisition. The intent was to stay just a year, which quickly turned permanent. Along the way he acquired thousands of acres of prime farm land. On today's show we're talking about agricultural investing. To connect with George and to learn more, visit bravantefarmcapital.com or his vineyard at Bravantevineyards.com. -------------- Host: Victor Menasce email: [email protected]