Today is another AMA episode. Today’s question comes from Ryan in Los Angeles who is asking about whether it is better to adapt an existing building for senior housing, or whether it is better to build new? --------------- Host: Victor Menasce email: [email protected]

National Property Management software firm Yardi is one of the premier software systems used by the majority of the large scale property management companies. The data is hosted by Yardi on their own servers. As a result, they have access to a lot of data on their servers. Yardi Matrix is their brand name for their data products. Yardi published their National Self Storage report at the end of January. This report focuses on the top 31 metro areas in the US. It mirrors what we have known for some time. Storage in the primary markets is saturated with supply. Supply has exceeded demand. Nationally, Yardi Matrix tracks a total of 4,627 self storage properties in various stages of development, including 812 under construction, 1,789 planned and 669 prospective properties. The share of projects under construction was equivalent to 3.6% of existing stock in December, unchanged from the previous month. Yardi Matrix also maintains operational profiles for 29,032 completed self storage facilities across the U.S., bringing the total data set to 33,659. The average national street rate for all unit sizes dropped again on a year-over-year basis, down 2.8% in December. However, average rates remain above pre-pandemic levels. Rates for standard-size 10x10 units decreased 2.3% for non-climate-controlled (NON CC) units and 3.4% for climate-controlled (CC) units. Meanwhile, rates for larger units outperformed those for smaller units on an annual basis, with rates for 10x30 units down 2.4% over the year and rates for 5x5 units down 3.4% over the same period. So how do you invest in self storage? You pursue secondary markets that are under-supplied.  ------------ Host: Victor Menasce email: [email protected]

On today’s show we are doing a deep dive on a new report from Real Estate brokerage and consulting firm Cushman & Wakefield. They recently published a new study on construction costs for industrial facilities based on a survey of construction costs in 43 markets across North America. We keep hearing about how construction prices have been volatile in the past couple of years. The truth is, some line items are way up in cost and others have fallen dramatically as well. If you’re looking to build an industrial facility, how do you get a realistic budgetary estimate of what it will cost? This 34 page report does a good job of summarizing the findings of their research. -------------- Host: Victor Menasce email: [email protected]

Jorge Contreras is based in Orange County California where he specializes in owning, managing, and consulting in the field of short term rentals. On today's show we are talking about the changing landscape in short term rentals and how to mitigate the risks. To connect with Jorge, visit https://www.instagram.com/thejorgecontreras/ --------------- Host: Victor Menasce email: [email protected]

Sam Kwak is one of the Kwak brothers on the The Kwak Brothers YouTube channel. On today's show we're talking about building a following using media like YouTube. To learn more you can visit the Kwak Brothers YouTube channel at https://www.youtube.com/@TheKwakBrothers/featured ----------------- Host: Victor Menasce email: [email protected]

Today’s AMA (Ask Me Anything) question comes from Ryan in Los Angeles who asks: What are the major components of a market feasibility study for senior housing and what do you consider strong indicators for a viable market? ------------ Host: Victor Menasce email: [email protected]

On today’s show we are taking another look at interest rates. Global credit markets seem to be at odds with the Federal Reserve’s hawkish statements. Jerome Powell announced on Wednesday another 0.25% interest rate increase in the federal funds rate. We heard the same messages yesterday that we heard back in December at the last rate increase. The Fed set forward guidance for another rate increase at the March meeting, while at the same time stating that they are making decisions on a meeting by meeting basis. The terminal rate is forecast to be between 5% and 5.25%. But the guidance prior to the announcement was already for a 0.25% increase at the Fed 1 meeting. The market had clearly priced that expectation into the market rates. In the day leading up to the announcements, the yield on the 10 year treasury fell even further to 3.415%. The yield on the 10 year Treasury peaked in early November at 4.2%. Clearly we are in a rising interest rate environment. The Fed increases the rate at each meeting and with the Federal Funds rate in the range of 4.5%-4.75%, you would expect the yield on the longer term bonds to be increasing as well. But that is not the case. What on earth is going on? ------------- Host: Victor Menasce email: [email protected]

Happy first of the month. On the first day of each month we review the book of the month. It’s not often that we get to reflect on timeless lessons. But that is just what “The Obstacle is the Way,” by Ryan Holiday does. The opening examples in the book draw upon Marcus Aurelius and John D Rockefeller or General Ulysses Grant. The common characteristic of these three men and many others, was an almost fearless approach to obstacles that presented themselves. This book is a reminder that some things remain true, no matter what society is experiencing. The book is based on an ancient Stoic philosophy, as outlined by Holiday. It focuses on developing a process that allows us to turn these obstacles into opportunities, instead of viewing them as crises. ----------- Host: Victor Menasce email: [email protected]

When you buy a property, you can expect a property tax re-assessment in many parts of the country. So relying on the backward looking property taxes of the property may not be indicative of what you would pay once you own the property. Performing due diligence means developing a realistic forecast of the property taxes once re-assessed.  ------------ Host: Victor Menasce email: [email protected] 

On today’s show we are going to look at some of the changes underway in the world of banking. I believe that banks have learned a lot about their business processes over the past two years. The pandemic forced an acceleration of the transition away from performing transactions in the physical branch to performing transactions online. We’re going to look at one major bank Wells Fargo as an example of the changes that are underway. Earlier this month, Wells Fargo told investors that it expects to cut expenses by an additional $3.2 billion this year after already trimming about $7.5 billion over the past two years. I view Wells Fargo as one of the best banks positioned to benefit from higher interest rates. In fact, almost all banks will benefit from higher interest rates, provided the default rate remains under control. Defaults can have an outsized impact on bank profitability and can cause more harm than good as we saw in the 2008 financial crisis. If I think about our own banking relationship with Chase, we have a business banker that we speak with regularly over the phone, but have never physically met in person. We took the time to open a new business account with them, a process that took several weeks. Since then we have opened many accounts with them. We can initiate most wire transfers from an online portal. Banks are also closing branches in order to respond to changing customer demographics and trends. Banks recognize that it is more efficient to concentrate a greater number of branches in densely populated urban areas. At the same time, banks have realized that many customers are now more comfortable banking from their homes or on their mobile phones. As such, many banks have responded by shifting resources to digital banking and away from physical locations. The banking industry continues to consolidate. There were over 10,000 banks in 2006. That reduced to 6,000 by the end of the financial crisis, That reduced to fewer than 4600 in 2023. We are seeing bank consolidation: Larger regional banks are merging with one another or taking over smaller banks in their regions to create stronger organizations with increased resources and competitive advantages. In cases where there is overlap, a number of branches are closing without losing customers. The overall operation becomes more efficient. ---------------- Host: Victor Menasce email: [email protected]

Levi Lascsak is based Dallas Texas where he has mastered the art of using Youtube's powerful search capability to have clients find him. Today is a powerful show that you will want to pay close attention to. To connect with Levi, visit passiveprospecting.com and register for an advance copy of his upcoming book.  -------------- Host: Victor Menasce email: [email protected]

Matthew Ryan is based in San Francisco where his firm specializes in developing co-living projects. Co-living is a product class aimed at the young professional who is seeking an affordable high quality accommodation in high priced markets. To connect with Matthew and to learn more, visit re-viv.com ----------- Host: Victor Menasce email: [email protected]

On today’s show we are talking about how having a sewer pipe at the edge of your property may or may not be useful. It’s a very common assumption that if the city services are available in the street, or perhaps nearby, you can have access to sewer services for your project. Unfortunately, it’s not that simple. Most sewer systems are designed to be gravity fed. So in an ideal world, the sewage treatment plant would be located at the lowest point in the city and the sewer pipes would all flow downhill to the treatment plant. Sadly, not all cities are convenient enough to make that statement a reality. If a gravity fed system is not possible, then a lift station is going to be needed to pump the sewage uphill. Hopefully at that point, the difference in height will be enough for a gravity fed system to handle it from there. Gravity fed systems need to flow down hill. So in a perfectly flat topography, your sewer pipe will have to get deeper, and deeper and deeper in order to maintain a gravity feed. You might contact the city to gain access to the sewer service that is passing in front of your property. After all, there is a pipe only a short distance from your property line. Surely accessing the sewer service should not be a problem. Bu then the city engineer regrets to inform you that the sewer line doesn’t have the capacity to support the size of your proposed project. You might be tempted to think, why can’t the city plan for growth? After all, just put in a big pipe and save yourself the hassle of having to upgrade the pipe in the future. ------------- Host: Victor Menasce email: [email protected]

These days at our development company Y Street Capital, it seems like we spend every day in underwriting. We are analyzing potential new projects, re-analyzing existing projects, and then analyzing them again. Bond yields are changing, which means interest rates are changing again. Some lenders who had paused their lending programs in Q3 and Q4 have re-entered the market and are being more aggressive about getting deals done. Construction costs continue to fall, and we are constantly value engineering the designs to pull cost out of the projects without compromising the finished product. We are performing sensitivity analysis on half a dozen variables. On today’s show we’re answering a simple question, “Does the real estate industry have a short attention span?” So much of the market is guided by playing the comparison game. What did the exact same model of home sell for down the street? What are rents in the same building, or in similar properties in the same neighborhood? What cap rate are Class A apartment buildings selling for in the local market? There are so many comparisons to make. When it comes to market conditions, we are programmed to think of comparison data as guiding fair market value. But that raises the obvious question of “What is a fair comparison?” Can you compare a three bedroom home and a five bedroom home? Not really. Can you compare a 12 unit building and a 100 unit building? Not really. Can you compare a 12 unit building and a 30 unit building? Well maybe. How far apart are they from one another. Are they of similar vintages? Assuming they’re relatively nearby, now you’re starting to get to a closer point of comparison, but not in absolute terms. Maybe you’ll compare them on a cap rate basis, or perhaps on a per unit basis, or maybe a per square foot basis. But even if you get all of that data and convince yourself that you have a valid point of comparison, you have another problem. The market has gone through so much change in the past year that it’s hard to look at market data that is more than six months old. Data from early in 2022, while not that long ago, was in a different set of market circumstances. Interest rates were still low. We were in the tail end of the pandemic, or so it seemed. We were in a different world. It seems a lifetime ago. ---------- Host: Victor Menasce email: [email protected]

How is the US dollar still the world reserve currency? Every year or two it seems like the US is running out of money again. Legislative gridlock, combined with spending money like drunken sailors leaves the population wondering whether those in Washington entrusted to govern the United States are really worthy of the honour and the responsibility. The debt ceiling is coded into the legislation by design. The debt ceiling is designed to force a public legislative dialog about spending responsibly. Some would argue that it’s hardly been an example of responsible spending. But somehow, The US has raised the debt limit 89 times since 1959. Wait a minute, do you mean to tell me that the US has raised the debt limit 89 times in the past 64 years? Yes, that’s right. You’ve no doubt heard the expression “fool me one shame on you, fool me twice shame on me.” I’m wondering if there is an expression for when the government fools you 89 times? Will we through a party when the debt ceiling is raised 100 times? Somehow, US treasuries are considered the most safe and secure investments in the world. There is no collateral considered as good as US treasuries. ------------- Host: Victor Menasce email: [email protected]

You know me as the host of the Real Estate Espresso Podcast. By day, I’m also one of the partners at Y Street Capital where we specialize in new construction and development projects across the US and Canada. We are observing that Investors these days are cautious. We agree that it make sense to be cautious. You want to ask tough questions whenever you are performing due diligence. You really want to understand what it means to invest in a particular project from a market standpoint. On today’s show we are talking about what strategies work in each economy. When the market is hot and the tide is rising, it’s natural to focus on growth. Growth is going to give the best results. That’s true in real estate investing, and it’s even true in the stock market. But when the market is contracting and the economy is hunkering down, the best results will come from focusing on value. Value outperforms growth over the span of economic cycles. Why is that? If you focus on value, then you will also benefit from the growth when it happens. You will get the double kicker of both value and growth. But if you’re focusing growth alone, then you’re going to get stuck when the market is contracting. So what do we mean when we’re talking about growth and value? -------------- Host: Victor Menasce email: [email protected]

We have heard of a debt trap. This is where the cost of servicing a debt exceeds the cash flow needed to service the debt. In those instances, some borrowers take on additional debt hoping for better days and hoping to outrun the bankruptcy. States, cities and provinces don’t have the luxury of printing money. They need to live within their means, or at least within their ability to get revenue from taxation. It’s no secret that companies and wealthy individuals have been leaving high tax states in search of low tax states. There is a well worn groove in the freeway from California to Texas and from New York to Florida. Rather than try to create the incentives for businesses to move to California, the state of California is doing the opposite. They’re doubling down on the incentive for people to leave. California lawmakers are once again considering a wealth tax. This is on top of the state surtax implemented recently which raises the state income tax level to 13.3%. ----------- Host: Victor Menasce email: [email protected]

On today's show we're talking about the negotiating techniques for sellers who are looking to sell when few people are buying. George taught negotiation at the law school at New York University for over 20 years. His writings on negotiation are based on his course notes from those days. George has established himself as a world class authority in negotiation through his many decades in the practice. ----------------- Host: Victor Menasce email: [email protected]

Paul Kazanofski is based in Nashville Tennessee where he runs Revision Homes, a high volume house flipping and one of the premier custom builders in Nashville. On today's show we are talking about the state of the market and how the downturn is affecting people in the business.  To connect with Paul you can find him on LinkedIn. ---------------- Host: Victor Menasce email: [email protected]

What is the no-sale auto auction, and why do we care as real estate investors? The world of real estate is highly dependent on borrowing and the liquidity and affordability that banks and other major lenders can offer. But banks lend in multiple areas. They have consumer credit. They have subprime credit. They have real estate credit, automotive credit, commercial credit, and on and on. The auto industry, like real estate is highly driven by credit markets. During the pandemic, dealers were getting credit authorizations for all kinds of insane financing. A buyer with no credit would get approved for a loan to cover 100% of the value of the car, plus the sales tax, plus an extended warranty, plus rust proofing and pre-paid oil changes. By the time the buyer walked off the lot they had signed paperwork for a loan at 130% of the car’s value with a $1000 a month car payment. During the pandemic when they were collecting their stimi checks from the government and all staying home, not paying their landlord, all was fine. Some realized quickly that they could not afford the car payment and asked the lender for forbearance under the emergency covid legislation to protect consumers. So the auto industry is sitting on a ton of bad loans that were originated during the pandemic. Much of this is not being reported to the public. It’s like a game of hot potato with bad paper. One out of every four is 30 days late. One out of six is 90 days late. These numbers are worse than 2008. The default rate in 2008 was 14% for cars. Today, the default rate across all credit ratings is 13.56%. --------------- Host: Victor Menasce email: [email protected]

On today’s show we are going to take a closer look at AI tools that are making headlines. A couple of weeks ago I put out an episode on the OpenAI framework and the software ChatGPT which uses that framework as the underlying AI engine. In that episode I gave some live examples of questions and answers that I put to the software. In that episode, I concluded that the results were underwhelming and no threat to us humans. It turns out that my conclusions missed the mark in that episode. Nothing I said was misleading. But where I missed the mark was by asking the software some very simple questions. If you ask an unsophisticated question, then you are going to get an unsophisticated answer. I suppose humans would respond in the same way. Ask a stupid question and you will get a stupid answer. Ask a better question and you’re likely to get a better answer. -------------- Host: Victor Menasce email: [email protected]

According to an article published in the Bloomberg Law Journal last week, we are in store for a massive meltdown in the world of hospitality. Just as it appears that travel is returning to normal, hotels are about to get slammed in the side of the head again. But this time its from their lenders. As of December, close to $4.1 billion out of roughly $93 billion in outstanding lodging loans are delinquent, according to data from CMBS analytics firm Trepp Inc. It currently projects about $35 billion worth of those loans to mature this year. According to the report, there are currently 155 loans secured by hotels that are in financial distress in the US. This number is expected to balloon as loans become due. Those who are franchisees of major flags also have covenants for capital expenditures to keep the hotels looking fresh and meeting brand standards. These are hard requirements from Hilton, Marriott, and IHG. Many of the hotel operators were allowed to defer those capital projects during the pandemic because clearly they were in financial distress with the large scale lockdowns that were crippling the industry. Now those improvements are required to happen at a time when the cost of financing those capital improvements has more than doubled. The hotel data company STR Global maintains industry statistics on hundreds of local markets. Recovery is underway when you compare 2022 and 2023 data with 2019. But averages are still below 2019 numbers in most cases. Parts of Europe experienced above 2019 occupancy for certain specific weeks, indicating strong leisure travel. The real story is that despite the recovery, the Bloomberg law article is onto something. There will be a significant number distressed deals appearing in the market this year. If this is an area of interest, be prepared to jump in and perform your due diligence for the right assets.

The World Economic Forum opened its annual meeting on Monday evening in Davos Switzerland. This five day in person event is one of the global networking events of the year where you can rub shoulders with some of the most influential people in the world. These folks hold sessions on everything from the economy to energy, to health care to climate change. The output of the conference seems more like a highly choreographed Hollywood production than a conference designed to influence change. The documents are highly polished and extremely superficial in their treatment of the issues. The footnotes are filled with academic style references. But I found all of the papers I read so far lacking in substance. On opening day the WEF published the Chief economists outlook for 2023. This 31 page document is based on a survey conducted of the chief economists in the months of November and December. So the outlook is pretty current in terms of the sentiment of these economists. Remember, the WEF takes a global perspective, not just Europe or USA or Africa. 100% of the chief economists surveyed said that Europe is expected to be weak or very weak this year, and 91% said that the US is expected to be weak or very weak this year. --------------- Host: Victor Menasce email: [email protected]

When you think of Elon Musk, we largely think first of Tesla, or PayPal, or more recently Twitter. None of these has the potential to materially impact the value of real estate. But SpaceX has changed the value of real estate in ways that are not showing up readily in the metrics. At least, you might not see the effect right away. Today, a large percentage of the population have adopted high speed internet. If you’re going to work from home, and participate in your office culture, you need a reliable high speed internet connection. Despite the fact that the internet has been around on a large scale since the early 1990’s, there were many areas that were underserved. This fact has kept many people from investing in rural properties. Rural properties offer a number of advantages for some families. It offers the potential of lower property taxes, lower utilities costs for those relying on well water and septic. A larger land parcel offers the potential for a home garden and a higher quality of life than a home in the suburbs. Starlink now has enough satellites in their low earth orbit mesh to supply a decent coverage and very respectable data rates. They have launched 3,500 satellites and just broke the 1M subscriber milestone. -------------- Host: Victor Menasce email: [email protected]

Carina Guzman specializes in land development. On today's show we are talking about a 90 acre residential subdivision that is next to a ski resort. To learn more or to connect with Carina, you can find her on LinkedIn, or on Instagram at https://www.instagram.com/the_land_development_queen/ -------------- Host: Victor Menasce email: [email protected]

Aundrea Newbern is the Chief Operating Officer at Get Rich Education. She also runs several businesses including a property management company, and a crime scene cleanup company that is based in Detroit Michigan. It turns out the crime scene cleanup can be a valuable source of properties for investors. Who would have guessed? You can connect with Aundrea at https://www.facebook.com/aundreasells or visit getricheducation.com/course --------------- Host: Victor Menasce email: [email protected]

Today’s show is a little bit of a retraction, or perhaps a refinement of something we have covered last year. The US Federal Reserve had it right. The economists working for the Fed in 2021 suggested that the inflation we were experiencing was transitory. That was the word that they used. J Powell said it. Janet Yellen, Treasury secretary said it. Many including myself at the time didn’t believe it. In fact, in the end, even the Fed didn’t believe it and had to course correct.

On today's show, we're answering a question from Martin who is looking to underwrite a small development project using an existing structure as the basis for the new higher density building.  ---------------- Host: Victor Menasce email: [email protected]

Today’s show is the first in a series we are calling back to basics. Back to basics means getting clear on underwriting criteria. On today’s show we’re going to examine the interplay between your project approval criteria, versus your lender’s project approval criteria. When you undertake a new project, how do you know it’s a good project? --------- Host: Victor Menasce email: [email protected]

On today’s show we’re taking a closer look at what it takes for the Bureau of Labor and Statistics to declare their numbers for GDP, and ultimately when they declare that we are in a recession. Why is this important for real estate investors? Well, interest rates keep rising because inflation is high and the economy is strong. The economy is strong is the part of that narrative that is continuing to fuel inflation expectations in the eyes of the Fed. We know intuitively that the economy in Nebraska is different than the economy in California. So knowing that fact, we could conceive it possible that one state could be in economic expansion, while another is in economic contraction. We’ve long said that real estate is hyper local. So too is the economy. Does the local state data give us any insight into economic contraction on a national basis? --------------- Host: Victor Menasce email: [email protected]

On today’s show we are going to focus on the market for T-Bills to try and understand why there is an apparent shortage of this paper. Demand is exceeding supply. Why is that? It doesn’t make sense. Is the market saying that they want to US government to spend even more? Do they want to see even greater deficit spending? The government holds a monthly auction for T-Bills and these notes sell in the open market to the highest bidder. The highest yield paid in the Jan 5 auction was 4.1%. The current RRP set by the Federal Reserve, which is supposed to be the floor set by the Fed at their last meeting, is 4.3%. But none of these T-bills sold at 4.3%. They all sold at a lower interest rate. There were sales at 4%, and the lowest sales were at 3.85%. So why would these bonds selling at auction be getting less than the coupon interest rate? Why would the buyers be willing to pay extra for these bonds and accept a lower interest rate? ---------------- Host: Victor Menasce email: [email protected]

Sam is based in NYC where his company is undertaking one of the most innovative coastal clubs that are actually floating private membership clubs. The first club will be located in Miami and you can learn more about the project at Arkhaus.miami.  --------------- Host: Victor Menasce email: [email protected]

Fred Moskowitz specializes is based in Philadelphia and specializes in buying notes from lenders. He's a real expert in finding notes that are being sold in the secondary market. To learn more, you can download some amazing material at giftfromfred.com, or connect with him directly at fredmoskowitz.com

On today’s show we are going to talk about one of my favourite real estate development strategies. I call that strategy Buy on The Line, Move The Line. So what is that line? On one side of the line is a hot gentrified neighborhood. On the other side of the line is an economically depressed area. Often, these lines get developed and moved. Over the course of time, a few properties get left behind. The net result is a form of Swiss Cheese. The question is whether the holes in the Swiss Cheese represent an opportunity or not? In my experience, filling the holes in Swiss Cheese is more difficult than moving the line. The reasoning is simple. When you are surrounded by more expensive properties, those derelict properties take on the aura of being in a more expensive area. The land value goes up because the properties have been improved all around them. The reason the buy on the line strategy works so well is because when you are on the wrong side of the line, you are considered to be in a bad area. Bad areas are worth less. But you know that you’re going to improve the entire area and in so doing, you’re going to change the market perception of that location. If you only do one or two properties, it won’t be enough to convince the market that the line has moved. But when you improve maybe 5-6 properties, or an entire block, the marketplace takes notice and says “Oh, the line has moved”. ------------ Host: Victor Menasce email: [email protected]

We are starting to look back on the pandemic as one giant bubble. There was the stock market bubble, the lending bubble, the real estate bubble. The pandemic saw demand for certain products multiply. There was a shortage of hand sanitizer. These days, there are pallets on sale at the drug store and Walmart, a sign of unrealistic inventory building by retailers. Clearing out those excesses will be painful. It will result in losses as those mistakes become visible. Companies bulked up during the pandemic. They saw business booming and they saw the opportunity to take advantage of the disruption in the market created by the pandemic. The traditional bricks and mortar businesses suffered, and those who adopted new technologies and implemented new business systems would thrive. Where department stores suffered, Amazon benefitted. Where restaurants suffered, Skip The Dishes and Uber Eats benefitted. Home improvement stores did a booming business during the pandemic, and the supply chain disruptions were legendary. Lowes had 12.5B in inventory in 2019 prior to the pandemic. Fast forward to today, and Lowes has 19.817B in inventory as of October 31. That’s nearly $20B in inventory. Considering the annual revenue is $95B and 33% gross margin, that inventory represents about 120 days of inventory. That’s means three inventory turns per year. That’s low for a retail business. For example, Target usually has about 60 days of inventory. Yes, it’s a different business. Back in 2019, Lowes had no more than 90 days of inventory. ----------------- Host: Victor Menasce email: [email protected]

Today’s show is another AMA episode. Today’s question comes from Paul who asks: “I have always considered development projects to be high risk. How do you mitigate the numerous risks in a development project?" -------------- Host: Victor Menasce email: [email protected]

Today’s show is a deep dive into the world of artificial intelligence. There are a lot of marketing agencies out there that are offering to write content for you for your website, or your blog. The problem with hiring someone to do this work for you is that they are being asked to represent you. But it’s rare to have a ghost writer capture your voice. A ghost writer is not going to be anywhere near the quality that you would get if you undertook the writing yourself. That’s why it’s not a good idea to have a ghost writer write a book for you. Sure you can do it. Lots of busy people have successfully launched a book written with the help of a ghost writer. But these days there is a new ghost writer on the block. This is the artificial intelligence bot. These learning software systems are getting better and better all the time. You can expect that an increasing number of people to start hurling marketing messages at you using an AI tool. On today’s show we’re going to look at what an AI tool can generate. I went into a tool that uses the OpenAI framework as the underlying technology. This is one of the most widely used. ------------- Host: Victor Menasce email: [email protected]

Signs of recession are everywhere. These metrics have not been seen in a long time. We are generally conditioned to think of a recession as a negative thing. But frankly, it’s a necessary part of the cycle and as real estate investors we should actually embrace the recession. Imports to the US are down 7.6% in November from the month of October. That’s a huge decline on the basis of a single month. We have been hearing for months now that retailers ordered too much inventory during the pandemic. The rise in interest rates means that the cost of carrying that inventory is much higher than forecast at the start of the year. There is a silver lining in a recession, the market for bonds will have correctly predicted a so-called Fed pivot. ------------ Host: Victor Menasce email: [email protected]

Out book this month is called "Who Not How" by Dr. Benjamin Hardy. I’m a huge fan of his work. Benjamin Hardy has listed Dan Sullivan as the primary author even though Dan Sullivan didn’t write a single word of the book. Rather, Dan Sullivan is the curator and designer of many of the ideas that underpin the book. Not only is Ben an excellent writer, but his work is well researched and methodically organized. He has written other titles which we have reviewed on this podcast including “Willpower doesn’t work” and “The gap and the gain.” ------------- Hoost: Victor Menasce email: [email protected]

This year was a year of managing the unexpected. Jan 1, 2022 was a day of optimism and a fresh start in a new year. The world was on its umpteenth wave of Covid. 0micron was the new word added to the vocabulary. The word endemic was being used and many countries around the world were loosening travel restrictions. I personally have not fully returned to the pre-pandemic average of traveling twice a month. But I did travel 10 times this year. It was well below my average. But it’s starting to feel more normal again. The travel industry struggled to cope with the return to normal travel demand. Business travel is still down. The airlines that only months earlier had furloughed thousands, went on a hiring spree and struggled throughout the year to attract enough staff to cope with the resurgence in travel. Hotels lacked the cleaning staff and stopped changing linens daily. 2022 was a year of adapting to change. Little did we know that we would witness a war that would rival the atrocities of WW-II. Little did we know that the vastly outgunned Ukraine would fight back and hold its ground. Little did we know that a new cold war would be the new world order. Little did we know that the conditions for a potential world war could be be brewing. Little did we know that the red hot housing market would turn in a matter of weeks. Little did we know that the inflation that was readily apparent would catch the ire of central bankers who would kick the economy in the teeth because when your only tool is a hammer, everything looks like a nail. -------------- Host: Victor Menasce email: [email protected]

The problems at Southwest Airlines demonstrate what can happen when your systems break down. All businesses, including real estate investment business have systems. These systems are designed to have limits. When you go outside those limits, you can’t expect those systems to keep working. For example, our investment management software is currently handling hundreds to low thousands of investors. We have no idea what would happen if the system was faced with millions of investors. I can’t tell you for sure, but I’m pretty certain our system would break down. ------------ Host: Victor Menasce email: [email protected]

On today’s show we are talking about what is coming in the world of energy. So why am I telling you this? This is, after all a real estate show. Well, wherever there is low cost energy, there is economic growth. Wherever there is economic growth, there will be population migration. All of this affects real estate. It’s going to get a lot worse before it gets better. But the good news is that it will get better. We have a global energy shortage. We think that energy is expensive at $1.50 per litre in Canada, or 1.70Euro per litre. That comes to about $7 per gallon in USD, and compares with $90 cents per litre in the US or about $3.60 per gallon. Naturally that price varies across the country. Energy is what enables us to live our modern lifestyle. The amount of energy contained in a single litre of gasoline is equivalent to about 110 person hours of work if done by human labour. At a minimum wage of $7.25 per hour, that same output would cost about 1,000 times if performed by human labor. The industrial revolution and the shift from bio-mass to coal, and from coal to oil is what has enabled our modern lifestyle. The fact that you can spend your evening watching a movie on Netflix is testament to the fact that energy has enabled our lifestyle. We will see a drop in demand for energy during this current recession. It happens in every recession. There is a direct correlation between a unit of economic output and the consumption of an equivalent unit of energy somewhere in the world. These two are inextricably linked. But once this recession shifts into recovery, we can expect to feel the full force of the energy shortage. We are past peak oil in the US. Can the US continue to produce oil for years to come? Yes, but the cost of extracting that oil will continue to rise. There will be increasing amounts of energy consumed in order to get at the oil which thereby reduces the efficiency with which we can produce energy. Even with the most aggressive forecasts for penetration of solar, wind and hydroelectric, we will not produce enough energy to displace the decline in oil and coal output. -------------- Host: Victor Menasce email: [email protected]

On today’s show we are talking about one of the unwritten rules that influences the success of medical facilities. In an ideal world, patients should be free to seek the medical care that is best suited to their condition. If they have insurance coverage, the insurer would pay the bill up to the limits of the insurance plan, and patients would get the best care possible. On today’s show I’m going to introduce you to a term you might not have heard before. The term is adverse selection. ------------ Host: Victor Menasce email: [email protected]

On today’s show we are talking about how to set goals for the coming year. There are two types of goals that you can set. The first are attainment goals. These are the goals that have a specific outcome. It could be something like “Buy a new house for my growing family by December of 2023” Or perhaps “Increase my income to $20,000 a month by the end of the year.” Those are attainment goals. Attainment goals, if well articulated can be powerful guideposts in helping you determine the thousands of day to day decisions that ultimately make up the next hour, the next day, the next week, and ultimately your life. But there is a second type of goal that in my experience is more powerful than an attainment goal. That is the habit goal. Habit goals become part of you. They become you, rather than something that you do. -------------- Host: Victor Menasce email: [email protected]

In the 1920’s stock market mania was in full bloom. The stock market was so hot that companies were issuing public share offerings at an unprecedented rate. In fact you didn’t even need an operating business to issue a public share offering in those days. The share offerings would sell out regardless making instant millionaires out of the company founders. Here are a few quotes from those days. "We will not have any more crashes in our time." This was said by John Maynard Keynes in 1927, two years before the stock market crash which led to the Great Depression. We will not have any more crashes in our time. This was said by John Maynard Keynes in 1927, two years before the stock market crash which led to the Great Depression. “I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future.” - E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928 So fast forward to our modern era with our advanced digital society. In 2020 the special purpose acquisition company became a really popular vehicle. These have been around for decades, but have not been that popular. These blank check companies were created for the sole purpose of acquiring a private company and enabling it to go public using the funds raised during the IPO of the SPAC. Forgive me if I’m the only one who thought this was eerily reminiscent of the 1920’s stock market mania. -------------- Host: Victor Menasce email: [email protected]

Dr. Tom Burns is based in Austin Texas as one of the principals of Presario Ventures a private equity firm that specializes in construction of new apartments. On today's show we are talking about the current macro economic environment and how it's affecting new development projects.  To connect with Tom, visit Rich.Life or email him directly at [email protected]. For those in the medical profession get a copy of his book "Why Doctors Don't Get Rich". ----------------- Host: Victor Menasce email: [email protected]

Today's show is an excerpt from the 2023 annual goal setting workshop. In this segment, we're talking about how to transition a goal into something tangible by putting a concrete plan behind it. Planning can be a daunting process. But it doesn't have to be.  If you follow a few simple steps to avoid the largest planning mistakes, you can create the core a solid plan that you can execute.  --------------- Host: Victor Menasce email: [email protected]

On today’s show we are taking a deeper look at what is happening in the world of short term rentals. This industry has become so developed that there are specialists in virtually every aspect of short term rentals. There are products designed to automate so many aspects of owning and managing a short tern rental. There are tools to manage help you integrate the calendars and portals associated with multiple booking systems, whether it’s AirBnB, VRBO, Booking.com, Home away or Expedia. These systems don’t talk to each other. So if a client books your property using Expedia, then all the other platforms need to be aware of the change in availability. There are tools to do that. Many people whose homes were underwater in the wake of the GFC were based in Phoenix or Mesa or Scottsdale, There are currently over 7500 rental listings in Maricopa county. That’s in addition to the 23,000 for sale listings. The sale listings represent 4.5 months of inventory and the average days on market was 56 days in November 2022. There are 27 municipalities in Maricopa county. Based on this simple but very crude analysis I can confidently say that there are many thousands upon thousands of empty homes available in the Phoenix area in the middle of January for short term rental. That’s in addition to the 7500 rental listings and the 23,000 sale listings. Let me get this straight. This is the time of year when the snow birds leave the cold and go south to places like Phoenix and Vegas and Florida to spend the winter. This is supposed to be the peak season for that market. I’ve been saying for more than a year that I believe the short term rental market is getting overheated. As always, real estate is hyper local. What’s true in Phoenix may not apply in Aspen or Raleigh North Carolina. Analysis of the short term rental market in the Phoenix area shows that 65% of listings had less than 90 days of occupancy throughout the year. I may not know the specifics of these properties. But I can tell you with confidence that occupancy of less than 25% is not going to be enough to provide positive cash flow. I don’t care what you think the nightly rate is. Only 111% of properties had occupancy between 50% and 75%. Only 3% had occupancy above 75%. When I owned a portfolio of short term rentals on the edge of Banff National Park, our annual occupancy was near 80% throughout the pandemic. I always felt that 80% was a good number. But as I look at the statistics across multliple markets, I’m seeing that 80% was an outlier and definitely not the norm. For this reason, I’m expecting to see a surge of second homes on the market, and eventually a wave of defaults on these properties. Many of these properties were secured with loans at below 3%. If forced to renew those loans today, they would be above 7%. These rates will put downward pressure on prices for sale.  --------------- Host: Victor Menasce email: [email protected]