The Real Estate Espresso Podcast

On today’s show we are taking a look at the so-called liquidity crunch to understand why it is happening. Is it just rumour? Is the lack of liquidity real?  On today’s show we have concrete proof as to why the credit markets are seizing up.  A few months ago it was simply a thesis that the regional banks were losing deposits to the major banks. These medium sized banks were under pressure ever since the failure of Silicon Valley Bank. The outflow of capital has been largely to the benefit of the larger banks like JP Morgan Chase, Wells Fargo and Bank of America.  But the outflow has not been a zero sum game. A recent review of the Federal Reserve Bank of St. Louis data set shows that nearly $1T in deposits have left the banking system entirely since June of 2022. The bulk of that decline was in the last 8 weeks. Back in June there was 18.1T in deposits in US banks. Today, that number is down to 17.1T. Somewhere along the way, 1T just vanished from the banking system.  The question is, where did it go?  ---------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about conservation easements.  We tend to think of the income tax code as a mechanism for extracting revenue from the population and from businesses. To be fair, that is true. But there are thousands upon thousands of pages in the tax code.  You can describe how much a business or an individual needs to pay in income tax in a very small number of pages.  The remainder of those thousands of pages is primarily a series of incentives  Conservation easements are one of those incentives.  Under standard conservation easements, landowners give up development rights for their acreage to a land trust. In return, they receive a charitable deduction equal to the property’s value, at its highest and best use, and the public benefits by the preservation of the land, which in some cases is made available as a park. In order to be eligible for conservation, the land must have actual conservation value. If the land was previously developed, it’s unlikely that you would successfully argue that the property has conservation value. Conservation easements are more robust than zoning when it comes to protecting land. Zoning can be changed, and conservation easements are perpetual. But there have arguably been abuses of this provision that went beyond the original intent of the legislation. In particular, the so-called syndicated conservation easements have been deals where promoters would buy a piece of land for a low price and then go get an appraisal for the value of that land as development land, regardless whether there was any realistic development potential for that land. With that appraisal in hand, the land would be donated to a land trust and the promoter would claim a tax deduction for the appraised value of the property. ------------- Host: Victor Menasce email: podcast@victorjm.com

Today's question is from Marc in Montreal The information you provide on your show helps me every day sharpen my strategies and tactics.  Thanks for that. I run a strip mall with a laneway behind it that is used for a McDonald’s drive through.   The city, rightly or wrongly, is not permitting McDonald’s to update is signage until “this is resolved”.  This seems quite unreasonable since the laneway does not belong to them, the last owner was alive 80 years ago, and this usage has been in place for 10 years.  We are going for prescriptive acquisition. Strangely enough, a neighbour on the other side of the laneway has a garage door that backs right into the laneway.  The lawyer has said that it would be good to get an agreement with this neighbour before taking ownership of the land, since they would likely object to potentially losing an exit for their garage. Even if we were to buy this neighbour out, we would still need an agreement that would keep the value of this property.  My question is “how would you go about making an agreement with this neighbour, and what kind of agreements are possible?" ---------- Host: Victor Menasce email: podcast@victorjm.com

Brett Swarts has been active in sheltering real estate from capital gains tax for several decades. On today's show we are talking about several strategies that can be used to shelter from tax including the Delaware Statutory Trust and the Deferred Sales Trust. ------------- Host: Victor Menasce email: podcast@victorjm.com

Max Hansen is based in Utah where he has been practicing as a 1031 Intermediary for more than 40 years. On today's show we are talking about some of the nuances of sheltering capital gains tax in the US tax code. To connect or to learn more, visit accruit.com, now part of Millennium Trust. ------------ Host: Victor Menasce email: podcast@victorjm.com

This past month, a milestone was passed that went largely un-noticed. China exported more goods in Remnimbi then in US dollars for the first time in modern history. This means that more and more countries are willing to do business with China.  When you consider what it means to be financially responsible, a few things come to mind.  You pay your bills You follow a set of well established rules You earn more than you spend Countries that don’t follow these principles get punished internationally. You see their currencies fall in value. Countries that can’t be trusted don’t have the privilege of borrowing in the own currency. They must borrow against a financial standard that is going to be predictable.  But when you are the world’s reserve currency, you can get away with breaking a bunch of these rules without much consequence. The international community will give you a pass.  ------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a look at why we are experiencing a banking crisis. There are those in the Federal Reserve and in the media who are critical of recent bank failures. Those banks were irresponsible and didn’t hedge their interest rate risk properly. Silicon Valley Bank in particular received heaps of criticism for not hedging their interest rate risk. But let’s step back for a moment and look at the big picture.  We have more than 10 years with interest rates being held near the zero bound. In that environment, interest rates on loans have been at historic lows. The problem is that our banks have a fractional reserve system. If every depositor comes to withdraw their funds all at once, the bank will go broke. Every bank, not just poorly managed banks, every bank will experience the same outcome regardless of size.  ----------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about why the math of home affordability is broken. The critics of home affordability put the blame at the feet of developers and home builders for not building affordable homes.  But the price of homes in the resale market is set entirely by market forces. This is a function of the laws of supply and demand, combined with the ability to pay.  The simplest evidence of that is the fact that many homes were selling above asking price over the past three years. There is nothing forcing a buyer to offer above the asking price for a home.  Who is to say that homes should cost less, when clearly buyers are willing to pay more. The value of any asset is always viewed through the eyes of the buyer and what they are able and willing to pay.  ------------- Host: Victor Menasce email: podcast@victorjm.com

In the world of economics, it’s vital to understand energy. Energy is the economy. The economy and real estate are connected through multiple threads. The ESG movement of environmental sustainability and governance has its heart in the right place. The problem is the so-called greenwashing which is the process of adopting the branding of something green and environmentally friendly, but doing something dirty under the covers.  On today's show we are going to be digging into some pretty shocking movements under the banner of ESG. -------------- Host: Victor Menasce email: podcast@victorjm.com

Today's question comes from Ms. Cortes in Atlanta who asks: I’ve been offered an opportunity to invest in a ground up construction of a new warehouse located near I-10. I’ve sent you the entire package of information from the deal sponsor including the webinar and the investor package. I’d love to get your perspective on the offering and whether this is something you would consider investing in. ----------------- Host: Victor Menasce email: podcast@victorjm.com