The Real Estate Espresso Podcast

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

 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: podcast@victorjm.com

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: podcast@victorjm.com

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 podcast@victorjm.com to learn how you can join. -------------- Host: Victor Menasce email: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com