The Real Estate Espresso Podcast

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com

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: podcast@victorjm.com