The Real Estate Espresso Podcast

On today’s show we are taking a look at counter party risk. This is a term that every investor should be familiar with. It’s an issue that we investors face on a daily basis. We are waiting for another transaction to close before a loan can be paid off. That’s counter party risk. We’re waiting for materials to arrive in order to complete a certificate of occupancy in order to switch from construction financing to permanent financing. That’s counter party risk. Your cousin who you loaned $10k to lost their job and now you need that $10k for something else. That’s counter party risk. Virtually everyone became familiar with counter party risk in the wake of the 2008 financial crisis, and again in the wake of the Greek Sovereign debt crisis that threatened to topple banks in continental Europe. Here we are again. Two weeks ago, crypto lending platform Celsius froze user accounts. The idea behind crypto is that if you are holding assets in your own wallet, then nobody can take them from you. But what happens if you are holding assets in a lending platform, or perhaps in the account at a crypto exchange? What happens if that crypto exchange goes bust? ---------------- Host: Victor Menasce email: podcast@victorjm.com

In another sign that things are upside down in our current economy, rents are continuing to rise for single family homes. There is an acute shortage of homes for rent in a lot of primary markets. You might be wondering what is behind that incredible metric. In fact, some tenants are in such an acute need for the rental property of their choice, that some tenants are offering above asking rent. What we’re seeing are two separate economies. There are home owners who have cashed out, sitting on lots of cash. They can afford to negotiate with landlords and even offer above asking rent. Then there are the working tenants who are paying what they can afford based on their salary. The economic value proposition to these two tenants are vastly different. Really strong tenants are appearing in the market and they’re paying top dollar. They easily qualify as tenants. They have 800 credit scores. They are spending 5% and sometimes less of their household income on rent. So when they offer above asking rent, they skew that market. --------------- Host: Victor Menasce email: podcast@victorjm.com

We real estate investors are entrepreneurs. Every time we purchase a new asset, it’s like starting a new business. But if we’ve done it before, that new business is more like starting a new instance of a franchise than an outright new business. There are systems in place, designed to replicate and scale. Our commercial tenants are entrepreneurs. Some are starting new businesses. Well, thanks to Simon Black, he put a new report on barriers to business on my radar. This 144 page report was published in February of this year by the Institute for Justice. The authors of the report examined the difficulty in setting up a new business. To better understand the local regulatory barriers entrepreneurs encounter, this first-of-its-kind study analyzes the rules, regulations, and requirements to start a business in 20 cities across the country. This report identifies and quantifies the regulatory hurdles entrepreneurs experience, while pointing to specific reforms cities can pursue to make it cheaper, faster, and simpler to start a small business. The number of regulatory steps involved in opening a business is truly shocking. In Atlanta it takes 76 steps to open a restaurant and 68 steps to open a barber shop. Boston requires 92 steps to open a restaurant and 81 to open a barbershop. Phoenix requires 21 steps to open a home based tutoring business. Our businesses don’t need government handouts with another layer of bureaucracy to qualify for the money. Our businesses need government to get out of the way and let commerce actually happen unimpeded by red tape. -------------- Host: Victor Menasce email: podcast@victorjm.com

We have seen a large decrease in the value of crypto-currencies. That’s both bitcoin, etherium and the thousands of other coins out there that make up the eco-system. The question is, how has the crypto market influenced the labor market? We know that in 2020 and 2021, government stimulus has created an incentive for people to collect a pay check and not work. That is reflected in the large reduction in workforce participation, and the huge number of job openings, particularly in the retail service sector including hospitality, food and beverage. When those bartenders, waiters, line cooks were sitting at home watching netflix, they were also dabbling in bitcoin. Several restaurant owners I’ve spoken with have witnessed a sudden and recent return to work from people who all of a sudden decided that waiting tables was not such a bad idea after all. Is this a result of the combination of stimi-checks having dried up, and now crypto can no longer fund their lifestyle? --------------- Host: Victor Menasce email: podcast@victorjm.com

Dana Samuelson is a real expert when it comes to physical gold. On today's show we're talking about how physical gold can be an effective hedge against inflation. You can actually purchase physical gold from within the US at Dana's company American Gold Exchange. To connect visit amergold.com or email info@amergold.com.  ------------------ Host: Victor Menasce email: podcast@victorjm.com

Robert Helms is the host of The Real Estate Guys Radio Show, and the organizer of the annual Investor Summit, now in its 20th year. On today's show we're talking about how to make sense of the current economic environment.  ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about bad behaviour in the world of construction. When you are building anything in the world of construction, whether it’s a light renovation or a high rise building, you will experience the full spectrum of responses from suppliers and trades people. You would think that the best prices are found in the volume market and with those suppliers who serve the largest builders. I believe that to be true. But the best pricing is truly reserved for those few large builders. I recently compared the pricing at a commercial lumber supplier with the big box stores. It pays to shop around. We have received a wide range of quotes for all manner of products and services. We are experiencing all kinds of quotes that span the spectrum. Some of these are outliers that simply defy logic. It’s easy to wonder whether these quotes are the new normal. Am I out of touch, or is the architect out of touch? It’s frustrating to waste time talking to people that are not a fit for your project. But the best thing to do is to let go of any emotional baggage associated with those interactions and not allow the memory to influence future interactions with high quality suppliers that you ultimately want to work with. It is truly the wild west out there at the moment. You can expect to have to talk to more people than ever before in order to find subcontractors that you can work with. This will take more time. It will require you to dedicate more resources to shopping around than might ever have been your practice in the past.

On today’s show we are talking about my forecast for the stock market this year. Why are we talking about the stock market on a real estate investment podcast? Many investors are investors first and real estate investors second. I happen to be one of those people who has lost faith in the inner workings of the stock market and am heavily weighted in real estate, but I’m not exclusive to real estate. I also hold hard assets like precious metals. I don’t invest in the stock market because I understand it. I’ve been an officer of a publicly traded company. I’ve watched the CEO of my company go on Jim Cramer’s TV show and lie to the investing public. I’ve seen how little control the investing public has. ---------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re talking about the use of digital tokens for trading real estate. Over the past week I had numerous discussions with people making investments to create a digital token platform that would allow for the derivative trading of fractions of real estate or shares in exempt market offerings. I personally know of at least five companies that are making investments to develop the token technology to trade in real estate and in securities offerings. The theory goes something like this. Once real estate is carved up into tokens that can be as small as the mind can imagine, these fractional shares become liquid and tradable on a secondary market. The technology allows for the transacting of tokens in the blink of an eye. The underlying technology can be used for anything. You can certify the authenticity of a token by virtue of the distributed nature of the way the token is created. There are literally thousands of copies of the token distributed across computers all over the world. This construct makes tampering with a token practically impossible since you would need to tamper not only with the local copy in your possession, but with the thousands of copies in existence whose whereabouts you have no idea. What these tokens represent is a matter of definition. You could use them to trade baseball cards, concert tickets, works of art, a Rolex watch, literally any meaning you wish to attach to a token as a certificate of authenticity. As someone with a technology background, I believe the underlying technology has a lot of promise to lower the transaction cost and revolutionize many types of commerce that don’t exist today. The problem I see with tokenizing securities is that securities are governed by a complex fabric of securities regulations with multiple jurisdictions each of which can be slightly different. The issue of compliance requires using the existing rules and regulations. The securities Act of 1933 generally doesn’t allow for the trading of exempt securities, depending on the exemption. The requirement to comply with existing regulations means that the digital token system would need to parallel the paperwork required to comply with securities regulations. Until the SEC, and all of the state and provincial securities regulators recognize digital smart contracts that are possible using digital tokens, the benefits of digital tokens will be completely negated by the need to comply with existing regulations. --------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re talking about a question that is on everyone’s mind. Construction prices are rising. Interest rates are rising. Not only are rates rising, but it looks like lender liquidity is shrinking. Rents are rising, but who knows for how long? Salaries are rising for now, but could flatten or even decline if we experience an economic downturn. Will that apartment project be affordable when it’s completed in two years from now? An economic recession seems all but certain. The question is, how do you underwrite a project in these market conditions when so many of the critical variables seem to be so uncertain? I just came back from the 20th annual Investor Summit on Sand and these questions and more were the topic of seemingly every conversation whether it was over breakfast, or dinner, or late at night. Almost all of the 282 attendees are trying to make sense out of it. We had Danielle DiMartino Booth, who worked at the Federal Reserve Bank of Dallas for nine years provide us with an insider perspective on the most recent announcement last week from Federal Reserve Chairman Jerome Powell. If you would like to see a replay of her talk, click the link ---> https://fb.watch/dHcuFbbHe6/ -------------- Host: Victor Menasce email: podcast@victorjm.com