The Real Estate Espresso Podcast

On today's show we're getting George's perspective on how to evaluate investments, independent of what's happening in the current market conditions. I was not expecting his answer, but it makes sense. At 94 years of age, he's one of the wisest men I know. Enjoy... ---------------- Host: Victor Menasce email: podcast@victorjm.com

Jake Marmulstein is the CEO of Groundbreaker in Chicago, Illinois. This software company develops and markets an online platform for syndicators to manage their marketing, customer relationships, and investor relations. Anyone who has investors needs a platform like this to present a professional system for the breadth of activities related to investment management. To connect with Jake and to learn more visit groundbreaker.co ------------------- Host: Victor Menasce email: podcast@victorjm.com

If we have learned anything in the past two years, it’s that our world is interconnected more than ever before. Countries that are close trading partners are rarely insulated from each other. In Canada we have a saying that when the US economy sneezes, Canada catches a cold. We’ve talked extensively on the concept of counter party risk on this show. Back in 2010, many European banks, particularly in France and Italy were on the verge of insolvency as a result of exposure to Greek sovereign debt. In the end, European and foreign investors solved the problem by lending Greece even more money. They kicked the can down the road and averted catastrophe, but didn’t really solve the problem. Let’s put this in perspective. Greece is a tiny country, despite holding a large place in world history. The total population of Greece is only 12M people, and about 4M of them live in Athens. Compared to the population of the entire European Union, Greece is a rounding error. At the time, some of France’s largest banks were leveraged more than 30:1, meaning they held deposit reserves of 3-5%. These banks had approximately 3% of their balance sheet exposed to Greek sovereign debt which by itself would be enough to sink some of France’s largest banks. The question is, how many other countries out there have gone through economic disruption over the past two years, are facing crushing levels of inflation, and are at increased risk of default? The question is which country is going to run into trouble first, and then what will the cascade effect be of that counter party risk when the dominos start to fall over. Will it be Greece? Will it be the UK with debt at 345% of GDP, or maybe the republic of Ireland with debt of 700% of GDP? We are fixated on the balance sheet of the Federal Reserve. That’s important to be sure. But the next financial crisis will be the result of a weaker economy having a cascade impact on the rest of the world. ----------------- Host: Victor Menasce email: podcast@victorjm.com

Today’s question comes from Chris in NYC. He writes: What are your thoughts in today's market on taking on bridge financing when acquiring a multifamily asset that has a CapEx renovation plan? My team is finding ourselves having to go this route either because A) the assets we're finding & underwriting have a DSCR that's not at levels to support traditional debt sources or B) the property owner's T12 clear enough. ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today's show I'm making what I believe is a convincing argument that our economy is in recession despite what governments are calling a growing economy. Let me know if you agree with the thesis of my argument.  ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about how to understand what the published measure of gross domestic product and how we measure inflation. Both are in fact misleading the voting public. The concept of gross domestic product is easy enough to understand. You add up all of the economic activity in a nation, and now you have the gross domestic product. Pretty simple. But not necessarily easy to calculate. ------------------ Host: Victor Menasce email: podcast@victorjm.com

Today's question comes from Marc in Montreal who writes: We own a midtown Strip Mall where there is an adjoining property worth $1.3M which has 18 parking spots.  It has a restaurant on the property that will be shutting down in 6 months due to retirement.  A developer has an offer on the land for $2M, and would probably let me purchase it for $2.1M.  Our strip mall has long term leases in an aging building.  I see a scenario where a Land Assembly could convert it all to a 3 storey mixed use building with underground parking that would surely yield profit above and beyond both projects.  What are the possible short term or long term strategies that we could take with this project? I am considering a multi-phase project whereby I tear down the restaurant, build some commercial units, move my commercial tenants there, then tear down HALF my existing building, move some of my tenants there, and then the last Phase?  3 Phases, and every tenant ends up moving.  After the last Phase, I simply fill the remaining spaces. On the 2nd and 3rd floor, I would have residential units.  Either Condos or rentals.  Is the extra $800K to purchase the corner property worth it?  I am not sure exactly how to do a napkin calculation on this, but I imagine price per square foot to build minus price per square foot to rent is the way to go, minus all kinds of carrying costs and commercial tenant improvements. All of the commercial tenants have different long term expiration dates on their commercial leases, ranging from 7-15 years. Let me know if you have any thoughts. ------------------- Host: Victor Menasce email: podcast@victorjm.com

Today's show is a replay of an extraordinary conversation with Hollywood icon Lisa Haisha. She's an actor, a producer, a coach, a real estate investor, an entrepreneur. There are so many powerful lessons in today's conversation that I felt it was worth sharing again. ----------------- Host: Victor Menasce email: podcast@victorjm.com

Jake Harris is based in Sacramento California. From there he is active in real estate projects across the nation. On today's show we're talking about his new book "Catching Knives". It chronicles understanding the difference between buying a bargain versus buying a disaster. You can order a copy of the book or connect with Jake at his website catchknives.com.  ------------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re talking about what we can learn from the Boy Scouts and the Girl Guides. I was speaking with an investor this week who was placing an offer on an 80 unit apartment complex in a small town. We’re talking a town of 6,000 people where the nearest population center is four hours away. This investor is looking at this small town 9.5 hours from where they live. I asked why they were looking at this small town and the answer was that the apartments were inexpensive enough that they should generate cash flow with relatively high leverage. She thought these apartments were a bargain. So I asked a simple question: The Boy Scouts have Apple day every year when they fan out across the city and sell apples. Where should the boy scouts choose to sell their apples? Should they go to the most affluent part of the city with the highest income, or should they go to the most economically depressed part of the city to sell their apples? The Girl Guides sell cookies every year. Where should they aim to sell their cookies? Should they go to the most affluent part of the city with the highest income, or should they go to the most economically depressed part of the city to sell cookies? The answer was obvious. The scouts and girl guides should go to the most affluent part of the city to sell the apples and cookie. So I asked her why? Why should the boy scouts and girl guides go to the most affluent part of the city to sell apples and cookies? The answer was not that surprising either. She said, there is more money. They will sell more apples. In some case, they will get donations, and some people won’t even take the apple. In those cases it’s as if they sold the same apple more than once. The next question was revealing. If you would go to the most expensive part of the city to sell apples and cookies, why would you treat real estate any differently? --------------- Host: Victor Menasce email: podcast@victorjm.com