The Real Estate Espresso Podcast

Yep, I'm going to be out of circulation for a few days. I've tested positive and am in an isolation area at a resort in Mexico. 

Dr. Neel Chadha is barely 30 years old, works full time in his medical practice and has developed his first senior housing facility as a side hustle. On today's show we're talking about his journey as a first time developer, and as a first time operator of a senior housing facility with several areas of specialty including assisted living and dementia care. This conversation is packed with powerful lessons.  ------------------ Host: Victor Menasce email: podcast@victorjm.com

Today’s show is a search of quality real estate news in the mainstream media. I suppose it’s also a critique of the Wall Street Journal. I’ve been reading the Wall Street Journal since I was a teenager. Yes, I know that sounds completely weird. As a teenager, I would go to the news stand and purchase the physical paper. Even if I was traveling in Europe as a kid, I would buy both the FT and the WSJ and the differences between the US edition and the European edition of the WSJ were readily apparent. I would also regularly buy the Sunday edition of the NY Times. I loved the fact that the NY Times Sunday edition was so thick it would take me an entire week to go through it. But today, much as I appreciate some of the reporting in the WSJ, I have to give them a failing grade for their real estate section. I went in search of more mainstream publications hoping to find something meaningful on real estate. Forbes Magazine, owned by publisher and libertarian Steve Forbes, sadly had little more to offer. Their real estate page was filled with stories of luxury properties. One article talked about exploring Paradise Valley, Arizona’s most expensive zip code. I know that the Forbes Council on Real Estate has some esteemed members. But somehow the access to this talent has not translated into meaningful content in the publication. The Financial Times doesn’t have a real estate section at all. Their reporting of economic and stock market news rivals the quality of the WSJ. But again, no commercial real estate news. Even Bloomberg News doesn’t cover real estate. The latter is not that surprising because Bloomberg has its roots on Wall Street having developed the industry’s fastest trading terminals for market traders.

The 0Micron variant is not serious enough to bring the world to a halt. That is, except for one thing. Because this virus, barely more virulent than the common cold has been sequenced, it carries with it the dreaded Covid-19 brand name and therefore this is a disease that must be stopped at all costs. The problem is that it can’t be stopped. The World Health Organization came out publicly and stated yesterday that they expect 50% of Europeans to become infected with Covid-19 over the next several weeks. It’s actually astounding that the WHO is so far behind in reporting what has been evident for more than a month. Over the next two months we will continue to experience supply chain shortages across a wide array of products. China has shut down major regions to limit the spread of the disease as they prepare to host the winter Olympics. Further supply chain disruptions will result from China’s attempt to create a Covid free environment for the Olympics. This means that we will see rising prices as customers compete and bid up the price for increasingly scarce supply. But at the same time we will see a decline in GDP. This gives rise to the so-called stagflation that rarely occurs, but is theoretically possible whenever there is an artificial constraint on economic output that hampers the functioning of a free market economy. We are certain to see Q1 as a quarter of economic contraction. The big question is whether this will persist beyond first quarter. If you remember earlier last week I went out on a limb to predict that we are likely to witness the current outbreak of 0micron as the end of the pandemic within a matter of weeks. I predicted that the pandemic as we know it will be behind us by the end of February. I am standing by that prediction. But that doesn’t mean we won’t experience economic hardship during the next two-three months. ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re talking about the importance of market segmentation. Because real estate is not easily moved, the supply and demand picture is hyper local. That means each real estate product has a radius where the demand is real. Outside of that radius and the demand could fall off significantly. In real estate we tend to segment the market according to asset class. We look at demand for residential, for apartments, for office space, for retail space and so on. But that’s far too simplistic an approach. The analysts quote the market vacancy rate. But frankly that’s a useless metric. How does that break down when you compare new construction, versus older properties? How does vacancy compare in 1BR apartments versus 3BR apartments? How is the vacancy in studio apartments? What is the vacancy in short term rentals? The generalization provides zero insight to the specific question you are interested in answering. ---------------- Host: Victor Menasce email: podcast@victorjm.com

Today is another AMA episode (Ask Me Anything). Today's question comes from Kevin who writes: "Your podcast has been great. It has really challenged my thinking in a lot of ways. I particularly call back to (and continually share) the podcast you did talking about opening a restaurant and how much thought you put into the dishes. This way of thinking is a lifestyle and something so much more than dishes, its about details mattering in everything you do and sending a message to those around you that they matter. Thanks for that insight. If I can add, you are an investor in multiple countries and I aspire to do the same. I am wondering how you think about currency and functioning in multiple countries. Do you try to hold fiat in multiple countries or do you pull your profits home to your home currency? Do you try to time exchange rates? Do you try to hold foreign profits in something like gold or do you find safety being diversified in multiple fiats?" ----------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are continuing our series on blockchain in real estate. There are dozens of articles on new blockchain startups to watch. Some are focused on crypto currency. A few are focused on real estate. Many of these companies seem to exist for the simple reason that they are a blockchain solution. When it comes to looking at any company, I always ask the same three questions. What problem is being solved that doesn’t have a good solution today? Is this a problem that people are willing to spend money to have solved? Are they willing to buy the solution from you? On today’s show we are going to look at several of the real estate blockchain startups through the lens of these three questions. ------------------- Host: Victor Menasce email: podcast@victorjm.com

Kent Ritter is based in Indianapolis, Indiana where he invests in medium sized multi-family apartment assets. This is a different take on value add investing where Kent is successfully bucking the conventional wisdom. To connect with Kent or to learn more, visit kentritter.com. ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re taking a closer look at modular construction and we’re going to be live on location at a modular construction plant. Modular construction comes in two principal methods. The first is where the manufacturer complete entire modules of the buildings. These modules are fully finished. They are fully painted, with flooring, utilities, and even the appliance fully installed and strapped in place to prevent them from shifting during transportation. Since these boxes can often be transported hundreds of miles from the factory to the final construction site, they have to be of extremely high build quality and extremely rigid so they don’t have lots of cracks in the finishes happen during transportation. The site work for these projects consists of the foundation and the rough-in of the utilities to a single connection point through a centralized utilities duct. The extra lengths of pipe and wires are all coiled up to enable the plumbers and electricians to complete the final utility connections in the basement level. The cost of modular box construction is usually on par with stick build. The savings come from the fact that the work performed in the factory environment is much more efficient from a labor standpoint. They don’t need licensed or unionized trades for the factory work, and the most expensive trades like plumbers and electricians are only needed for the final service connections. The total cost of construction involves adding together the site work with the factory construction and the much higher transportation cost for the finished boxes. These will be wide loads and will often require a carefully planned route with special permits and sometimes police escort. You will require heavy cranes on site for the final assembly of the modules. The second form of modular construction consists of panels. These panels can be flat packed on a flatbed truck on put in a shipping container. Transportation is much simpler. But understand that this form of assembly is much further from completion. You’re basically accelerating the framing portion of the construction. Everything else, the utilities rough in, mechanical systems like heating, ventilation and air conditioning all need to be installed onsite. The construction follows the usual permit process with all of the inspections happening onsite with the building inspector. There will be a foundation inspection, framing inspection, a rough-in inspection, insulation inspection and so on. The main benefit for panel construction is by saving time onsite. You get a much higher quality assembly. You don’t need very heavy equipment. Most of the onsite assembly can be done with a boom truck or even a forklift. This can be particularly important if you’re trying to build new construction in the winter months. If it’s -20 degrees outside, you can’t always count on the framing crew to be super careful with their measurements, ensuring the proper spacing of fasteners. You tend to get a bit of chain saw carpentry happening. When measurements are not accurate, then you will have gaps in the building envelope because things don’t fit together properly and the insulation of your property will be compromised. On today’s show we’re onsite with Dylan Sliter at Deka Pro Panels in Almonte Ontario. I’ll warn you in advance that we are in a very noisy factory environment with plenty of pneumatic tools firing in the background. So the audio quality is not the best. But we will be doing a small walking tour of the factory environment. ---------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking in detail at the minutes of the latest Federal Reserve board of governors meeting to try and make sense of what the guidance means for us as real estate investors and developers. ---------------- Host: Victor Menasce email: info@victorjm.com