The Real Estate Espresso Podcast

Today is another AMA episode - "Ask Me Anything". Tom Blake asks, “First things first, your podcast is fantastic. What are your two favorite creative transaction strategies that maximize the likelihood of finding a win/win outcome between you (as purchase, partner, option holder, etc.) and owner, and why?” Tom, this is a great question. If you were to take a class in creative strategies, you would find that seller financing probably tops the list of strategies that are routinely taught in the world of investing. There is no doubt that seller financing is a powerful and effective tool. But before discussing a strategy, I want to get at the root of why you would want to employ a particular strategy. Many rookie investors have not mastered the art, legalities and the science of raising capital. So they resort to seller financing because it makes the problem of raising capital and qualifying for bank financing much easier. If a creative strategy happens to save us the effort of raising capital, then great. But that’s not a major factor in our decision making. When we look to get creative it’s because we’re trying to solve a problem, specifically in the area of risk. On today's show I lead you through a thought process of how we approach creative transactions. --------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re re-playing a recording with special guest Gene Guarino. If you’ve been listening to this show for a while, you’ll know that we are developers of assisted living facilities. Gene was the founder of the residential assisted living academy which has served as a source of momentum in the development of the residential assisted living product in the marketplace. Sadly, Gene Guarino contracted Covid-19 several weeks ago and this week Gene Guarino lost the fight against that infection and is no long with us. Today’s show is a replay of an earlier interview with Gene as a tribute to him and for all that he’s done for the world of senior housing. Gene you will be missed. Here’s my conversation with Gene Guarino. ---------------- Host: Victor Menasce email: podcast@victorjm.com

On today's show I'm coming to you live, at street level, in central Rome. We're talking about how things are different here in Italy compared with the US and Canada. ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we’re answering another listener question. Emilio from El Paso Texas writes, I continue to enjoy your podcast every morning. I want to ask you if you had any references that you could share regarding how to adequately price an option to buy a piece of land. Any help would be appreciated. Emilio, this is a great question. Let’s define first what we mean by an option. An option is quite simply a contract where you the buyer have the choice to buy a property, and the seller has the obligation to sell the property to you if you exercise your option. But if you don’t exercise the option within the option period defined in the contract, the contract is cancelled. There are several ways you can structure an option in order to meet your specific needs as a buyer. Depending on the nature of the project, you may require more or less time to exercise that option. The terms that will be acceptable to both buyer and seller are a function of the amount of time you want the option to remain in effect. In a lot of cases, if that conditional period is short, in the range of a few weeks, maybe even a couple of months, you might pledge a fully refundable deposit. In that case, you are getting a completely free look. But if you’re looking for a longer time period and the seller actually wants to sell the property, then they will likely demand a higher payment in exchange for the uncertainty in the sale of the property. I often see contracts written where there is a refundable conditional period of say, 90 days. That’s a free option. You might then negotiate a few extensions into the conditional period where there could be a hard payment paid to the seller in exchange for the extension. Look at the contract from the seller’s perspective. They have to endure the uncertainty of the property not selling at all, and in the meantime, they’re barred from selling the property to anybody else who might come along with a firm offer. Most sellers are uncomfortable with that uncertainty. So if they are going to endure that uncertainty they will want to be compensated for it. As a minimum, you want to figure out what the holding cost would be for that period of time and consider offering an option consideration that would cover the holding cost. At least the seller’s holding cost goes to zero and the impact of continuing to own the property would go to zero. It all comes down to understanding the seller’s needs and negotiating a win-win deal between you. There is no one set formula. --------------- Host: Victor Menasce email: podcast@victorjm.com

Today's question comes from Chris in Florida who asks, I’m considering a property South of Houston for an industrial equipment storage facility. The address was located in the email. I have a good understanding of what that segment of the market needs, but have limited knowledge of the Houston area. Chris, this is a great question. The specific location that you’ve highlighted is not a good location in my opinion. It’s too far South West of the city and is at the edge of the urban developed area. It’s not on the way to anything. It’s about a 15 minute drive from the nearest freeway which connects Houston and Galveston. In my opinion, owners of industrial equipment will not want to add a half hour round trip to the daily movement of equipment to be that far away. The additional cost of fuel will erase any savings that might be possible with the lower cost real estate at the extreme edge of the urban boundary. It’s true that there is no zoning regulation in the Houston area. That means that you can literally build anything anywhere. But the lack of government restriction doesn’t mean that your product will be economically viable in any location.

On today’s show we’re talking about the acute shortages that have been created by the massive shift in our economy over the past year. I hope to convince you on today’s show that the price inflation we are experiencing is not temporary. ------------------ Host: Victor Menasce email: podcast@victorjm.com

Globalization has made it possible to squeeze inventories down to nothing. Just-in-time delivery means these hyper-efficient, hyper-optimized supply chains can deliver the promise of owning no inventory and still meeting customer demand. Offshoring was the name of the game. First, Japan was the manufacturing location of choice. When Japan was too expensive, companies moved production to China. When China was too expensive, production moved to the Philippines and Vietnam. All of this worked, until it didn’t. The supply chain disruptions have shown just how many links there are in that supply chain and how many opportunities exist for delay and outright breakdown. -------------------- Host: Victor Menasce email: podcast@victorjm.com

Today we are talking about the state of assisted living across the nation. The mere mention of the terms senior housing, and assisted living generates a reaction from most investors. The natural reaction is to say something like “Oh senior housing is a hot area. There’s a lot of money to be made in assisted living.” That’s the urban wisdom. Beneath the surface, the reality is more complex. In most primary markets, the entire assisted living industry had built ahead of the demand with the expectation that demographics and the aging baby boomer population would catch up and bring additional demand in the coming decade. There are not too many industries where you can increase supply a full decade ahead of demand. That can be an effective strategy for grabbing market share. It can also be a recipe for financial failure. On today's show we segment senior housing into specific vertical specialties and see which ones are working and which ones are not. 

Stacy Rossetti travels the country with her family in an RV and acquires distressed storage facilities in secondary and tertiary markets. She does it the old fashioned way, over a cup of coffee with the owners. These tired owners invariably just want out of the day to day of running a small business.  There are so many ways to invest in real estate. Lifestyle design can be at the heart of your personal investing philosophy. To connect with Stacy and to learn more visit StacyRosetti.com -------------- host: Victor Menasce email: podcast@victorjm.com

Every calendar quarter we take an entire day with the leadership team offsite to work on the business. This is an opportunity to pause and take stock of where we are and make course corrections if necessary. On today's show we're reviewing a snapshot of the past 90 days and getting input from members of the leadership team. Do you take the time to implement a culture of continuous improvement?