The Real Estate Espresso Podcast

In his groundbreaking book "Influence: The Psychology of Persuasion," renowned social psychologist and marketing expert Robert Cialdini. He delves into the world of human behavior and unravels the secrets behind the art of persuasion. Cialdini came from the world of academia that had long resisted publishing works in the popular press instead of strictly academic publications. It was with concern about ridicule from his peers and with great hesitancy that his book was written with a broad audience in mind.  First published in 1984, this timeless classic remains relevant and influential, serving as an essential guide for anyone seeking to understand the subtle forces that drive human decision-making and influence. ------------ Host: Victor Menasce email: podcast@victorjm.com

Today’s question comes from Chris who writes.  What are your thoughts on diversification? I keep hearing about how diversification is important to mitigate risk. How would you diversify your real estate investments? I’m not even clear on what would be considered to be truly diversified versus scattered.  -------------- Host: Victor Menasce email: podcast@victorjm.com

Kenny Rose is based in Chicago Illinois where he is the principal at Franshares a company that specializes in fractionalizing share ownership in franchises across the USA. Franchises come in all shapes and sizes. They range from food and beverage, to fitness, to waste management to property management. On today's show we are looking deeper at franchising and the opportunity to own fractional shares in frachises. To connect with Kenny, visit franshares.com. ---------------- Host: Victor Menasce email: podcast@victorjm.com

Travis Godon is based in Ely Nevada where he specializes in land development for large utility scale solar farms. On today's show we are talking about the criteria that make for a suitable solar farm. To learn more or to connect with Travis, seek him out on LinkedIn at https://www.linkedin.com/in/travis-godon-b4a772ba/ ----------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a snapshot look at how one state is trying to address housing affordability.  Home pricing follows the laws of supply and demand. Sellers put their home on the market and buyers place an offer. That price might be low than asking price, higher than asking price, or at the asking price. It’s a full contact negotiation. There is nothing compelling a buyer to pay a particular price. If the buyer and seller can’t come to terms, then no deal gets done. This is the classic process of price discovery.  Some jurisdictions have been addressing affordability by applying downward pressure on landlords and developers. Those greedy landlords are to blame for the lack of affordability. I’m thinking of places like California that have imposed state level and even municipal level price controls on rental housing.  The effect of these measures is to discourage landlords from entering the market. The net result is fewer landlords, fewer rental properties and therefore higher rental rates.  The state of Utah on the other hand has been growing rapidly and has experienced net migration growth for 31 out of the last 32 years. Utah also has the highest birth rate in the nation and is one of a very states that is growing organically.  The state has also taken a very enlightened approach to encouraging new product to enter the market. The first step to encouraging growth is to remove the bureaucratic obstacles to growth.  The legislature has implemented 10 initiatives aimed at reducing bureaucracy and encouraging development. ---------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a look at interest rates. Yesterday the Federal Reserve increased the Federal Funds rate to a range between 5.25%-5.5%.  This clearly sets the stage for short term interest rates to increase. The yield on the 10 year treasury decreased from 3.91% to 3.86% following the Fed announcement.  The yield on the 30 day Tbill is currently 5.46%. This is matching the Fed funds rate.  Back in October of 2022 the 30 day T-Bill yield was ranging between 2.85% and 3.75% as the Fed was aggressively increasing rates during that period. The yield on the 10 year Treasury at that time was 4.25%. The interest rate that most investor care about is linked to the yield on the 10 year Treasury.  Today we have an interest rate inversion where the market is clearly signalling to the Fed that they don’t believe them.  The real question is what’s next?  We are seeing deflationary prices. We have a globally synchronized  economic cycle.  The Fed says it is raising rates, and the European Central Bank says it is raising rates. But as we have discussed on this show before, we have not seen a dramatic rise in bond rates over the past 8-9 months. Since most long term lending is indexed to the yield on the 10-year or the 30 year bond, these numbers have hardly moved since October.  If you listen to the rhetoric from the Fed Chairman, you would think they have tremendous influence over the market.  The market sets the rates, not the Fed Open Market Committee.  In Europe, we are seeing demand for credit falling. This is not being driven by rate increases. The reason we know that is that rates have hardly increased. So that cannot be the reason. Businesses are not going to stop borrowing money for a couple of percentage points if they have things to do that will drive business growth. We went from 0% to 2% in Europe. That’s not enough to choke off business activity. There must be another explanation.  These are deflation and recessionary markers that are consistent with an economic cycle.  Rates rise when there is a competition for money. Rates fall when there is a lack of demand for money. When we talk about money markets, this is an accurate term in the true sense of the word “market”. Just like the price of tomatoes or gold or oil, if demand goes up and exceeds supply, the price goes up. If demand falls, then prices fall. It’s the same thing with money. If demand for money goes up, then interest rates rise. Regardless what the Fed says about rates, we see supply and demand forces are dominating the cost of money over the longer term. 

On today’s show we are not talking about real estate, but instead about a major shift that is taking place in society.  We have an unstated assumption in our world that more is better. We want more money, a bigger house, a faster car, a bigger boat.  As investors we want more units, more mobile home parks, a higher rate of return, a longer vacation.  Marketers want more content, more more more. We are literally carpet bombing people with advertising.  To what end?  That is the same impetus that drove fossil fuel extraction. It is the same impetus that drove the building of entire cities in China that remain empty with no inhabitants. It is the same impetus that created the Netflix library with more streaming content than you could ever watch in your lifetime. We are mechanizing art. We won’t have the time to absorb it all.  We are going to need AI to summarize the crap created by AI for us. ------------- Host: Victor Menasce email: podcast@victorjm.com

Tenants can hardly be blamed for being confused. Many have never owned a home and they have no idea what it costs to own and maintain a property.  With the rise in interest rates, home affordability has become even more expensive. Inflation has affected many of the maintenance and repair costs. Air conditioners have gone up between 15%-25% in the past year. If your air conditioner fails, you will feel the pinch. That means your replacement budget just took a substantial hit as well.  ----------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking at a fundamental economic concept, called the law of supply and demand. I have been a huge believer in the law of supply and demand as one of those fundamentals that must be respected. I treat it like a law of physics similar to gravity.You can try to bend the laws of physics, but gravity will usually win that battle. Suppliers, often struggle with assessing demand, simply based on customer orders. One of the largest contributors to that confusion is the buffering of demand and supply chain inventories. The larger the buffer, the larger, the potential for confusion. Over the past several decades, businesses all over the world, have aimed to reduce inventories, in order to reduce the cost of carrying that inventory. it takes a lot of working capital to carry inventory on a large scale. The law of supply and demand is fundamentally rooted in the distinction between demand and utilization. I am making the distinction between demand and utilization. They are different. 

Shawn Moore is based in Park City Utah where he specializes in short term rentals. On today's show we are talking about the state of the short term rental market and how it is changing and "growing up". To learn more or to connect with Shawn, visit https://vodyssey.com -------------- Host: Victor Menasce email: podcast@victorjm.com