The Real Estate Espresso Podcast

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Lessons From Argentina Aug 15, 2023

Show notes

On today’s show we are taking a look at what can happen when politicians print too much money. The US, Japan, Canada, the UK, and Europe, China and many others are all at risk of becoming financially unstable. Argentina has a history of being fiscally irresponsible. The country has debased the currency a lot over the past two centuries. The country has also defaulted on its debt 9 times in the modern history.

Argentina defaulted on its foreign debt in December 2001. Many analysts thought this would lead the country into a long period of stagnation and would make it a pariah in the world’s financial markets for a long period of time. Oddly this did not occur.

A sovereign debt default occurs when a country does not meet a debt payment (principal or interest), that is it fails to meet the terms of a contractual agreement.

The incentives for avoiding default are not associated with the collateral damage but with the country’s reputation. A country’s incentive to make repayments is to preserve its future access to international credit markets and international trade. If you become known as a credit risk, then your borrowing costs go up which can have an impact for decades after a default event.

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Host: Victor Menasce

email: podcast@victorjm.com

AMA - Mechanics Liens Aug 14, 2023

Show notes

Today’s question is actually two listener questions, both of whom have described very similar situations.

JR got plat approval and paid a contractor called straight edge for the horizontal development. That work consists of the road paving, and the infrastructure that is buried in the ground. Straight edge went bankrupt and never paid the paving bill. So the Paving company files liens on all lots that aren’t owned by home owners. That’s a total of building 20 lots at $6500 a lot. The total paving bill was $130,000. Fortunately JR is eating the loss and reimbursing the cost to the paving company. At the end of the day, it matters the people you’re doing business with. What should JR have done differently?

The second question comes from Mark who had a very similar situation involving a contractor whose business partner disappeared and emptied the company’s bank account. The contractor had been paid for steel and concrete work, but the subcontractors were not paid. The original contractor was forced out of business. The subcontractors wanted to be paid and put a lien on the property. Mark now faced the prospect of paying twice for the same scope of work. Not only that, but the original contractor had low bid the job in order to get the business. After interviewing several contractors to complete the construction, it was clear that the project could not be completed for anywhere near the original construction quote. How could Mark have prevented this from happening?

These are both excellent questions. The very fact that we have virtually the same question being asked twice within a relatively short time period suggests that this is a shockingly common occurrence.

Architectural Design with Susan King Aug 13, 2023

Show notes

Susan King is based in Chicago where she works with HED, a major national architectural design firm. On today's show we are talking about architecture and how it applies to design of affordable housing. To connect with Susan, visit HED.design or connect with her on LinkedIn at https://www.linkedin.com/in/susan-king-faia-leed-ap-bd-c-lfa-0057b45/

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Host: Victor Menasce

email: podcast@victorjm.com

Live From The Investor Summit 2023 Aug 12, 2023

Show notes

We hear about all of the risks in the current market environment. But we rarely hear ideas on what you can do to find opportunity in the current conditions. Today's talk was recorded at the 2023 Investor Summit.

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Host: Victor Menasce

email: podcast@victorjm.com

A Globally Synchronized Deflationary Recession Aug 11, 2023

Show notes

One of the goals of this show is to help you connect the dots on what is happening in the economy. Today’s show is not strictly about real estate. However, we have seen central banks in the US, Canada, Europe, and the UK all raising interest rates to combat inflation.

On today’s show I’m going to share some data with you that hopefully will convince you that we are already in a global downturn which will cause central bankers to flip from restrictive monetary policy to stimulative monetary policy. There is no soft landing in this story. It’s a hard landing and there is no question in my mind that we are already there.

We are talking about how the result of globalization is a global economy.

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Host: Victor Menasce

email: podcast@victorjm.com

More Banking Headwinds Are Coming Aug 10, 2023

Show notes

Last week Fitch downgraded the sovereign debt rating for the United States. And late Monday, Moody’s downgraded the ratings of several US banks. Moody’s took action on 27 banks, including downgrading the credit ratings of 10 and putting others under review or giving their ratings a negative outlook.

Many of the reasons for the actions will be familiar: Rising deposit costs and risks to commercial property and construction loans posed by the shift to remote work.

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Host: Victor Menasce

email: podcast@victorjm.com

Changing Accreditation Requirements Aug 09, 2023

Show notes

If you're currently an accredited investor, then you definitely want to pay attention because I believe that in a year from now you may not be accredited any longer. And if you are not an accredited investor, then I've got some good news for you, because there's actually a non-financial path that you can take to becoming accredited. Currently, the SEC is looking into increase in the accredited investor qualification threshold from its current $1 million net worth requirement to as high as $10 million as reported by Bloomberg.

One of the byproducts of inflation is that what once seemed like a really big number is now not so large after all. When a number is hard coded in the legislation, it will eventually become meaningless. There was a time when $1M was a really huge number. Today, it’s just a big number. So they’re going to contemplate resetting the threshold to qualify as an accredited investor.

At the same time, the SEC has already passed a rule that would allow non-accredited investors to qualify as an accredited investor. You might be able to qualify by taking an test for financial literacy.

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Host: Victor Menasce

email: podcast@victorjm.com

What Is Your Right To Water? Aug 08, 2023

Show notes

On today’s show we are talking about water. Water is one of those life sustaining commodities. Water is seemingly everywhere, and scarce at the same time. 3/4 of our planet’s surface is water. Our human bodies are about 65% water.

In many parts of the country if you don’t have municipal water supply at your property, it is often sufficient to drill a well and you will find water.

But in arid parts of the world, water can be in short supply.

Water in most commonwealth countries follows Riparian water rights which is based on British common law.

In the Western part of the United States, water follows the doctrine of prior appropriations.

All of this means that the ownership of the water is separate from the ownership of the land. Water is treated in a manner similar to mineral rights. Just like mineral rights can be separated from the land and sold. So too the water rights can be severed and sold. The office of public record for water right ownership is the county recorder’s office for the counties in which the water is diverted. Just like the county recorder maintains sequential order of priority for ownership, easements, and liens, water follows the same process.

When you buy a parcel of land, a certain amount of water is associated with the land, and this water right is recorded on title. This is usually measured in annual usage measured in acre feet along with a peak flow rate measured in CFS.

In the Western part of the US, when you purchase land and rezone it for development, you often need to surrender your water rights to the municipality in exchange for getting access to the city water supply. If your property doesn’t have enough water rights to sustain the density you are seeking, you might be forced to buy additional water in order to qualify for the density you are seeking.

Is The Fed Biased? Aug 07, 2023

Show notes

On today’s show, we are looking at a human phenomenon called bias. We would like to think that the professional, economists and decision makers in government, or making objective decisions using hard data. However, we see the exact opposite and play in numerous facets of our economy. On today’s show I’m going to give you two distinct examples from vastly different areas of government. Both of these examples have had severe economic impact with nothing more than recent events to skew the decision making process.

Biases are often clouding the human decision making process. The most common of these is something called confirmation bias, confirmation bias of the process, whereby a thesis is formed, and then the decision maker goes looking for data to support the thesis. You would think having supporting data would be a good thing. however, when the decision-maker ignores conflicting data or fails to look for conflicting data, the result is confirmation bias.

If you look at the actual data in 2019, the annual consumer price rate of increase was higher than in the most recent report in 2023.

In the face of stronger economic data, the Fed was dropping interest rates in 2019, whereby today they're increasing interest rates. When you look objectively at the data, you could argue that we should be doing the opposite.

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Host: Victor Menasce

email: podcast@victorjm.com

Property Management Affiliates with Arielle Evan Aug 06, 2023

Show notes

Arielle Evan comes to us from Israel where she is CEO of Compera. The company is focused on managing affiliate relationships for property managers and tenants across multiple domains. By offering preferred services to tenants, the landlord provides a valuable service and this can also translate into a supplementary revenue stream. To learn more or to connect with Arielle, visit Compera.io or email Arielle@compera.io

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Host: Victor Menasce

email: podcast@victorjm.com

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