The Real Estate Espresso Podcast

Latest Episodes:

The Broken Phillips Curve Mar 09, 2023

Show notes

On today’s show we are talking about the fallout of Chairman Powell’s testimony to the House Financial Services Committee on Wednesday and the corresponding Senate committee on Tuesday.

In his remarks, he reiterated that the Fed sees raising rates further in response to the unexpectedly strong employment, GDP and inflation numbers.

On Tuesday, he said the central bank would consider raising the federal funds rate by a half-percentage-point later this month, leading investors to anticipate the larger rate rise.

All of this analysis is based on the famous Phillips Curve that forms the basis of so much of Fed policy. Every time the Phillips curve is shown to have fundamental flaws, they tweak the model to try and take some new factor into account. But the same fundamental flaws exist. The basic premise that a tight labor market automatically puts too much negotiating power in the hands of employees is at the core of the financial model. But if we go back through history there is example after example where a tight labor market did not result in inflation. The conclusions drawn by Fed officials using the Phillips curve each and every time has been shown to be incorrect.

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Host: Victor Menasce

email: podcast@victorjm.com

Security of Supply Mar 08, 2023

Show notes

On today’s show we are looking at where companies are making major investments. This is happening at time when economic uncertainty and higher cost of capital would suggest that it is not a great time to make major investments in new plant or equipment.

There are two main drivers for investment in new manufacturing in today’s environment.

Expansion of capacity for new and emerging technologies
Global Security of Supply

In my opinion, these two reasons driving investment in new manufacturing.

On today’s show we are going to look at six new factories planned in the United States to see why these factories are being built.

The Economic Model Is Broken Mar 07, 2023

Show notes

On today’s show we are talking about the theory behind economic cycles and how the theory completely fails to take into account the reality of our world.

If you want to learn more about projects that we have underway at Y Street Capital, visit https://ystreetcapital.com/investors/

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Host: Victor Menasce

email: podcast@victorjm.com

Are Black Markets Disrupting Forecasts Mar 06, 2023

Show notes

On today’s show we’re looking at the impact of black markets on the quality of data in today’s data rich environment.

In particular, we are going to be looking at energy and trying to make sense out of numbers that just don’t add up.

We have experienced one year since the start of the war in the Ukraine. At the start of the war oil prices shot through the roof as energy supply chains around the world were disrupted. Part of the increase in price was caused by fear that economic sanctions would mean oil shortages. Now One year later oil prices have reverted to levels that reflect a new stability. Western governments have imposed supposedly crippling sanctions on the Russian government. They have imposed a price cap on exports of Russian oil. Yet it seems that the crisis of oil supply in Europe has failed to materialize. The shortage of oil was temporary.

The fact is Russia has been able to avoid sanctions on a very large scale by effectively laundering oil in many places around the world. Many countries with excess refining capacity have been purchasing oil from Russia, and then reselling refined products to those very same markets that were previously refusing to purchase Russian oil. there is no shortage at the gas pumps in Europe one of the consequences of this massive black market in oil is a degradation in the quality of the data. If you track the number of barrels of refined product and compare them to the official numbers for crude oil imports, it is obvious that the numbers do not add up.

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Host: Victor Menasce

email: podcast@victorjm.com

Neal Bawa Mar 05, 2023

Show notes

Neal Bawa is based in Silicon Valley and he invests in multi-family apartments mainly in Texas. On today's show we are talking about the market conditions and the impact of loan interest rates and terms on multi-family projects. To connect with Neal, visit multifamilyu.com. He hosts live webinars on a wide range of topics every two weeks.

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Host: Victor Menasce

email: podcast@victorjm.com

Brent Bowers Mar 04, 2023

Show notes

Brent Bowers is based in Vero Beach Florida. Formerly from Colorado Springs, he now invests in land nation wide. On today's show we are talking about land investment strategy.

To learn more or to connect with Brent you can find him as Brent L Bowers on TicTok or at his company https://www.thelandsharks.com/

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Host: Victor Menasce

email: podcast@victorjm.com

AMA - Triple Pain Mar 03, 2023

Show notes

Today's question comes from Zoe who asks:

I purchased my first investment property, a mix-use triplex (commercial main floor and two 2bed/1bath residential above) downtown Hamilton on October 1, 2021 - At the time, we paid $1,100,000, put 25% down, and started a $825,000 mortgage at 2% for 1 year fixed rate.

Prior to closing, my lawyer hadn't received the zoning verification back from the City in time for the requisition date. He told me, the zoning should be fine for the barber, they've been there for 2 years. He didn't advise me to ask for an extension, or to not move forward without having the verification. After closing, the verification came back, indicating that indeed, personal services were not allowed due to the number of residential units in the building (less than three). We figured, since the barber was already in place, and had just renewed her lease, that we would cross our fingers and hope for the best, not sure what else to do.

Initially we were generating $1200 a month in positive cash flow.

In February of 2022, the barber in our commercial unit stopped paying. We ultimately evicted the barber.

We put the unit up for lease, however, due to the zoning, we could only advertise for office space, which during the pandemic was not in demand and rents were extremely depressed and they continue to be depressed even to this day.

An idea to convert the commercial unit to a 2 bed/2bath residential unit was investigated, and it seemed like a value add option to increase rents and value of the property. There would be a tax consequence to the change of use, but

In October 2022, the mortgage renewed. We thought we were pivoting to a residential loan once the project was completed, so we did not take a lower fixed rate option. The open variable rate increased the rate to 8.2% and we are now experiencing extremely high negative cash flow.

Now, 6 months later, at the end of February 2023, the permit for the residential conversion is finally in hand, New quotes for the conversion are now double the original quote.

At this time, my question to you is: What do you recommend in this situation?

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Host: Victor Menasce

email: podcast@victorjm.com

Canada's Housing Crisis Mar 02, 2023

Show notes

On today’s show we are looking at an absolute housing crisis in Canada. For many people this translates into a crisis of pricing. But in truth, this is rapidly emerging as a crisis of availability at any cost.

Canada is a relatively small country in terms of population of 38.6M. That’s up from 37.7M in 2020.

You might be wondering, how can that be? Most mature western economies are experiencing an aging population, declining birth rates, and people are starting families later in life than ever before.

The fertility rate in Canada dropped to 1.53, the lowest on record. That’s down from an average of 1.59 for the period from 2015-2020. In 1970, Canada’s fertility rate was 2.61 and has been dropping steadily ever since.

What is fueling all that demand for housing? That’s what we are going to look at today and discuss what the data is telling us, and where the data is actually misleading.

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Host: Victor Menasce

email: podcast@victorjm.com

Book of the Month - Daily Rituals by Mason Currey Mar 01, 2023

Show notes

Our book this month is definitely worthy of the book of the month. Our book is Daily Rituals: How Artists Work by Mason Currey. I was put onto this book by Tim Ferris who has been recommending it for some time.

Daily Rituals is a fascinating book by Mason Currey that delves into the daily habits and routines of some of the most creative minds in history. From writers and painters to composers and scientists, the book provides a captivating look at how these artists structured their lives to maximize their creativity and productivity.

If you are involved in a creative endeavor in your work, you are an artist. The author has compiled a wealth of information on the daily habits of creative geniuses, providing a unique perspective on how they managed to accomplish so much in their lives.

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Host: Victor Menasce

email: podcast@victorjm.com

Single Family Slowdown Feb 28, 2023

Show notes

It’s no secret that home buyer activity has shrunk significantly over the past year. But which parts of the market have cooled the most?

On today’s show we’re taking a look at which segments have cooled the fasted.

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Host: Victor Menasce

email: podcast@victorjm.com