The Real Estate Espresso Podcast

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How Distorted The Perspective Can Become Jul 16, 2021

Show notes

When you look at demand for housing, you often hear the statement “Everyone needs a place to live “.

That’s true. But if we go back to the financial crisis and look at the counties in the US that had large numbers of foreclosures, a disproportionate number of those foreclosures were in fact on second homes.

The outsized number of foreclosures in Miami Dade county and Broward county were among the highest in the country. Maricopa county which comprises the municipalities of Phoenix, Scottsdale, Mesa, Tempe, Glendale, over 20 municipalities in all had some of the highest foreclosure rates in the country.

What distinguishes these locations is that a large proportion of these residences are in fact second homes. In moments of financial distress, people will sacrifice their second homes to protect the family homestead. That makes perfect sense. Most rational people would do the same thing.

On average, prices fell about 33% as a result of the financial crisis. But prices in Maricopa county fell an average of 56%. A disproportionate number of these properties were second homes. There was a similar phenomenon in Las Vegas and in south Florida and Orlando.

We are not accustomed to managing price volatility. In the moment, the heat of the current market conditions, the price today seems to make sense. At least it’s possible to explain why the price is what it is. But with the wisdom of hindsight, it’s easy to see how distorted the perspective can become for periods of time.

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Host: Victor Menasce

email: podcast@victorjm.com

episode # 1279

Retirement of Buildings Jul 15, 2021

Show notes

Back in the day, houses were built to last hundreds of years. My family owned a 13 century farm house in Tuscany. It is still standing. The house that my father grew up in on the island of Rhodes dates back to the time of the Knights of St John. We estimate that the house he grew up in was built in the late 1400’s. It’s hard to wrap your mind around a house that old.

If the useful lifespan of a modern building is 70 years, you can expect that many of the buildings constructed in the 1950’s will be need to be redeveloped in the near future. Some of those buildings built in the 1960’s will need major retrofits or will need to be demolished. It all depends on how the buildings have been maintained. Even some 1970’s buildings are looking pretty tired at this point.

Building obsolescence does not appear in any of the analysis that I’m seeing reported in statistics. It's almost impossible to get statistics on demolition permits. How much new product will be needed to replace existing buildings that are ready for retirement?

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Host: Victor Menasce

email: podcast@victorjm.com

A Humbling Mistake Jul 14, 2021

Show notes

On today’s show we’re talking about a mistake we made in a site plan development. It’s an opportunity to learn from our mistake.

We thought we had done everything correctly. We had designed a subdivision that we thought complied perfectly with the zoning requirements with zero variances. I can tell you that it is pretty rare to have a project of any size that has zero variances. But our goal was and still is to have zero variances. When you are complying 100% with the stated rules, then you eliminate reasons for a politician or a bureaucrat from saying no to your proposed development plan.

It happens that you sometimes get an answer to a question from a public official that can lead you down an incorrect path. I’m not blaming that public official. Maybe we misunderstood the guidance.

I actually don’t think we misunderstood. But I have to assume full responsibility for the project. I can blame them for telling me something incorrect. But it doesn’t help.

AMA - Self Storage Investing Jul 13, 2021

Show notes

Today's question is another listener question. We're talking about investing in the self storage asset class.

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Host: Victor Menasce

Email: podcast@victorjm.com

Tired Owner Syndrome Jul 12, 2021

Show notes

On today’s show we are talking about businesses with no exit plan. I’m not talking about weak businesses. I’m talking about businesses that are vibrant thriving businesses. But they are closing. No, it wasn’t because of the pandemic. It wasn’t because the business was going bankrupt. It’s because the owner wants to retire and they had no succession plan.

On today’s show we are going to take a look at two of these businesses. Both are healthy businesses. But they don’t know how to exit. In the end, they will probably just quietly close their doors if they can’t find a buyer.

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Host: Victor Menasce

Email: podcast@victorjm.com

Special Guest Danna Olivo Jul 11, 2021

Show notes

Danna Olivo is an expert at responding to requests for proposals. We're talking about the business development function within the world's major architectural, engineering and construction firms. There is a process to responding well to requests for proposals and requests for quotation, whether in the public sector or the private sector.

To learn more reach out to Danna at marketatomy.com.

Mike Morawski Jul 10, 2021

Show notes

Mike Morawski has a cautionary tale and some life lessons to share. He made some fundamental mistakes at the height of the 2007 real estate mania and paid a heavy personal price for those mistakes. Listen to today's powerful conversation. To learn more, visit mycoreintentions.com and you can download a free copy of his book "Exit Plan" at mycoreintentions.com/exitplan.

Somebody Find Me A Kitchen Jul 08, 2021

Show notes

On today’s show we’re talking about a shift that is taking place in the restaurant business. It would seem that converting a restaurant kitchen to a ghost kitchen would be a fairly easy transformation. It turns out that it’s not that simple.

I know of several chefs that are aiming to buy a commercial kitchen in order to satisfy the growing demand for their catering businesses. We're talking about how best to create a ghost kitchen. A world of opportunity exists for the enterprising real estate investor who seizes the opportunity.

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Host: Victor Menasce

email: podcast@victorjm.com

Affordable Employee Housing Jul 08, 2021

Show notes

On today’s show we’re going to focus on smaller resort towns. People want to visit the idyllic resort towns of Banff, Aspen, Vail, Sun Valley. The problem is that the most profitable real estate to develop is for the owner occupant, and the vacationer. Why would you build affordable housing that gets you $1.50 per square foot in rent when you can build a hotel room, or timeshare that rents for $2.00-$3.00 per square foot. A myopic developer will choose the higher value real estate every time. But the problem is, people won’t come and occupy those pricey ski chalet’s if there’s nobody to serve dinner at the nearby local brewpub, or stock the shelves in the local grocery store. Many of the service jobs in these small but affluent towns are going unfilled.

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host: Victor Menasce

email: podcast@victorjm.com

AMA - The Comparison Game Jul 07, 2021

Show notes

Today’s question comes from Chris in Long Island.

“I’m having a hard time getting offers accepted. I’m seeing so many people closing deals on social media. We keep getting outbid. What am I doing wrong?”

Chris this is a great question.

I can’t say that you’re doing anything wrong. The worst thing you could do is pay too much for a project simply to get the short term feeling of accomplishment that you got a deal closed. If you paid to much or bought the wrong project, that feeling of accomplishment will be terribly short lived and you will spend months or even years trying to recover from having made a poor decision.

I can guarantee you that hardly anybody is posting on social media that they cancelled a contract, or that they got outbid, or that a project got delayed because of an issue with title insurance or a lender.

People tend to post their successes only. You don’t see the majority of the projects that don’t see the light of day.

One of the most successful investors I know looks at hundreds of deals before pulling the trigger on a handful. Even then only a small percentage of those will actually close.

It’s a bit like playing the comparison game with photos in a magazine. You don’t see that the model is wearing makeup, that the photos have been modified in photoshop. That extra bit of flabby skin on the back of the arms have been slimmed down and eliminated to appear thin and toned.

The problem is that when you play the comparison game, the comparison is against a magazine cover that is not real.

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Host: Victor Menasce

Email: podcast@victorjm.com

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