June 2020 Market Update Investor – Investor Letter #14

Share on facebook
Share on twitter
Share on linkedin
Share on email

0:00
The reason why I do these things is you know maybe you guys hear an idea or something and you guys can implement it in your own life.

0:08
This is

0:08
a story about a dude named Lane he moved to the mainland and bought one place to stay. And then one day he went try to rent them out. And then he became one we live that’s still me.

0:23
All right, welcome everybody. It is June 2020. This is the monthly market update. You guys can find us videos and reports at simple passive cash flow calm slash investor letter. For those of you guys for a little Thank you for coming. You guys can download the easter egg of the month, which is the net worth tracker sheet that I created just recently. In downloaded this at simple passive cash flow.com slash legacy and what this cool spreadsheet is you pretty much Put in your you know how much money you have now what your interest rate is assume that you know of your investments, if you’re in the stocks and stuff like that, I don’t know why you’d want to do that. You put in like 7%. And then you also put in how much money you’re saving every year. Most people in our community are, are probably assuming 30 to $50,000. You put in your age you put in your year, and then it shows you a few different scenarios. There’s a bunch of tabs in here, or it shows you growing at 510 15% and shows you how quickly your net worth grows kind of fun sheet because again, you can get that it’s passive cash flow calm slash legacy. A lot of news today we’re going to cover if you guys haven’t, please check out the YouTube channel. We do a weekly podcast it’s simple passive cash flow found on iTunes and Google Play something start off for fun since I don’t know about you guys, but I’m kind of tired of all the politics. So, you know, do we stay close, we open up the economy, got a little fun thing here, everyone’s been stuck at home. And here’s a little diagram of what each state is watching for the most part. So we got a lot of Trekkies up in the northwest, California watches friends, Texas watches friend thought of friends in here, kind of something fun to kind of break the ice here as we get into more of the news. And we’re gonna start with a few teaching points. So this first graphic here we’re showing and for those who are listening on the podcast, we have this on the YouTube channel also too, you can see the graphics and slides. But you know, people are always asking, you know, where’s the residential market going? Is the price is going to go up or down. So what they did here is they overlaid in blue, the great financial crisis of 2008 what happened and the orange line here is what is happening. name now, with I guess they’re calling it the great lockout or the great, you know, locked up at home and demo. So these lines are showing the supply that out that is out on the market. So I guess what happens in the last, you know, few months is, you know, if you are an agent or you’re a home seller, what you probably did is you probably pulled it off the market, so that when we are starting to open up right now you can put it back up there. Or if you were on the verge of releasing the listing, you probably held it back. So I mean, we’re probably at on 100 months average of supply in June, and that dropped all the way to under 20% of that. And that was a sharp contrast to in the great financial crisis. It kind of stepped its way down. So what they’re saying is because there isn’t much supply, purchaser demand is still there, but we can save From that, as you know, maybe the price will probably level out and the balance between sellers and buyers will be the same. So moving on to interest rates, here’s kind of where we’ve been with the Fed funds rate in red. We’re currently at zero percent as of a few months. But that doesn’t necessarily mean that your guy’s interest rates and our interest rates in our big commercial deals are going to come down to you can see the the Fed Funds rates and prime rates, they’re correlated, but the five year arms, they’re your mortgages, they’re coming down slightly. I don’t have a crystal ball, but I hear a lot of people are kind of refinancing and I never never trust those loan brokers. They’re always geeky fellows trying to get you guys to refinance every every day. Seems like I would maybe if I was doing it, I would probably wait maybe three to three to six months because they just drop these Fed Funds rates a couple of months ago and I think where the interest rates are I think it’s still going to kind of follow it down even more. For those of you guys who have rental properties, I did a little bit video on loan forbearance options, it actually was pretty easy. I didn’t really need to do this, but I just kind of wanted to see how easy it was. So I just, you know, I clicked on the links, and I kind of follow that and I did a little screen share of me applying for for parents. And so you can check out the video at simple passive cash flow, calm slash for parents. So what this is, is just kind of delaying your payments, you still gotta pay, you gotta have a big chunk, when this thing runs out. I think mine’s I set it for three months, which is no problem I got in the bank. So it’ll just pull three months from now, but um, you know, some people are saying like, what’s going to tank your credit, and I don’t think it really, I’d like to see an experiment of you know, how much it really impacts it if you’re kind of hurting for cash to kind of see a flow. You know, a lot of my dentists investors are kind of like that, you know, maybe something like this maybe exactly what you need. We’re going to get through some of the news here. I’m starting up with some headlines from CVR he kind of summarize exactly what’s been happening 2 million jobs loss unemployment rate for gene point seven. Not fun stuff, but you know we need dig into here. Some of the interesting points are approximately 78% of the total unemployed will report us furloughed or temporary, indicating many of these jobs could return once the economy fully recovers. That’s good news. unprecedent impact and COVID-19 has pushed the unemployment rate to a post war high but later on in the week Seabury also released this demon You know, they’re they’re expecting a rebound expected in q3 after record drop in employment. Real Estate recovery should follow up beginning in 2021. Of course, as an investor, you’re always buying individual deals and each individual deal doesn’t necessarily track the overall market. It’s nice to have the trade winds of a bull market behind you, you know, for the most part, it’s nice to see that The macro economy is looking to be pretty good. Second half this year and beyond. Here’s this little summary of what’s been happening. You know, I think this kind of goes without being said but nice little graph outlining the percentage of population understates with stay at home orders were pretty much all 85 and above percent, were under lockdown April 22. And then April 29. May 6 is when things start to open up. And then end of May was kind of a threshold where things started to open up to about 30%. And that kind of brings us today where we’re kind of slowing one by one slowly opening first headline here us housing markets vulnerable to Coronavirus impact clustered in the north east and Florida. This is from Adam data. So they’re looking at markets like New Jersey and Florida having 24 of the 50 most vulnerable counties. They named a few of these and New York suburban areas virgin Essex middle six union counties. The 10 counties in Florida are concentrated in the northern and central sections of the state include Pfleger Lake play Hernando, and all Sorento counties, other southern states that include the top 50. These are spread across Delaware, Maryland, North Carolina, South Carolina, Louisiana and Virginia but mostly in New Jersey and Florida. Multi housing news reports that common launches workforce housing brand, so common is a company that they they’re now entering the workforce housing space, something that a lot of us investors enjoy, because there’s a sort of a housing shortage with housing, good, good value based housing for regular people, which we call workforce housing, or maybe B and C class assets. So a thing through this whole COVID-19 pandemic mean you’re seeing office space getting killed. needs like shopping mall or retail storefront getting killed other than shopping malls of course are not shopping mall shopping malls are getting killed, but other than grocery stores, a lot of asset classes are just getting annihilated whereas the workforce housing You know, a lot of our collections have been pretty strong through this and kind of riding this, this wave and you know, valuations aren’t really dropping. So you’re seeing a lot of the bigger players kind of jumping ship from their original model and coming into work first housing, which kind of says something. Another trend here so popular popularity of shirt search term home for rent by metro area, a lot of these were in the Georgia’s and Tennessee’s and Alabama, South Carolina.

9:49
So a few of the movers in terms of you know, they weren’t that popular in terms of search rank, and now that they are popular on the Delta in rank are men conto Minnesota auto Missouri Lubbock, Texas turn pros are Arkansas. Just a lot of blue collar cities on this list are a business online reports a whole bunch of death in the retail space. I am sorry if you’re saddened by the loss of these great companies such as JC Penney filed for Chapter 11 they are going to be doing some debt restructuring. Neiman Marcus files chapter 11, Lord and Taylor, I guess they’re all kind of old school department store and Tuesday morning files for chapter 11. Also closing plans to close two to three of their stores. For those of you dudes out there who don’t care about those brands. Well, you might care about Gold’s Gym filing for chapter 11 bankruptcy also, for me closing 30 centers. I think that’s been this has been the trend even in Good market you need to see a lot of these these retailers like for forever 21. close down. But you know, with the COVID-19 you’re you’re seeing a lot of these guys accelerate these, the slow death. So this map here outlines the percent of adults in households or someone had a loss in employment income since March 13. Some of the losers are a lot of the coastal states, a lot of Washington, Oregon, Nevada, California, Hawaii. Other than that, a lot of the plains states were less impacted, but still everybody’s feeling the pain at between 30 to 60%, where someone had a loss in employment income, john burns consulting, great source for really cool data did a study and they had four big takeaways. Though on the new home side they send New Home Builders should capture the pent up demand for apartment dwellers, homebuyers moving to cities families wanting more space and residents relocating to jobs. You know, I think people being cooped up in their little apartments are probably realizing it’s nicer to have a bigger space. But I argue as the apartment investor myself, all right, well, everybody wants a bigger place to live but when you got to pony up and pay the the mortgage and come up with a down payment, let’s see who actually can actually make that happen. Actually, we’re seeing a lot of demand for mobile home parks, applications have kind of gone up. So the apartment people are kind of going to the mobile home parks or potentially its people having trouble paying their mortgage and their their homes. Going to the mobile home park space. Because Malone parks are a little bit more independent living you’re not sharing walls with your your fellow neighbors from the apartment front apartment. renters may move closer to jobs and we’re cities, to cities where businesses are hiring. They suddenly double down in larger units, while others look for efficient spaces at lower absolute rents. I think the big trend that I’ve been hearing is, you know, like a lot of very expensive cities like San Francisco where you do have that there’s just too many people. It’s hard to self isolate in a big, dense area like New York or San Francisco, people are realizing that they don’t need to be there, especially with all the remote working. Those single family home rentals there are seen single family rentals allow financial flexibility with privacy with enhanced social distancing opportunities. Many will be renters by choice and will pay a premium to live in a dedicated community with other renters and community amenities point here on the commercial. Real Estate front. Retail stores will remain open in the best locations and expect accelerated sub urban malls of redevelopment with some new housing. Some office some markets will need more space and Bran branded hotels with strict cleaning standards may benefit from business travel. They’re basically saying the the retail storefronts in the bad locations are going to suffer. Yeah, this whole COVID-19 is trimming the fat. Those weak and not positioned well are going to get cut. Multi housing news reports that the Coronavirus dents multifamily development, new supply expectations fall this year. And of course due to all that happening, but future construction impact hinges on the downturns vary in length. This is something I’ve been following. And you know, this development space is interesting to me. There’s still a strong demand for demographics for these new builds. And they’re saying that normally or there was expected to be about 300,000 units coming online by the end of 2020. And that will likely be reduced to 250,000 So I think that’s about 20% decrease, I think if I do my math, right, so, you know, if you’re able to push through the project and get it to build, I mean less competition out there. So let’s talk about red collections here. The month of May looks like the average was about 93.3%. This is a 1.5 percentage point decrease from the previous one. So I mean, I’m on our portfolio of, you know, about 3000 or so units. Yeah, normally, we’re around 97% you know, collections years and a half a, you know, a few people out of 100 just be a deadbeat. And worse, that’s where you have to go through the process to evict and go through the collections but the 90% sort of baseline thing for April and May we some we saw something similar, you know, drop a few percent points in April and then dropped another few percent points in May. So You know, I think we’re seeing the impact from COVID-19. But this is exactly why you invest in workforce housing and rentals because at the end of the day people are making the choice to, to stay in their homes and quit with shelter over their head. Are you a non accredited investor looking for opportunities to invest passively? How about a newer investor looking to get a bit of a track record and confidence from your spouse he’s a little bit skeptic of what you’ve been listened to the last few months and could use the reinforcement of double digit returns paid like clockwork in the form of monthly dividends. The American Home preservation fund or HP is currently open again and it’s looking to bring new investors with them. I have been investing with them since 2016. And originally I use it as a means to pay for my regular expenses. I started with $60,000 as my initial investment and that paid my car payment completely for me every single month. He collaborates with existing homeowners to keep them in their homes forever. restructuring or selling the depths. Unlike their competitors, it’s a way to make great returns while feeling good about making a social impact. After investing myself in the fun, it was awesome when owner George Newberry saw the impact simple passive cash flow was making and eventually approached me to become a spokesperson for the company, you can start investing with as little as hundred bucks. And if you want a fee birdsong book, please send me an email at Lane at simple passive cash flow calm. For more information about investing with hp, go to HP servicing.com slash investors.

17:37
Like I think the one the one takeaway, or the one lesson learned I have coming out of this whole COVID-19 experience is that the cahsee assets that we have are the ones that have the biggest collection issues. And it makes sense, right because these lower earning workers are the ones who are going to typically get cut. The most we’ve got one property though, you know, classy, but it’s near like a grocery store and the grocery store was looking for new workers because they increased demand. So that was a nice little win there. But you know, that’s that’s an individual case and you know, a lot of what we talked about here and these monthly reports or macro concepts, but you know, you investors out there supposed to find those diamonds in the rough that kind of bucked the trend, or hopefully take advantage of the trend. And I was kind of talking about that national real estate investor had an article on the outlook for classy apartments is mud muddied by tenants loss of income. So, here given the industries hit hardest in recent job cuts include the hospitality and retail sectors. loss of income has been especially prevalent in the classy property renter base. That’s especially problematic when few of those households have any financial cushion to fall back on. So why are the collections the hardest? Well, a lot of these guys, they don’t have like thousand dollars or more in savings. So once they kind of dip into that they’re, they’re screwed. And now there’s just a hard place. So a little bit of good news and you know, a few months of predominantly bad news. Um, but then that’s how you look at it, right? Like there’s opportunity coming, of course, and another bull market coming. The shopping center business as Papa John’s, the pizza company reports, May as best salesman in restaurant history. Apparently, people want their pizza and they’re stuck at home. So that’s the monthly news for June. The remainder of the presentation is mostly going to be surrounded up what I’ve been kind of personally up to and some of the takeaways that I’ve been having. If you guys would like to put in some questions, now is the time to do that. And we’ll catch you up there at the end. But let me get situated here and we’ll get started with my. So I kind of break up what I’m up to and six big categories. So the first one is, you know, growth. How did I challenge myself and grow? Well, we haven’t got the pretty much got the official word but close a 140 unit apartment complex in Lake Dallas, Texas. And I’m pretty happy because it’s the first HUD loan that we’ve done. So these hundred loans. We’ll do a future podcasts on this. But hormones are the gold standard of agency financing. They are better than Fannie Mae, Freddie Mac debt in terms of amortization, you can get up to 40 years amortization and the interest rate is lower than what you’ll get on a Fannie Mae Freddie Mac. The only problem with these things it takes like forever to get approved whereas a Fannie Mae Freddie Mac loan On apartment, it’ll take like a month or two to originate or these guys will take like four to six months. So we’re going to kind of working on this since I believe October is when I first went out to Dallas to go check this one out. Yep. Finally, great A cos asset and a minus kind of area in these are the great things to just kind of convert your cash to as these are commodity plays right with the stimulus money creating seemingly infinite amounts of fake money and debt, the government’s going to inflate the money supply so owning properties like this is the way to go as they just inflate the debts and then you know, hopefully your your properties will inflate in value with market appreciation. We don’t count on market appreciation. We won’t count on the force appreciation that we do the other value add and rehab of units but that’s icing on top of the cake that appreciation number two here contribution How do I leave a The world a little bit better than I found it. So we are looking to roll out the turnkey remote renter ecourse to be completed next month. We currently have a mastermind for accredited investors that you guys can learn more about at simple passive cash flow calm slash journey is filled with mostly accredited investors. And something that I’ve been I’ve been seeing in the past year is that there are some investors in there, they’re still trying to pick up their first rental property. And they need a little bit more hands on and they think there’s a lot of other guys out there that they need the Rolodex and they need to know who they’re working with in terms of property managers, brokers, and that’s something that we can supply along with the BI weekly handholding and do it in a cost efficient manner where, you know, I’ve always been against people paying, you know, 10 2030 $40,000 for a bunch of videos and some weak, you know, phone calls from some guy who didn’t even own real estate Before that works for one of these large education companies. So we are working to bring this out to you guys it’s going to be more of a boot camp style six, five, I think five months is kind of what we’re targeting. It’s an intensive period where you guys get our we’re going to kind of hold your hand to buy your first remote investment. You know, a lot of you guys live in California or primary market but you know, buying a property in Oklahoma, Alabama, Kansas City, Annapolis is very daunting, especially if you don’t know who to work with. So be on the lookout for that if you guys are interested in joining the beta group, shoot me an email at Lane at simple passive cash flow get more details. Number three significance here. I just racked up all the numbers here lately, our we deal pipeline club has acquired over $215 million of real estate syndicating over $30 million from you guys. Wow. That’s a lot of money. We have 20 apartment buildings, seven manufactured home developments and assisted living facility. That’s Just got started under construction, even though it’s a little wet out there, it’s kind of slowing construction a little bit 3200 units over nine US markets Alabama, Georgia, Oklahoma, Louisiana, Iowa, Texas, Missouri, Mississippi and Ohio. So, yeah, so some pressing numbers and that’s the enemy today. So number four here, how did I create uncertainty in my life. So sometimes I have to fight to kind of look for this, especially when I’m stuck at home. So I’ve been kind of learning about a new world of development with you know, this is I came from the world of, you know, being a civil engineer, as a project manager. You know, my role would be to bring on architects, promoters, engineers, and bring on construction management to go and build a project with a contractor or builder. I’m kind of learned learning this space in from a more of a non institutional type of money when I mean that instead of me being an owner for like, Government agency or big company, where there’s like all this type of bureaucracy and like, you know, I mean, for those of you guys who you know, a lot of professionals into this job, so we all deal with contractors, but you know, it’s so annoying when you have to decide you have three candidates, you have to build this silly matrix unlike and quantify, which was better based on some kind of silly rubric that you decided on beforehand. And, you know, I know how you guys all do it, I kind of do it too, right? You kind of disqualify certain vendors because they’re not exactly what you want. But it’s hard because on paper, it looks like the same but you know, who is the best value, the best vendor to work with? And what’s nice when I’m the kind of the developer, I don’t have to deal with any of that nonsense. I can just pick what what what is the best value for the owner and for you know, us so it’s been liberating and I think that’s what really upset me and you Very jaded about working for a private company is that a lot of those, those really pain in the butt type of activities are gone now. And we can actually just get the business and roll up our sleeves and get get stuff done a lot of the same concepts again, and that’s why it’s yearly yearly familiar, like engineering and permits. I did a lot of horizontal construction which is different than vertical but you know, it’s essentially the same thing. Just some some nuances are different. How do I get certainty in my life like got my money on that dang tsp program for those of you guys that’s like the government 401k just clicked a few buttons. I had to have them send me my tsp number like four times in the mail which took forever but I finally got my money out. And I officially am 100% out of a paper asset. So got that money getting that money working boss is a loving connection. And the reason why I do these things is You know, maybe you guys hear an idea or something and you guys kind of implemented in your own life, but I made it a goal to connect with all 350 of my investors in my deals at least once a year, you know, touch base, you know, I want to know everybody kind of personally and know who I’m working with. So I spent the last couple months I think a lot of you guys have, we’ve kind of touched base and reconnected. But I want to kind of carry this forward and make it a goal of mine to kind of keep doing this throughout the year even though we’re not stuck at home under pandemic conditions. Those of you guys who haven’t checked out the website or the YouTube channel lately, check out the article on legacy some of my thoughts there on some trust ideas and building a nonprofit axis that it’s simple passive cash flow, calm slash legacy. The trade line on guide and ecourse is up. It’s a simple side, hustle and high made To over 10 Grand 10 grand a year great for you guys who are not quite accredited and you know, struggling to save up 2030 grand a year you know and could use an extra $10,000 to go to investments and try out some trade lining. You can check that out simple passive cash flow calm slash trade lines. And there’s also a another hack with that to build your FICO score, I think you can boost your your score pretty easy by 25 points. So a lot of you guys looking to buy your own rental property 680 is kind of the magic score that you need to get to get the highest interest rate. So if you’re close, you know, maybe maybe you should go authorized user on your mom’s or sisters or your buddy’s credit card and that might get it for you. You can check that out simple passive cash flow calm slash cycle and you know all the stuff we talked about here is just information right until you’re professionals. We are this information and entertainment, podcasts and YouTube channel here. Episode 200 was released a few weeks ago and I read my story simple passive cash flow calm slash story, you guys can read that or listen to it there on a past podcasts. And then I’ve been adding to our mindset guy, which is that simple passive cash flow calm slash mindset. So if you ever kind of get stuck or you need some tips, go and check that out there. I discussed earlier my video on how to get a forbearance. Check that out simple passive cash flow calm slash forbearance and the last entry that we made this month, the simple passive cash flow library was the second part of the David mcaveeney interview. We talked about, you know, who’s going to win the election. Of course, this was pre COVID was when we recorded this. And things really changed after that, but you know, a lot of the same. Now that we’re kind of getting reopened. It’s kind of like I don’t know if we can officially say this until six months a year from now, but it does seem like this whole COVID thing. Was is a black swan event that in terms of the economy, of course, there’s a lot of people unemployed, but it seems to me that things will kind of bounce back certainly next year. So some barriers distraction noise that I’ve had to deal with is, you know, unfortunately we had to delay distributions on a lot of the deals and due to COVID-19 because it just wasn’t prudent for us to pay out money when we just in unprecedented pandemic times, you know, but um, you know, as of yesterday, we press and just press go on for projects to just cut loose distributions because we’re kind of seeing how this June collections are coming in and kind of in within expectations, so we feel that April collections may collections was kind of a kind of knocking on wood there and then June was kind of the last of it. And I think we’re kind of coming out of this thing. First. Knock on wood one more time. Hopefully, we don’t see any kind of resurgence. Um, but you know, if we did see a resurgence, I wouldn’t be surprised if we see a stimulus number four that really helps more passive investors like us because the first three stimulus package didn’t really help us, passive investors out. And I’m sure those in power are really trying to slip that thing in there. One little weakness or hint of a second wave, I think they’re going to get everybody up in a frenzy and make a push to put in another 700 page stimulus package. And hopefully there’s some goodies in there for us. Those of us who buy real assets, some doodads, I’ve been buying Well, I’ve been running up a lot of air conditioner. It’s been hot here at home and I am tired of fighting and saving money and being hot and being grumpy and unproductive. So I just said, screw it. I’m just going to pay for air conditioning and pay the electricity. Because you guys are wondering like I think my electricity bill here in Hawaii. You got to understand that we have like single firewalls and horrible insulation but I think we pay like 200 bucks a month. I don’t know how it is in other places but we hardly pay anything in the in the wintertime when it’s cold for us. We have no heat. Those of you guys who would like to join our book club can check out simple passive cash flow calm slash lane hack. The lesson learned for me this month is you know, I’ve been really relying on my coach, personal coach, they helped me out with keeping me accountable and I’ve been I have these like sticky notes here and I write little messages to myself and I keep myself accountable. And lately what I’ve had to do is a type of what I did that day and I send it to all men, I don’t know if they read it but it certainly keeps me accountable and keeps me checking in on kind of making progress you know, and not saying you have to pay for a coach or anything but if you got a buddy accountability buddy that really helps you maybe they shoot you what they did the last couple of days and you just reciprocate and that is the end of this month’s press. And again here is the legal disclaimer we’re just giving informational and entertainment advice hopefully we can get out and I can meet you guys again I’m looking to do a trip out to Cleveland and Huntsville later on this month so if you guys would like to join me shoot me an email Lane at simple passive cash flow and maybe we can sync up I would love to you know show you what we do and you know just watch the properties with us you know have some dinner after check out more events at super passive cash flow calm slash events and if you’re new to real estate investing go to simple passive cash flow calm slash start and thanks for you don’t have any questions. We will see you guys next month. Aloha

33:49
this website offers very general information concerning real estate for investment purposes every investor situation is unique always seek the services of licensed third party appraisers inspectors to verify the Evaluating condition of any property you intend to purchase, use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here. Information is not guaranteed as an every investment there is risk. The content found here is just my opinion and things change and I reserve the right to change my mind. Above all else, do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best interests.

Close Menu

Free resources!

1) Turnkey & Syndication Guides

2) Networking Opportunities

3) NEW Trial of eCourse

Join our Community? 

Free 15 minute
Strategy Call

*No sales pitch. Period.