Oct 2020 Monthly Market Update

They you and try to rent them out and then became one. All right, everybody, this is October 2020. Monthly market update, you guys can find pass reports at simple passive cash flow calm slash investor letter. But let’s get going here, we always start off with a little bit of a free easter egg giveaway. And this month, we’ve actually got two of them. So I created a version of the Miracle Morning for real estate investors, which you guys can go and it’s quick PDF download, change your mornings and achieve your goals. It’s a quick read. To get this email me at Lane at simple passive cash flow calm. And also, you guys can get a downloadable return on equity tracker. So this is what I talk about a lot as one of the most common mistakes real estate investors make where they buy and they never sell. Well, I’m not saying you should sell but you definitely should be either doing a refinance or a HELOC, at least to be pruning that equity off. Because Have you seen it with turnkey rentals, you can make 30% pretty easily your first year, but that eventually tails off as you are your property gets more and more paid off your appreciated property appreciates. The money you make sort of stays the same rents typically increase a little bit but they generally stay the same. But the deployable equity that nominator the question of the equation, right the increases so this makes your return on equity goes down sophisticated investors always read leverage their equity to keep this return on equity high. Of course, let’s not be a bonehead, we have to look at our cash flow levels. But this spreadsheet allows you to figure out where is your lazy equity, you can go and get it at simple passive cash flow calm slash r o E. So here we are, if you guys want to join our community, go to our Facebook group. And you can check us out on I do these slides in the YouTube channel. And also this is recorded for podcasts for

Unknown Speaker 2:08

support passive cash flow podcast but doing it since 2016. First starting off with a little bit of a teaching point this month is even been looking at refinancing a lot lately, all time lows, and people are always asking Should I get a refinance. But we’re always remember, like the lenders are always pushing you to get a refinance. And it may not make sense for you there yet may they may call it a no fee refinance. But all they’re doing is they’re increasing the rate a little bit to kind of hide those fees. So astute investors know that you need to take into account rate and feed and see if it makes sense. There’s always a crossover point, you need to figure out what that crossover point is. But here’s on the screen, here are some rules of thumb on a 6% 5% mortgage and what the payment will be how much you will save, you use that return on equity spreadsheet, a lot to figure out, maybe you might want to just dump the asset and sell it and buy two to 10 more houses or three more syndication deals, creating like a lot more maybe three times and see your cash flow at that point certainly up multiplying your return on equity. Now we’re going to get into the monthly report this month. Some general thoughts on the economy’s takeaways here this past month, encouraging signs of GDP growth, we’ve seen some splurge spending, which is a pent up demand. This is what I think is going to be happened in 2021. Generally, people are shopping people who have got good jobs are looking to spend some money next year feeling get the heck out of their house, of course in a lot of people are struggling. But it’s unfortunate, right? Like you there have the haves and have nots kind of a situation here. Devin, definitely a progressive tool for different asset classes getting impacted very, very differently. I will go into this, this report will also have I’m going to be doing a little bit of a breakdown for different asset classes like office space, mobile, home parks, retail, multifamily, of course. And we’re talking about the real estate sector, and you have different asset classes. And within each of those sub asset classes are as well as sub asset classes where you’re talking about different types of offers, or different types of areas, different types of a Class B class and you can break it down from there. So a lot of news articles, they are very broad, right, because most people don’t dig into this stuff. But my hope is to educate you guys to a point where you haven’t read between the lines and we still wouldn’t be Watts’s. At the very least we’re not just going to read the headline, right? Not always up getting into a point of reading the whole article, but picking out the one line in that article that’s really important that maybe may or may not align with the headline, the clickbait One of the the books that came out of the ITR report that I don’t refer to a lot is if you wait for the macro economy to enter a full fledged recovery, you will fall behind the curve and the ITA report is a paid report that I pay for. And it is one of those that I think it’s a great resource if you guys are looking to get away from the mainstream media, which I think is a lot of garbage. That’s something to go and subscribe to. Also, the Richard Duncan is another great resource that you guys can learn more about down and support passive casserole.com slash Duncan, but budget threats to wash, like the onset of the flu season once the month momentum in total retail sales, what’s the feds doing oil prices? And the thing about I’ve always watched is us intermodal rail traffic, because I worked for what are the four major railroads for about seven years, they are definitely a leading indicator of what goods and services what goods are our big move on the rails, especially the raw materials like the lumber, they they’re a precursor to when the the raw materials first before it gets put into service several months later. So there’s some chitose there in the first half of September, uncertainty regarding unemployment benefits as the next MLS fun is working its way through the system, there’s always going to be risks, right? How else do you get people to watch the news, if there were no risk, nobody would ever watch you. And you wouldn’t have any advertisers on there. But for my syndicator point of view, talking to some of my peers, you hear a lot of rumblings about stimulus burning off, I would say we’re we’re not too concerned about that, especially if you’re, you know, good stable market, certainly away from the States. We were much more worried about the April May 2020. Collections First, the first stage of the COVID coming out how that will get what’s gonna happen pulling up the yardie matrix, one of great data sources out there in their August 2020 report, they showed that multifamily rents increase by $1. In August, over year over year basis, national rates declined by point 3%. And whenever you read this, you got to take it with a grain of salt, right. But they’re combining markets that I would never invest in one city never. But markets like San Francisco, Seattle, New York, the lifestyle asset class continues to be hit the hardest and like so asset class is the luxury stuff again, stuff we don’t invest in, we invest in what they call renter by necessity. So that is, as the name implies, you’re renting because you need to because you can’t afford it in house. So that’s a we like to invest in to provide good quality housing for those folks. So they held up well since the beginning of the pandemic care report with only eight of the top 30 market experienced negative friend growth in August, and also the Bay Area’s die.

Unknown Speaker 7:57

been investing with hp since 2017. To buy distressed mortgages and discounts to offer struggling families sustainable solutions to stay in their homes. When homes were vacant. He recognized that lenders frequently struggled as they tried to limit their losses. That’s why owner George Dewberry founded pre reo, a platform that gets these vacant properties into the hands of local investors like us during the foreclosure process, which mitigates losses to lenders and accelerates returns for investors a win win. I’m very excited about this platform that connects local investors with board appointed receivers in their area to cost effectively repair, lease and maintain and rent vacant homes during the foreclosure process and ultimately make a profit. I’ve been checking out local properties here in Hawaii. And I think it’s a great way finally pick up my home to live in. Even though I think homes, the buyers aren’t the best, you can learn more about pre reo by going to simple passive cash flow calm slash

Unknown Speaker 8:55

v Rio.

Unknown Speaker 8:59

I think a lot of people are running over to the sacramental part of the bay to seem to sum up ticket prices there. But yet people have finally got the group that that great. Second reason to get the heck out of this this overpriced city of San Francisco and the Bay Area. Again, the first was just generally it was too expensive. But now close quarters and a lot of social events are happening. It doesn’t make any sense why stay and why they love the tech couple years there are allowing their employees to go to sometimes next summer to work remotely. Now I will cabinet saying that not all office is out of business. Maybe look at all the places that aren’t tech hubs where you can do remote work, you see that a lot of those events kind of kind of change strong. And I think all of us agrees when maybe not us listening. But definitely in amongst our peers. There’s varying levels of productivity, I think generally would say that Yeah. offices nonpoint man, but let’s start at the top. What they found is that’s usually the feeder that everybody starts out with a single family home. So they typically multifamily not seen multifamily is the best asset class. But it is a great starting point. And that’s is where we will begin. business now reports that class B assets are the sweet spot and we’ll take family right now. And they are CD D showcase in resiliency during an economic downturn. RV business online reports on Marcus and Millichap that won’t take family fundamentals progress as government assisted waves, the kind of blue mesh type of headline article, but hey, I actually read the thing here and I pulled up this where they’re saying July 2020, available supply dropped to the lowest point since 1982. Meaning not everyone wanted to make the leap into home ownership can do so. So a lot of people with the rates low. We saw it we did see a lot of in our more higher end apartments, people opting to go and buy a part of buy a place to live in and moved out, we had a little bit of turnover for that. Obviously, that’s not happening in the B class C class type of stuff more than a B plus a minus type stuff. But getting back to the article for this reason Marcus and Millichap believes Class A garden style suburban rentals with larger square footage and Apple outdoor space will benefit in the future. Or a business also also reports the US economy adds 1.4 million jobs in August. And now unemployment rates return to single digits. So I think we had like a get a Yeah, I mean, it was just a bloodbath in March in April, which makes sense because we shut down the country. But it does seem like we are coming back unemployment rate dropped from 10% 10.2% to 8%. Last month or so property executive reports. And now we’re starting to go into some different asset classes, right. So you can see how things are recovering amongst different asset classes. And us investor takes this into account, I take the standpoint of I’d like to be diversified in all asset classes for at least being able to learn and to know what fields to go into. So that when when the world eventually changes every three years, we kind of move from one asset classes to another. So Blackstone, which is that big fund out there, and which I call smart money. They just bought almost half a billion dollars of hard assets. So they’re a buyer of mobile home parks. Bobby, because mobile home parks, if you ever been to a to one night, they’re not Schiller parks right there, these are pretty nice places to live, they, they’re cheaper. And they are good for people who enjoy their space, right? So they’re very pandemic friendly. Dallas developer from the Business Journal reports that the demick has slowed demand for luxury high rise apartments. Most of us will say no, no duck, commercial property executive now we’re talking about office space here, recreating office for the foreseeable future. So talking about some trends that you’re seeing in office, I think a lot of us see, it seems like a big part of my community lives in the West Coast. And we’re currently seeing what’s happening in San Francisco, Seattle, just got to remember that those are predominantly tech type of

Unknown Speaker 13:34

industry that are using that office, which is not the case in the rest of the country. So some office space needs to be decrease. They say in this article, but some firms are, and I quote twice as much space for social scene is so a firm will double down. There’s gonna be somebody went out of business not using a space so they are acquiring more space that they can adequately deal with their employees with the space he did socially distance. I would say a lot of other places other than tech hubs are realizing that their employees are really useless when they stay at home. And they play with their cat all day long while they’re supposed to be doing work. That’s me, talking to another recent investor saying brought up another point that we don’t have that mentorship. You don’t have that. That transmission of knowledge from senior employees down to junior employees. I mean, just imagine if you were coming out of college and your first day at the job was oil back at your house. That ain’t good at all. I think this whole trend is pretty temporary. But I also have the five word where are they building stuff right so Manhattan, Chicago, Boston, Los Angeles, Washington DC is where the inventory is happening. Here are where your tech your we call them assume communities because of the reliance on Zoo or just working from home. Starting at the top, San Jose, San Francisco, Los Angeles, San Diego, Denver, Salt Lake, Seattle, Portland, Sacramento, all those are West Coast tech hub cities and not until we get to the eighth or ninth position to be see Boston Austin, Washington DC New York, Phoenix, Minneapolis St. Paul. So what we’re seeing in these those are the top areas where most people are telecommuting began you don’t a lot of tech hubs again, pointing that out. Multi housing news reports American landmark denser begins Orlando developments now we’re talking about hotel stuff like tourism type of stuff. So I don’t know too much about hotels and leisure and like the high end stuff like that one, I I know that it’s very it does really well, good times, people were flying high with their short term rentals. But depending where you are, you could be shut down. Another article with Blackstone right? The Smart Money guys. So blacks Wall Street Journal reports that Blackstone is ready to lend after basic record property debt fund. So they are ready to get after it, which shows the Smart Money is acquiring Blackstone, they just bought back a billion dollars of mobile home parks. Now they’re loading up to people going after Warren properties. Yeah, I mean, it’s funny, right? Why is the smart money to eat this. But why is everybody having the same line of Oh, I want to see it how I want to see a vaccine first, or I’m uncertain, or I want to see who wins the election. Just making the observation. Commercial Property executive reports that ball dry giant strikes a $80 billion deal for JC Penney for Simon group. So the mall is buying JC Penney, and most of us know that JC Penney is the cleanest place to shop. And I don’t I’m not a big fan of commercial, retail, storefront type of stuff are certainly not walls. I think that they’re slowly going away. I don’t think e commerce is here to take them out in the next five years. But I think it’s a lowering trend. Like I don’t think people are going to use ATMs anymore. I just generally don’t agree with Yeah, that kind of usage. But I’d like this, this article is cool, because it’s like, people make make money. Real investors investment. There’s blood in the streets. And Who woulda thought buying a JC Penney, but I hope Simon does really good with it. Right? I mean, that’s what people talk a lot about, like all these guys not paying taxes. Well, they’re the guys who invested the year to before I wouldn’t when they put in extra funds to be able to deduct in the next tax year. Right. They kind of deserve deserve the text funds, because they’re the ones getting the reinvestment, when most of the country are just sitting around waiting. A couple articles here on a couple of asset classes. We don’t talk about too much senior housing, reads take stock a month added turbulence not it was aren’t going too well in senior housing, because if you had a senior housing, you probably stricken with operational costs, having to wash things every 50 seconds or whatever, right? I mean, there’s just more operational costs. And people think people ask me all the time, what I think about assisted living, I think it’s great. Silver wave is coming. But it’s not a real estate, investment. It’s a business, it’s no different than investing in a Burger King, or some other franchise. I kind of stay out of that type of stuff, operational businesses, preferred apartment communities exits student housing market is. So you have a big week, China unload some of their apartment communities for student housing. And again, student housing. I never liked it. I just never really liked catering to one little full for such as students. I would I prefer to go after workforce housing, because that’s the largest competition and so the message here is to stick to the basics. And the last asset class I’m kind of talking about today is if you’ve been watching, like a lot of TV, maybe you’ve been seeing the new Dave and Busters commercial, which I think is probably my pick of the Year for best advertisements on TV, but they have this like Asian girl who is a really good actor, she portrays herself as having a very low self esteem. She does that Dance Dance Revolution game every time she does a great step. She’s like, because Perfect, perfect, which makes you kind of want to go to Dave and Busters and play around and play some video games, but apparently they’re spending all that money on advertising. To get me to do that, because inner busters reports 85% dropping 40 revenue source with bankruptcy.

Unknown Speaker 20:09

So I don’t know, maybe the advertisements just last ditch effort. Or maybe it’s just a really good commercial and it got my attention. For those of you guys listening, watching on the YouTube channel, I have a 3d map from how much dotnet of the US cities with the highest economic output. And it’s kind of a cool 3d map with bunch of cones, and each cone represents how much money is being generated there. And, of course, New York, Boston are kind of the financial centers. But some of the surprising ones well, Chicago’s there to Los Angeles there to think surprisingly, is San Francisco is really not that big. Oh, it’s only half of 540 9 billion were of Los Angeles is $1 trillion. Houston is half a billion dollars. And Dallas has half a billion dollars, which is equivalent of San Francisco. But not not saying that these are the places you want to invest, but sometimes you just have to look where the money is going. Housing why reports that the Fed expects low rates to the year 2023. And I think we’ve seen pretty much rock bottom rates for the last was like, five, six months now. So they released the statement once they were all 17 members of fullback, which stands for the Federal Open Market Committee. He said that they expect to keep the central bank’s bank benchmark rate near zero at least next year and 13 estimated it would stay there through 2023 a little bit of a pop culture here. So ti the rapper I think he went to jail for a little bit a few years back but now he’s back out and he’s urging people to ditch cargar Cartier watches and believe baton sway to buy property instead. I don’t know if he’s talking about like we’re gonna stay for rentals or just buying it but we were he’s saying we were actually as a kind of a cool voice so I’m gonna tell it in my tea. I was we were just in a studio having discussion I just felt the need to actually that’s not very good. So he says that it’s just the Share it he says in the clip all y’all getting that money from the government. Eight no more partiers and eight or Todd’s you got to get some property please. Please y’all will get some property. So listen to TI get some property, lower interest rates. If you guys are looking for your first rental property, turnkey rental remote rentals. We got the group for that that’s the revolt investment debater and you can also check out the E car so you just want to study alone, I guess. Simple passive cash flow.com slash debater. And if you guys are more of our credit investor want to build your network with other credit investors to stay close to the in crowd to know who to work with what to do, how do you do your taxes, go to support passive cash flow calm slash journey and live for our group there. This is the part where I go over my little personal updates this past month and always trying to improve myself and the first one is growth. So I found this little article here that I tried to apply by this month. It’s from that episode or love it or even first first tip here is being quite passionate towards yourself. It’s okay to not be okay. And I think I put this in here because with the whole pandemic, there’s a lot of people out there having a hard time. You know, especially the extroverts, right, they want to be out there, people shaking hands, hugging people, maybe the introvert out there happy plans, maybe they’re not they never know, but yet just be more compassionate towards one another. Tip number two, develop a routine. Engage with search at anchor points or actions throughout the day to help route you. Sometimes I make myself go crazy. I feel like every day is the same I get a check. We do the same thing. I like routine. Number three, consume media that helps detach. Helps you detach from reality take a break from what is overwhelming you. It’s okay to distract yourself. I think unfortunately, he’ll do this a little bit too much. It’s think this one is assuming that it’s a minority part of your day. Before solve problems in your everyday life. Doing this can help with small barriers that can add up and increase the feeling of overwhelm. So what I personally do is once a week I kind of take inventory of my bigger projects. I have and likely I have

Unknown Speaker 25:02

probably been on my list for two or three weeks at that point. And I try and break it down into little steps. So try that out, see how that works. On number five, be grateful for the things that you have, it can lift your spirits, and the spirits of those who receive gratitude and gratitude. If you Google that term, and you look for all these articles on it, it is definitely one of those hacks out there. Or if you just change your mood and outlook, instantaneous, you share how you are struggling. So everyone is struggling in some way or another suffering is universal, and reach out to other people. And maybe they can empathize with you. Or maybe you might find somebody who’s struggling even more you can help them. But think you’re you guys aren’t alone. That’s why we stress community in our. And yeah, I’m a little wary, I say if you need something, let me know.

Unknown Speaker 25:53

But I talk to your circle of friends,

Unknown Speaker 25:55

right? I mean, or, and I think reach out to people in your circle, see if anything is going wrong, and just audit a little bit. So why we got contribution, we have over 350 investors in the investor club, and hopefully a year like they’re all on the road to financial freedom, investing in real assets, where they know the people they’re working with, and not getting screwed over by retail investments that may just make Wall Street rich. How am I going to get your significant system this month? Will I’ve been times I’ve been trying to be like Simon properties and trying to by being a little bit of a venture investor. I’m not buying JC Penney, I wouldn’t do that personally. What I am looking to, to invest in things that are definitely I think if people hear about it, they definitely agree to have a teacher reaction. For those who are closer to be in my community, certainly in my mastermind group reach out, I shall explain. Some big things come in, I have a little bit of uncertainty out I get a little bit of spice in my life. Well, I joined a second mastermind currently in a real estate mastermind, called the collective genius where I rub shoulders with a lot of high performing real estate investors and operators. But I’ve joined a second mastermind that is more entrepreneurial, it’s a it’s a digital online mastermind. A lot of high performers really cool actually got a really a lot of good ideas to have my next mastermind, which we are looking to have it in January, I’m still on the fence a little bit if we’re going to have it with all that is happening in Hawaii and how people are generally a little bit conservative up here. And we are a little bit behind the rest of the US mainland in terms of pronoun cases. But I got a lot of really original ideas and creative ways to use that platform. It takes a little bit of planning, but I kind of think I can make a better event virtually, then online. How did I get a little bit more certainty in my life? Well, during that mastermind, we had Derek Silver’s gave the keynote. And one quote that came out of that was scarcity comes clarity. So I think a lot of people suffer from abundance of choices. And maybe I did that in the last 30 minutes where I overwhelmed you with multi family assisted living, David busters, office retail, I’m missing some. But yes, so many choices to invest in. This is very synonymous with often markup. Gladwell is the book, The Paradox of Choice. The more choices you have, the more unhappy you are. When things are simple, you feel like you’ve made the right choice. And whether you make the right choice or not, you’re happier. So I think in terms of investing, just try and find deals that cash flow better at good areas. That’s my thesis these days, and lock it up with good debt. That will be your friend when inflation, inflation ultimately comes. But I just try and keep things simple and look at one thing at a time. A lot of investors get overloaded with choices, pick one and go deep. Don’t be one of those investors that just kind of looks at MSA data, or Oh, yeah, in industrial properties are good or office space is bad, or what they found me is good. You got to dig a little bit deep. And I think the only way to do that is to grow your network around you. I was just talking with a bunch of family offices today. It’s amazing how differently they think than the average person. It’s not like they’re smarter. It’s just more connected and they serve around just their circle of people is so much more different. How did I get a little bit loving connection this month? Well, I didn’t. I made a stride in that. That direction and I bought myself a pool table. Because full table is the watering hole of people people like to gather on the pool table. So if I get it I hopefully people will come and click Boise and hang out be my friend. Some new podcasts and articles that we released this month of had George with hp. Talking about pretty Rio, we had Russell gray talking about how to hedge against the recession, talked about the know how inflation is coming. I had a few short videos on how to use a 15 year mortgage or a 30 year mortgage. Those are all in the YouTube channel. You brought even Brazil to talk about costing patients and mice a little hack there but asked me doing that with your home you live in and moving out and moving back in. Talk to your CPA on that one. But yeah, getting created there I like it. I found this neat little card the x one credit card that’s supposed to give you four x reserved reward points and how to live a fulfilling life a little bit more type of podcasts. But yeah, try and sprinkle those in every once in a while. If you guys are looking for more, get a good topic for the podcasts that we know some resistance and barriers and noise for ask for you guys to help me out. I’ve been frustrated I can’t travel I was used to going at least six trips a year maybe seven or eight trips a year the six for like business to check out properties but this year I’m grounded. But by the time you guys probably listen to this I made I’ll be making a trip up to Cleveland to Sydney. Perfect. A lot of you guys there do dads I put this in here because if you’re going to buy something dammit call it a dude that call it a waste of money. And the thing I bought this this was a very expensive frog Ling’s slow juicer and this thing is pretty cool. He put like big carrots and whatever into it, it just uses that had got a bit I was spending like I think like 4050 bucks a month on those pre made juices. So spending a lot of money on that. So I figured I was just doing myself and actually pretty fun. I don’t know it’s kind of like an adult coloring book Zen type of activity that make juice and in health as well right so I figure it’s a good investment and then also kind of getting into work gardening these days. So I have like a worm farm. So this is like a pump where you put like the worm droppings into a bucket and you Airaid it and then it becomes like the world’s best organic fertilizer

Unknown Speaker 32:44

this thing is a little object that you stick like bottles in and then you can go on a trip and your plants will die and she didn’t water it but I like gardening yeah so just wrapping up here just a reminder that the easter egg go and grab it it’s the Miracle Morning for real estate investors email me at Lane at simple passive cash flow calm and also don’t forget that return on equity tracker simple passive cash flow calm slash bar he can get access to this and more at simple passive cash flow calm slash club. Those are our club members. And Robert not giving any tax legal advice here and we’ll see you guys next time but 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 value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal adviser before relying on any information contained herein information is not guarantee 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 interest

Transcribed by https://otter.ai