October 2022 Monthly Market Update

What’s up folks? This is the October, 2022 monthly market update where we go over different articles that I think are pertinent to real estate investors out there and probably other investors out there.

But if you haven’t yet, check out my book. The Journey is Simple, Passive Cash Flow, Passive Real Estate For the Working Professional. This is available on kindle and there’s the audio book version. If you guys wanna check out the YouTube version for free, you can go to simple passive cash flow.com/book.

But currently up to a hundred. Reviews, I think. So that’s cool. So at least a hundred people read it. Maybe more. If you guys are listening to this on iTunes, also check it out on the YouTube channel where you can check out all these cool slides that we have prepared for you guys. And then lot of, a lot of these articles have great graphs and visuals along with it.

But first thing off Starbucks plans to open 2000 new stores by 2025. Invest 450 million in existing locations. I think there’s a lot of Tucker recessions, but, I think you’re gonna see a lot of the big players have the capital to reinvest in, potentially rough times ahead or there could be some of the best times to invest.

All this is happening. While, they’re also applying to expand their mobile ordering offerings via the company’s app. So even with that, they’re still planning to expand real estate locations while HOP reports the 2022 safest cities in America. At the top of the list is Columbia, Maryland. Nashua, North Half New Hampshire, Laredo, Texas.

Portland, Maine. Orwick, Rhode Island. Yonkers, New York, Gilbert, Arizona. Huh? I didn’t know Gilbert was that safe. Burlington. I think it’s Virginia. Raleigh, North Carolina. Lewistown Main. For some of you guys who are curious, Honolulu, Hawaii is in the 75 and then some of the worst ones. La Chattanooga, Jackson, Mississippi, Oakland, Oklahoma City, Memphis, Baton Rouge, Detroit, San Bernardino, Fort Lauderdale, Saint Louis West.

Also on the same. Law enforcement employees per capital. Some of the top ones are Washington, DC, New York, New Jersey, St. Louis, Chicago. The fewest ones are font, California Monte, California, Fremont, California, Irvine, California, Trula Vista, California. Fewest traffic fatalities. And, that’s not too important.

You guys can check out that on the the channel. Later. So this is the, a little visual of the US 30 year fix just to, take that one data point. And these are all the month to month changes in the the interest rates basically. So what you’re seeing now is you’re seeing as of like quarter one of this year, Fed has been raising interest rates pretty greatly.

If this is all new to you, check out the podcast I did with Richard Duncan at simplepasscashflow.com/Duncan. We’ll tell you all about how that supply chain unemployment, you war Ukraine and Covid crisis and China, all is related. And I think after you watch that podcast slash video, I think it’s gonna make you a lot more comfortable with what’s happening out there.

The way I look at these kind of charts is, do you see the uptick right now? And in these upticks, they typically play themselves out a year. And that’s why I tell people, about 18 months from now, we should see the capital markets start to open up. And my prediction is we start to hit off to the races again.

That is, if you know the raising of interest rates is able to increase unemployment just slightly so we avoid a hard landing and do a soft landing recession. But you can see how in, few times in history, like the 19 eighties where the interest rates skyrocket a lot more than it did.

Now, some people I talk to, and this is more of an extreme point of view, think that the interest rates may need to get up to eight to 10%. We’re not there yet, how much more does the interest rates need to get pushed up so that unemployment comes back up? And unfortunately, home prices are gonna go down a little bit just because people aren’t gonna be able to get their affordability up to afford more via loans.

But that’s just a thought by product. Again, what we’re looking at is that unemployment to come up and for us to correct. And this is also the same thing. It’s, but it’s visualizing the interest rates in a little bit different fashion here. And we’re seeing this increase in 2022, the interest rates. And you see how it compares to the 2015 to 2018 climb, which was a lot longer and a lot more gradual. And then you see the nine, the 99, 2001, and then the big one.

I think the big one was like the 1980s there, so all this has been happened before and this is the one of the major levers that the Fed pulls to keep inflation at bay. This article, it’s talking about the rise of all of renters. Now, a lot of millennial renters are giving up ownership. Why? Because the prices of homes have gone away from them, even though they may be coming down. But affordability, due to the interest rates is allowing them to qualify for less. Now we don’t have any news, if any, May, Freddie Mac are gonna make things easier for borrowers to qualify for more.

But this this study done here by apartment list is suggesting that more and more millennials are just giving up and just saying, Screw it, we’re just gonna be renters. And gone up from, averaging around a 20% range at now, up to 24.7%. Of course this is all survey data, so you. Who know, survey data is always, there’s a level of fudge factor in there.

But I think that’s why we all are investors and we understand that the lower middle class, or at least the folks that are captured in this study, which are, the younger people not yet to their family formation years and they haven’t amass wealth yet, or down payments for properties.

It just makes more sense for them to rent. And this kind of coincides with a more mobile workforce, with people having to move around a lot for their jobs, especially because you’re not gonna be working at your job for the rest of your life. You’re gonna probably skip around and jump around to different employers.

Why are they saying that they’re not going to buy a house and instead rent forever? The biggest thing here is they just can’t afford it, which is 77% of their participants. Said that now this is the next excuse or if you wanna call it excuse, is I like the flexibility that renting provides, that has, that response has gone down slightly over the last few years.

And then also I prefer to avoid home maintenance and other additional costs. And other people think, I think buying a home is financially risk. I would say for most young people who are good at saving their money, I think buying a home is a bad thing to do. Although most people fall in the category of their bad worth, their money, and they need to force piggy bank at that point, I think buying a house makes more sense.

So if you’re confused by that and you’re a good saver, That’s how you say, join our club. Check out my article about buying a house to live in. Is it the right thing for you? Do you, which side of this paradigm do you fall in with the common guy who should buy a house or the people in our group who are, getting on the offense and buying assets and instead for going on buying that lovely primary house with the white picket fence.

I still rent, by the way, for what it’s worth. I practice what I preach for now. At some point I’ll probably wanna just enjoy life and spend my money for once. Also reports from Zumper, occupancy rates and the pace of rent increases are now falling in major metros as the renter.

Demand softens with fear of recession, kicks in with many renters assign as they put or trade down our most expensive option. And I think this is, we’ve had a quite a big of a run up, right? Some markets such as Phoenix, the rents were going up like 10 to 20% every. I know we just got back from Alabama where we had one property in particular where we had a lot of legacy tenants and we were rehabbing properties and we made the decision.

It’s finally time. After two years of ownership, that’s really time to bump up the rents up 25% and a lot of ’em are taking it. Every market is different, right? That’s why when you look at these national rent world statistics, you have to take it for with a grain of. But I would agree that in some markets, you know this, there people have this in the back of their head that perhaps Ace is looming as if that’s always a case, right?

Never know, but maybe me, people are using that as a means to, instead of springing for that $1,600 luxury apartment, just going for the $1,300 one. That makes sense. Which they should, I think. Also, maybe you can contribute this to the interest rates going up, but seller sentiment is decreasing with more inventory coming online in sales, taking longer to complete yet, I think you still seeing a lot of me major metros with the days under market of under a hundred, which is that, two to three months.

That’s considered a seller’s market. At that point because you don’t have that much inventory, but we’re still a lot of places still below that and therefore, or I dunno, therefore, or as a result we, there’s a general housing shortage, especially in some, particular markets. The growth states, their marching markets, as we call it.

Also millennials today are in their prime home buying years. The millennials are now 25 to 40. Man. How have they grown? According to the definition we use here as such, their home ownership rate has increased faster than any other generation over the past. Decade. So although we’re just talking about how they are gonna stay renters forever, the ones who are buying very quickly, a lot quicker than other generations prior to.

And maybe you can contribute to that, to the fact that in the Great Recession, 2008, 2010 era, that they just absolutely got beat. And it’s taken them well over a decade, almost a couple decades to recover. And the last five years they’ve greatly picked up the home buying. So this would be a great, if you guys were to come back to the YouTube channel.

If you’re listening on, we also put this on the podcast too for you guys who you’d like to drive in the car and listen. And I tried to describe these pictures as best as possible, this is probably one that you guys wanna check out on the YouTube channel, but it’s kinda interesting, if it has this, the lines of the silent generation, the baby boomers, Gen X, and they show the percent of home ownership rates.

Baby boomers have finally caught up with the silent generation. Maybe the silent generation is maybe no longer or statistically gone already, like they’re about that age already past the age 80. Not many of them are around it anymore. The. Baby boomers are potentially in the same clump with the silent generation that Gen X are sitting at 69%. Baby boomers and silent generation are about 78% home ownership, where the millennials at 48% at climbing.

What is the big issue with millennial renters not having down payment savings? Two thirds of prospective millennial home burners have no zero down, have zero down payment savings. Survey in 2022 said that 60 60% do not have any dedicated down payment savings, and only 60% have saved. $10,000, huh?

That’s pathetic. But hey, that’s what this national data is, right? A lot of you guys listening to these types of podcasts, at least our investor base, most of you guys, Our credit investors, making over six figures. And most of you guys, eh, I’d say if you make as a household 300,000, I typically see you guys saving 50 grand at least a year.

So you guys are definitely not the focus group captured in this pie chart. But, and I tell you that because number one, you take this data for a grain of salt. It’s not you particular driving in your car to your cool job. And it’s. Maybe an appreciation to it, right? Because if you’re listening to this and you have the time, you’re doing pretty good for yourself, but you can do better, right?

And that’s why we are further continuing along this financial independent journey together. If, and if that’s the case join our club simplepassivecashflow.com/club and let’s get to know each other a little bit better. We give everybody a free introduction call with myself.

I usually pretty quickly ascertain what the heck is going on and give you some pointers. I’m not fucking you financial advice cuz I’m not here to sell you some nonsense financial securities such, stock market stuff. But I’m just, I think it’s good that, when I talk to people, it’s not often that they get to size themselves up with people, their constituents, such as our.

A lot of you guys are the people who max up your 401ks, make good salaries, maybe even be the, the best person in your family financially let alone your friend group. And it’s. It’s nice to compare yourself with people who are also financially minded. That said, you keep doing that too much, you start to get really depressed and sometimes it’s good to compare down.

But no I think this is why it’s good for, if you guys have never made it out to a retreat, we always allow you guys to come to the, one of these events at least once to test drive our organization. Make sure you’re part of the club because the The retreat event page is going, is almost done, and we’ve got a hotel pick for Waikiki, so we’re gonna be releasing that and then ticket sales are going to be going starting here in the next month. So be on the lookout for that.

US apartment construction on track to reach 50 year high in 2022 is interesting, right? Supposedly we’re in a recession right now, or maybe some people have dub gloo, but, or is that just the unsophisticated investors out there? Because the institutional smart money, the developers, they are.

Building like crazy right now. A part of that is the obvious fundamental shortage in housing. Like New York developers have upped their game and the Metro is projected to see the highest number of units this year, surpassing Dallas Fort Worth Metro for the first time in And this is despite headwinds related to labor, shortfalls, material costs, and availability and supply chain issues.

This is that first article in a many that I’m gonna show where, the professionals, the institutions are in a way kind of doubling down as you saw Starbucks did, as we mentioned at the top of the call. So where are they building? I’m just gonna read up from the top to the bottom. New York, Dallas, Miami. Austin, Houston, Texas, Phoenix, Arizona. Ooh, that one’s a little small. I can’t see it. Atlanta, Georgia. Washington dc. Los Angeles, Orlando, Denver, Nashville, Raleigh, Charlotte, Chicago, Portland, San Francisco, Twin Cities. So those are the year from the top to bottom, top 20 metros for our compartment construction in 2022.

John Burns. He released this great infographic on the top, 10 signs of a market bubble. Some things that were not seen that normally would be indicative of a market bubble is, very high supply. We have very low supply right now. Days in their market in most places are under a hundred days, and so that’s not happening.

Other things, luxury cars for the staff. When you start to see shippers buying , just using a reference from that big, short movie. But when you start to see, regular blue collar folks jobs, buying luxury cars, that’s the time to scratch your head and that’s not happening. The other thing that’s not happening is creative mortgages, right?

Like after 2008, the federal government got involved and built a lot of fail safes. And then the last thing, the mortgage defaults and arms, we don’t have that anymore. Or at least it’s not as prevalent. And that is one of the, some of the things that are not happening that are indicative of a housing bubble.

There are some other things, and which is why I think we’ve already been in a recession for the last couple quarters. But the industry publications I read are saying we’re gonna be in this state in the next year. I think it’s gonna be more like 18 months, but 20, 24 we should be often running.

And I think it’s a mistake to wait. But just change your type of investing, right? Don’t go after these kinds of deals where there’s no equity or collateral, right? So what am I talking about? Maybe like in crypto or OutCo or ATM mining stuff, unless it’s with an industry leader or somebody with an unfair advantage, those are type of business that don’t really have any collateral behind them, which is why I still like investing in real estate. Now, if you really wanna be uber conservative, investing in real estate world is pretty conservative, but maybe stay away from some of the more heavier value add type of stuff and stick to more on the debt side or stabilize yield place.

So Hurricane Ian impacted the Florida’s apartment market. What’s the impact from that? Expect demand from vacant units, from displaced homeowners that’ll prob likely reverse a 2022 trend of declining occupancy rates across Florida. I don’t have any properties in Florida anymore. I had a DI in Putta Goda that luckily sold although, that’s what you got insurance for, but, I had some properties in the Gulf that we saw prior to this, and it’s a, I think this hurricane e, like an insurance broker told us that, man, if there’s one more major storm it comes through.

I don’t know who knows what the insurance rates are gonna be. I can say on a few deals that we had, insurance costs went up like threefold from what it originally was. And then who knows what this is gonna be? my thinking is that the insurance rates are gonna be so high or uninsurable that the federal government’s gonna have to get in and help back so people can buy insurance so people can live there.

But we’ll see how that plays out. But for now, hopefully that Tampa area recovers pretty quickly. This commercial property executive article continues with this catastrophic loss impact to insurance and reinsurance carriers. Carriers would be firmer in the requirement for increases and pressure on the magnitude of their thought process.

Retail and restaurants are probably the most vulnerable, but maybe not the most expensive. A lot of companies, especially in Florida, do plan to for catastrophic and for more expense it would be to replace their equipment. Then more seriously, they take it already. Florida was already seeing challenges in terms of securing capacity, high instruction costs, and supply chain issues.

Hurricane Ian has the potential to exasperate these market issues while making insurance difficult to find and maintain, and I would personally add on. , We’ll see what the premiums increase this next goal around.

So one trend that’s happening, multifamily developers are turning some dead space office into apartments. We’ve gotten involved in that as a group too, just know that these are some of the most difficult from an engineering perspective, cuz you’re tying into existing systems where if it were me and future developments, I would just prefer to.

Start off what we call the green field, right? Where we have a just. A flat bearing land. We finished the Chase Creek apartments. We were out there last week. We have move-ins now. Yay. It looks amazing. It’s a lot better than what I thought it was going to be. We’ve initially came up with the idea and man, did that project come together so quickly.

I believe summer of 2021 were where the con, the concrete pads were getting installed and, It didn’t take much more than a few months for the frames to get construction and then it to start to look like apartment complexes. So we’ve got 230 units out there in Huntsville, Alabama. Plan is to do more and if you guys wanna jump on the next deal, get to know us and join the club.

Jim Costello, Chief economist at s c I real Estate says the key issue people do not understand is just how difficult and expensive these conversions can be. And I think that’s what I mentioned earlier.

So here’s a trend that I’ve been tipping my investors, especially those who joined the club. With the difficulties in the capital markets, we were seeing Fannie Mae and Freddie Mac get a lot less aggressive on lending and giving outsource terms back in March and April, and now we’re starting to see some of the secondary lenders, community banks, et cetera, do the same.

Gray Star, which is traditionally one of the bigger operators out there, they’re starting to offer financing to multifamily borrowers because of this need, right? As big players pull out, there is a demand and folks like Gray Star are filling that void with obviously higher rates because that’s what the going rate is.

But this is also why we’ve switched. Our mindset and our acquisition strategy, and that’s why we’re really not doing deals anymore. I really don’t know how people are making these deals pencil these days with interest rates where they are, and because they can’t get really good lending, and this is where we’ve starting to fund deals as a lender.

Because it is a lot more secure, especially in uncertain times in the head, but still, still you gotta outpace inflation, right? And, we have to still remain active. In a way, we’re copying what Gray Star is doing here. The good news though is multifamily fundamentals remain strong.

A lot of people expect loan demand bounce that bounce back next year. Multifamily remains a favorite investment class and has continued to perform well. Another, this is more for the advanced investors out there, but commercial property Executor is commenting on the benefits of in interest rate caps at this time like this.

So interest rates, caps are, most times people are doing bridge loans these days, and the bad thing about the bridge loans is the rate can potentially jump up on you. Of course, if you’re doing value add, it’s not a huge deal because you’re generating so much force appreciation and you’re always gonna be, you should be in theory, over water or above water.

But one way you can mitigate that is doing a interest rate cap. So your interest rates can’t go above, say a percent or two. It is costly though, and though the Feds policy are raising the Fed’s funds rate and quantitative timing to help with inflation should eventually provide builders some relief.

It’s no wonder that in recent months borrow who plan to start construction projects have been asking their debt capital sources for fixed rate notes. . But in a way this is like an insurance policy or hedging. You pay little money for that that rate cap.

But right now they’re really expensive because everybody and their mother knows that interest rates are likely to go up several times at a half a point, three quarter point intervals. This is where I, I’m speculating we get into eight to 10% range for just regular, 30 year mortgages for people and then, it’ll go back down.

But this is where these rate caps are extremely expensive for folks, for operators. But here, you’re seeing, you can buy different term lengths and then the cost of doing them. For those people who buy options and calls and things like this type of chart will look very familiar to you guys. But, it’s, in the financial world is a lot.

Know, kind of these charts and in a way you’re just gambling at what’s happening in the future and you’re pricing in risk. Ari business online is, talking about battle over rent control. So municipalities in New York and California, these, more blue states have taken steps towards enacting further rent control. What states, such as Nevada are shooting them down entirely. These are the batter ground.

States to watch if you’re a landlord. Only five states, California, Maryland, New Jersey, New York, Oregon and Minnesota and DC have rent control laws in place. 31 states have preemptives that prevent rent control policies, including Florida, whose law bans local governments who controlling the price of rent in certain cases.

As one, California, New York probably need the the nation. They follow each other as a group. So they, to me as an investor, it’s always good to have one eye on this, but, if you’re one of those people gets stressed out and freaked out about all this type of stuff, don’t worry about it.
Just diversify your portfolio and you try and stay one step ahead of the curve and invest in the states that aren’t going to go down this.

There was a, an article here that kind of talked about the ground looks shaky. The safe thing is to dude, is to build multi-family assets. And this is the approach that we’re personally taking as we start to pick up more parcels of 20 to 50 acre pieces of land. If you guys have any let us know.

We’ll buy it from you because there is a, it’s a very safe play. If you can structure your contracts and you have the. The educated personnel and experience to take a dry piece of land or entitle piece of land and turn it into the highest and greatest use, which could be a class, a apartment, of course work.

Cross housing is a sector we still like to stay in. You have a lot of room for margin. I think the numbers on the last one, we just built like 180 grand with all hard and soft costs 188 grand per unit, we should be able to sell it for at least two 50 here in a bit. So you’re talking a huge profit margin right there.

And what I’m learning is that sophisticated investors, they don’t really care about the cash flow along the every month or every quarter. Because they have a bigger balance sheet, higher network or jobs. But what they care about is security and, making bigger racks of equity. And that’s what the developments come in.

So we’re gonna be focusing more and more on this. So if you guys want the insight scoop on this make sure you guys are part of the club and you completed your onboarding protocols. Call with myself, et cetera. And first step, go to simplepassivecashflow.com/club. The Congress passed Inflation Reduction Act, which everybody joked and, uttered that.

Yeah. How the hell can you create an inflection reduction act when you’re spending billions of dollars in the process, but not much from my circle has come, ways you can use this. One of the most significant benefits of was the ira ex is the expansion of the Advanced Energy Project tax credit.

This allows you to credits up to 30% of the investment property using qualifying advanced energy project that is certified by the department Energy. So what does that mean? I think this is the point where they write it and then they administer some letters down the road. So some of the drawbacks that came out of this inflation reduction act is an enactment of the corporate minimum book tax. Minimum tax would be 50% of book income, which is amount of income showed on the applicable corporations financial statements.

Fortunately, this doesn’t really infect individuals like any stimulus checko, right? But this goes out to the municipalities. The states are already providing some economic development incentives for new or expanding manufacturing facilities, either in the form of property tax exemptions or income tax credits.

So some things that are not included in the final edition of the bill are changes to the carried interest requirements that would’ve had a tremendous negative impact on the multi-family industry. So what carried interest is some. Sponsors, general partners who only get paid when passive investors get paid there.

There’s some tax benefits to that. It gets taxed at a different rate, or like the big mutual funds or big, big funds out there, those leaders get paid off. Carried interest That has been left off the table. I’m just, I’m pointing this out because this is just another thing that they put in there to scare everybody.

Or maybe the Republicans put it there to scare of Democrats or who knows, vice versa. But a lot of these things put in there and then when these things are actually written, most of these concerns just fall off the map. What was the last one earlier this year was they were gonna threaten everybody’s self-directed IRAs, where you, now you had to get this cumbersome type of, Appraisal done every single time. That costed you a fortune. You know that stuff like that. They put it out there and then they pulled it back at the last revision.

So how the inflation direction will affect multifamily Some things that are impacting those you guys who invest in apartments the base tax credit efficient commercial buildings deduction. The new energy efficient home credit will now apply to all buildings that meet energy staff, multifamily, new construction programs to 2032. So that’s an extension there.

Other things. One, building in total grants to help states adopt recent residential commercial building energy codes, 8 million to HUD to provide grants for loans for affordable housing properties. So that, I think that helps out a lot of investors here. That just means better when the capital markets do open up a little bit, that’s the money to you know, back and ensure some of these loans.

Then just over three billing for funding for state and local governments to improve neighborhood access and equity, including infrastructure improvements in antis displacement policies. I don’t know if it was in this program, but I do know. That additional funding got released. Lisa, were talking with our operations folks who sit down with the tenants to help them apply for government assistance.

That funnel was back on, some of the buildings in certain municipalities or ju or under the viewpoint of certain judges, going through the eviction process. Some, there are people getting those government checks, that government assistance. So that’s good news for us.

A multi-housing news says some horn prefer single family rentals discovered that one in four owners would live in a rental house if they could find a place that meet their exact needs. And I always question these types of surveys because it’s sure they would love to live in a house, but can they afford the damn.

Just like a lot of our investors, they always say, this happens two or three times a year. I get investors saying, Yeah, I’m gonna be talking with my tenant in my rental property, and they wanna owner finance it. So it’d be a great way to not pay taxes and get a good price. And I’m like, I laugh because it’s Dude, I’ve never seen that happen.

Every tenant wants to buy the house. They live. And none of ’em have the credit score, let alone $10,000 to the name for a down payment. So you’re better off just selling the thing, unlocking the equity, and then putting it into other syndications or buying more rentals. But I’m just telling you, if you guys are listening out there and you have tenants ain’t gonna happen.

It’s just they run their credit score first. Make sure it’s at least over 6 50, 700. If not. It’s a pipe. Here’s what the the big guys are doing. So when Blackstone, a private equity giant, flowed the idea of creating vast portfolios of homes after the global financial crisis, the banks view refused to lend it. One of the firms Ran the idea by Sam z, a property mobile who sold Blackstone, his 39 billion office empire before the financial crisis.

Said no way for a investor routinely sping on hotel chains and swanky office towers. The buy to let business seem like small fight by comparison. Now you’re seeing like a lot of these Wall Street companies snapping up family homes, single family homes, just. Mom and Paul investors, but unlike you guys, mom and or mom and Paul investors out there who tend to own no more than a handful of homes, the biggest institutions hold tens of thousands of these things and offered renovation and probably run these things a lot more tighter ship.

There’s obviously, we’ve seen this before, 2009, 2012, where these guys would come in and they’re not super effective at, managing. These portfolios, they’re coming in again and it could be an opportunity for some of you guys to unload some of yours, but just know that it’s, I’ve always thought like single family homes was like a last frontier that, the regular person could buy, get into real estate and transcend themselves to a credit investor status and beyond without having to work at a high paid job for more than a decade.

Seems like that, that this little opportunity may be going away. It’s sad. It’s sad. It’s if Sanel created like a trillion dollar fund to go after the essential oil companies and compete directly head in head with them and all their direct multi-level marketing consultants essentially the same.

don’t know why they would do that, but if they did a Fannie Mae projects modest recession in 2023 the combination of high inflation monetary policy tightening and slowing housing market will likely tip the economy in a modest recession next year. I would argue we’re already there. As I do believe the second quarter of negative GDP growth, which we had, is a definition of a recess.

Fannie Mae Pilots positive only rent payment reporting program. So here’s one of the things that I, I uncovered that Fannie Mae is, like pseudo government entity, they launched this program to they’re only gonna report the payments made so that they. Let the credit bureaus and also people can start to improve their credit scores now when they’re renting.

Now I don’t know what, like a non-report of a positive, one’s gotta assume that the dude didn’t pay, but it’s, I think this is a, as a landlord or a property owner, I like this because it gives me some insight into who the heck we are renting. That there’s some kind of trended history there instead of just some random people off the internet or Craigslist people, you, I joke there, but, or people coming off the street literally.

But that’s something that they’re putting together and they’re, the reason why they’re doing is they want people to improve their credit scores to eventually buy houses to live, or, at least the qualified ones South region sees the most pandemic error, revenue growth. We’ve talked about this many times. The particular metric focus on rent row, but does not include many these or concessions. So it provides a nice apples to apples comparison of revenue performance across regions and markets.

The northeast, again, really outperform through 2020, in fact, A in the west region there was a slight declined. Both the West and the South saw revenue increases of about 10 cents per square foot during 2020.

V reports rising rent, please. Prices are keeping inflation high. It’s a chicken and egg thing. Is it the rents going up? Is it pay going up or is it just general inflation? Either way it’s all going up. The typical US monthly rent was $2,090 in August, up 12.3% from a year before is much higher than it was before the pandemic.

In February, 2020, the national average rent was 16 at 60. So e economic policy makers closely watch rent prices, not only because consumers spent spend a big portion of their budgets on housing, but also because the categories a major contributors. So set to inflation shelter is a larger component to the CPI making up 30% of the or in inflation. You know what’s messed up about the inflation numbers?

Like they don’t take into account like oil prices and some other things. You guys can check out, like there’s a lot, if you google this train of thought that I’m having, it’s, you’re gonna probably agree with me, but to me, I don’t like how they include like housing. Housing is such a huge thing, part they have to, but I almost like to be an industry like in like oil and gas, like where.

You can just increase your prices on people and then it doesn’t get captured in the cpi. But that’s just my side comment there. One of the questions that we get a lot, and in this article in its title, Do households flock to BC properties during recessions and. BC apartment performance certainly does hold up better than Class A in times of economic stress. Based on, the two graphs here showing, the sustainably higher rent growth than Class A properties.

Maybe about double that. Not all recessions or economic stress are the same. So The pandemic was very interesting because you had people working from home who were more on the higher end. Your white collar workers, your knowledge workers who work from home and order Ubers eats and they were pretty untouched.

And where your b and c workers, where your frontline workers, you’re people who have, expendable jobs, where when people went out of business, they cut those jobs. Those are people who struggled the most during the pandemic. So the complete opposite. What would happen in a normal economic stress or recession, but in a typical recession, that’s what this happens.

And this is why we effectively invest in workforce housing. And this is why I would not really suggest like building a portfolio entirely of short term rentals, right? Cuz it’s more of a discretionary item. Now we are gonna be rolling out I’m gonna be getting involved in some of that type of stuff, so stay tuned.

So make sure you guys, jump on the the newsletter email list. Again, like you wanna diversify portfolio. But primarily most of my portfolio is in this workforce housing sector. I don’t do that much Class C these days. I’m not a huge fan of that type of stuff. I still like the class B stuff.

Board. This is from Moody’s Analytics. By the way. During the last three recessions, both class A and BC absorption levels declined from their respective cyclical peaks, but class A levels and deltas actually remain relatively stronger than Class Bs, which is exactly what I was mentioning. The pandemic hurt the lower end instead of the upper end, which is a little.

There’s this really cool class cut absorption and rep income that we have on the screen here. If you guys can check out later, I’m not gonna get into it too much, but the last point here is after recession’s official end that many households. Those have been out of work for a long while or have had to take a job with a reduced hours, or incomes have burned through much of their savings and are finally forced to trade down.

So there can be quite a bit of a leg. No different than like the leg that we’re seeing right now with inflation, right? We’ve been trying to get that damn thing down, but there’s just so much liquidity in the system, right? Because if you go look at the Rich Duncan videos, there’s so much fake money pumped into the system.

That it’s gonna take a while for that money to vacate, for inflation to come down. No different than, most people generally have some savings out there. It takes a while, a leg for that to, expend out for people to finally say, Oh my God, I gotta change. I gotta go to a cheaper rent apartment.

Two straight quarters, a negative GDP growth and persistent inflation signal that the US economy is starting down a recession in the near future, if not one in already. Class B and C rent growth has outpaced class a’s through the first half of 2022, and in the first quarter of the year, class B. C absorption outpace Class A for the only, the second time in the over two decades tracking this data.

It’s a sign that household budgets are a bit pinched due to inflation, but it is also a reflection of minimal supply growth and a more social problem of persistent income inequality. Two things unlikely to improve over the next couple of years. The risk get richer, the poor get poured. Whether it’s right or wrong, it is what it is and that’s happening.

And as an investor, you guys need to understand that and put your money in the right places. I would so argue that Class B and C are probably the places to be if you wanna play a more hedge strategy. Although as an operator of 8,500 units, I will also say that It’s not all smooth sailing month to month, right?

You try and go into deals where there’s adequate cash flow, but you have to protect the asset, which means having enough cash reserves and if you. From a month to month basis, you’re gonna have higher months of vacancy, evictions, et cetera, than others. And this is why we’re switching and focusing on a lot more developments in the future.

We don’t have to deal with all that tenants, toilets and termites in a way. So he’s gone full circle again. But I think, you have to diversify your portfolio and all kinds of things and. In the alternative investment world,

and that comes up to the end folks. So we’re gonna be doing the retreat in January to 2023. So join the club to get first access to that simplepassivecashflow.com/club. Those you guys are in the family office group. The phone, you guys are gonna get first crack at it. So if you guys are in that group, When we send you guys your checkout forms, sign up for it as soon as possible because you guys get the best pricing and we try to hold slots for you guys.

But after a while, we need to know what our head count is. We need to know who’s coming. If not, I’m going to get stressed out and we need to plan the activities for that three day retreat here in Hawaii. That’s gonna be coming out probably after Halloween time, so you guys have some time if you guys are new to the group get on board. And if not, check out the book, simplepassivecashflow.com/book and I will see you guys next month.