September 2022 Monthly Market Update

What’s up folks. This is the September, 2022 monthly market update where I go through a bunch of news headlines that I feel really impacts how investors should be thinking. Welcome everybody. This is the monthly market update. Here we go. Now I’ve gotta warn you guys that this is going to be a pretty beefy presentation today.

I went a little bit crazy with the amount of articles. I think a lot of people have been really attuned to what’s been going on with all this talk about recession, Ukraine and supply chain in China. But I would say if you don’t know what to do with your money and it’s sitting in some kind of 401k with some financial planner or Vanguard or fidelity or some kind of retail investment option, I would say pick up my book.

The journey, the simple passive cash flow. I think we’re up to almost a hundred reviews now. But here we go. And if not, if you guys like podcasts, check out our podcast, simple passive cash flow, passive real estate investing. We also put this up on the podcast too. And for those of you guys who are listening on the podcast right now we also have all the slides that we’re gonna be going over today on simple passive cash flow.com/investor letter, where if those of you guys joining us live, thank you for doing so.

If you have any questions or comments, as it comes up, feel free to drop into a comment below. It somehow magically fed me. And I do give you guys a shout out as we do this live, but here we go. Indicators for a recession. There’s some flowing data. This is a pretty cool article or it’s actually not really an article, it’s just pictures, but they graph eight different types of supposedly indicators for recession.

And in case you’re wondering the 2020 recession, which it technically was since the country was shut down that was a recession, but they’re showing like what’s been going on this last six months before and downturn six months after, and you can take a look at some of these, percent change in non-farm employees, employment level.

Unemployment is at an all time low right now. Industrial production is very high. GDP increases higher personal consumption, GDP product, personal income except manufacturing. But the other three, I mentioned they are. Comparing pretty well, that really begs the question or really in a recession.

Are we just gleaning what the headlines are saying? As I said earlier, unemployment is at about 3.5%, which is very low. And to some people who believe in healthy economics, they believe that unemployment should go up and down a little bit within the ranges of five to 10%. Maybe not 10%, but maybe five to 8%.

But certainly right now at 3.5%, we are very low and this is pretty evident in, people are getting paid, are able to go around and negotiate higher salaries. And this is humbled with the inflation data, which is inflation really higher than what it really is.

Right now it’s put out there at 9.1%, but when it’s been said that they remove the energy costs and some of the food costs and some of these other things, is inflation really higher than it really is, which I would probably argue that it is, it’s probably more like 10 to 15%.

And why does that really matter? If you have your money sitting in some kind of investment account or worse in cash holding onto the sidelines, I would say that’s the worst option you could be doing? GDP growth from b.gov, real GDP decreased at an annual rate of 0.6% in the second quarter of 2022.

Following a 1.6% increase in the first quarter, the second quarter decrease was revised up 0.3% point from the advance estimate released in July, the smaller decrease in the second quarter, compared to the first quarter primary reflected an upper turn in exports and a smaller decrease in federal spending. So Novo grad, a website that I follow for different tax information.

They’ll release semi commentary on, like solar and, taxes in general, but they had an article on there talking about Biden science, inflation reduction act into the law, including renewable energy provisions. It was a 750 billion budget. And a lot of people, especially Republicans were laughing saying like what the heck type of inflation reduction act.

That actually is spending money, it’s counterintuitive, it was a cut down bill from almost like two or three times what it was. So $750 billion of government spending is a fraction of what it was. So from that point of view, it actually is a little bit of inflation helps a little bit, or it helps inflation a little bit.

But the things that were stuffed into this bill were renewal energy production tax credits, and investment tax credit. But who knows how that will work its way through the system, but the government continues to spend more.

But then, I always talk about the fundamentals, there’s all this stuff coming around and news headlines, but what are the fundamentals? And that’s really what I think what attracts a lot of folks to our community is, value investing, whether that’s investing in companies where they produce some kind of economy that people need in good times or bad times, or this is one of the main reasons we invest in residential real estate.

Multi-housing news reports that 4.3 million new apartments are needed by the year 2035. And this new demand research shows that despite economic uncertainty and growth during the pandemic in single family sales and new products such as built to rent, the fundamentals for multi-family remain strong underbuilding largely resulting from the 2008 financial crisis and decline of 4.7 million dollar affordable units. So basically, it’s the lower middle class that are the underserved more immigration. And those immigrants who are on the lower end of the economic spectrum who live in apartments are the ones driving up this demand.

And some 40% of the future demand for apartments will come just from these three states. You guessed it, Texas, Florida, and California, which alone will require 1.5 million units in the next 13 years. Things are happening now. Things can get really good. Things might take a turn for the worst. We don’t know, but in the long term, people need a place to live. Now, the visual capitalists report that these are the salaries needed to buy a home in 50 US cities. And The top 10 are San Jose, San Francisco, San Diego, Los Angeles, Seattle, Boston, New York city, Denver, Austin, Washington, DC.

So these are all the places where the median home prices range from half a million to $1.8 million. And in San Jose, you need a salary of $330,000 to be able to afford an immediate home there all the way down to Washington DC at 110,000. So pretty ridiculous.

As I get more involved in hotel investments, large brands like Hiltons, the Marriots make a lot of money. They make the most money off their timeshares because it’s just a branding in play. So when somebody is making a lot of money off one product line, you as the consumer, in this case, people buying timeshares, those are the worst products to buy. So don’t do that.

If you guys like this video and you wanna make up for that person, please like it or share it with your friends. But continuing on, so flip flop it, the salary needs to buy a home in the bottom 50 US states. Those would be. Pittsburgh, Oklahoma city, Cleveland, Louisville, St. Louis, Detroit, Buffalo, Cincinnati, Memphis, Indianapolis, those salaries range from 42,000 to 53,000.

And those median home prices range from 185,000 to 271,000. Now I think this is where like most of our clients who live in high price areas like California, Hawaii, tech, we have a lot of investors in Texas, but their home prices are pretty low. But some of these other places have a lot of sticker shock.

When you start to see some of these, where one place we invest in like Cleveland, 190, $2,000 for a median home price. Actually we don’t, we invest in too many at these places, but I used to want a home in Indianapolis. 271,000. That this is how a lot of America, in fact, probably the majority of the people in America not invest, but live in these types of homes.

I’ve always said, when you’re buying your little rental property as most non credit investors do, a lot of us are accredited investors these days. When you’re trying to buy that first rental, you’re looking for anywhere from like 80% of the median home price.

So what does that mean? So if you’re looking at $192,000 median home prices in Cleveland, maybe starting around $160,000 is a bad place to stay, to start looking. But I think, a lot of unsophisticated investors when they start off and I was there at one time, you’re starting off to what one of these.

Areas like, your Indianapolis is good and the median home price is $271,000 are there. And I see a lot of people buying houses that are 300,000 and above, and now you’re starting to get more into the B plus a minus type of tenant profile there. And you’re just not gonna get the returns you are.

Although there is a, probably a lot less headache investing that way. So CBR braces for impact of interest rates hike. So there’s no secret that the interest rates pushed up again and it probably will push up maybe another two or three more times. So what this is doing, it’s creating an aftershock into the capital markets, which is, basically the capital Marx is the term.

Where people get their loans from the banks. The Fed increased rates in March with a 25 basis point hike and a 50 basis point hike in may. And the three quarter 0.75 for you, people who understand numbers more than English terms that got raised in July. Now the largest since 1994. And it’ll probably get pushed up a couple more times.

Like I said, now, the goal, the Fed, what they’re doing is they’re raising the Fed’s fund rates to fight inflation. So it’s one of those things where you increase the interest rate to Dow inflation, because what probably happens is that the cost of capital you can’t expand. Businesses can’t buy more factories or infrastructure or, on our end, like our cost of borrowing money to buy assets such as apartments, our ability to go down.

So our ability to pay more goes down. Sure. This also affects the Joe blow random small homeowner, right? Their affordability obviously goes down too, the world doesn’t revolve around the little homeowner, it, the way I see it, if you look at what the businesses are doing. And in this case, the business will not be expanding.

Now at some point, they’re probably gonna change their forecasts. Whether that’s next quarter or next year or years down the line, they may say maybe we shouldn’t make as many widgets or units, whatever their business may be. And also let’s also, now let’s start to maybe not hire as much, not replace attrition or maybe even cut back on hiring.

And that is what the Fed is trying to do. They’re trying to create that behavior to push that or unemployment to creep up right now, like we said, it was 3.5%. It probably needs to be almost double that for, to get to a point where we can get back to a little bit more equilibrium. I follow a guy, Richard Duncan, if you guys are interested in this stuff and really wanna understand it as opposed to just get, screwed around left and right with all these news headlines.

I would go to simplepassivecashflow.com/duncan, and read a, watch a couple of those podcasts there, how everything’s connected now, the problem is like this stuff, isn’t exactly in a vacuum and with the war Ukraine and the China, still a kind of in lockdown, basically pushing up our cheap labor sources.

Now that’s also gumming up how this is all working. And also it’s not like you, you push up the 0.75 points on the rate and the inflation pops up. It’s just not that there’s gonna be slack in the system. And the one good thing going into, the past year, there was a lot of money liquidity in the system.

So it’s gonna take a while for that to drink, which results in a longer slack period. Now obviously the fit is watching this and they’ve probably got the best insiders in the game, or they should make sure that they don’t tip the scales and push us into a hard landing recession. But, I think this is all very natural and it’s one personally, I don’t really wanna see rents go up 10, 20, 30% or 10 or 20%, like how we’ve been seeing it. I think that’s the most sustainable. What I would rather see is just the normal, two to 3% rent increases, which is just normal average, basic inflation.

Because when you’re a business owner, you just wanna do business in normal times as opposed to things going up and down. And that’s what the Fed proposes in my opinion. And I gotta, I have faith that’s what their angle is just to keep the highs, not as high, but the lows not as low and compensate things out to make things a little bit less bipolar.

Pretty much give it a L give the economy a little bit of I don’t know, a drug that is, little more chilled out I guess. Multi-housing news reports, senior housing’s next wave of investment opportunity, like how we were saying, there’s a huge demand and supply shortage for low income housing in apartments. But there’s also a bunch of baby boomers going to be retiring right now, but it’s gonna be a while till they need that senior housing facility.

And nobody knows exactly when that will hit. We’re not there yet, but there’s an obvious need for this in the future. a 45% uptick in construction loans for the first to third quarters of 2021 on the investment sign transactions quickly started to rebound in 2021 and Tate, a 55 year over year increase. Now, I think there’s obviously a silver wave, what they call it, that the baby boomers need these facilities. But I personally really haven’t found reliable operators who could capitalize on this wave. So basically good surf conditions, but coming, but nobody can surf too well, basically.

And, as an investor, unless you’re the one who’s gonna get your hands dirty, take out all the debt and the risk and be the young person who makes the on the general partner side, you’re looking for people who are standout operators that are honest, that do what they say they’re gonna do to help you capitalize on these macroeconomic and microeconomic events.

So Fred Mac expects, the pace of growth is slow in the second half of this year. I think that’s what everybody has known. And I, what I wanted to compare here really is look in 2021, look at that kind of just slack back year from 20. It’s just worked, do it.

And I, and a lot of the industry reports that I read. And if you guys are interested in that send an email to team@simplepassivecashflow.com. We can send you everything that we read or what I read, but, I guess what they’re saying is 2022 will continue to be, as slower growth year 20, 23 is a slower growth year, but 20, 24 is when things are off to the races.

So I think a lot of people may make the mistake of it. All right. I’ll just chill out and do nothing for 2024 and just sit on my butt and have my money lose 9.1% every year with inflation. I guess that is a semi logical idea, but unfortunately I think the way it works is like, once things get moving, you can’t get into these assets for the prices that right now they’re fetching for right now, As the same goes the best time that buy was yesterday and in support to buy under fundamentals, despite what is going on in headlines.

Now, this is a top and bottom 10 metros by gross income growth. The top ones were Jacksonville, Albuquerque, Tampa, West Palm Beach, Orlando, Phoenix, Tucson, Memphis Raleigh, and Fort Lauder. Their annualized growth in income was 12.7% to about 10%. Vacancy rates range from 2.7% up to four, up to five and a half. That’s a normal vacancy rate. I would say some of the bottom metros were Memphis. I don’t wanna talk about Memphis Minneapolis. Washington DC. Lexton Knoxville, Kansas city St. Louis, New Orleans, Columbus, Buffalo, San Jose. Those annualized growth range from 3.1% to 4.8% and their vacancy ranges from 2.7% in Buffalo, all the way up to 8.9% in Washington DC.

The one outlier I see on this list is I thought Knoxville was a little bit better than that, but, maybe that was like Knoxville’s kind of Boise, Idaho, where it had a huge 2001. Maybe it just got a little too overheated and slack back. Not to say it’s bad, anything bad with that market.

But sometimes when you have a breakout year like that, you’re bound to come backwards and it gets lost in these types of arbitrary ranking articles. Joint center for housing studies of the smart people at Harvard university, who makes these really insightful articles. They’re talking about rental deserts perpetuate social economic and racial segregation. Rental deserts are disproportionately located in the suburbs where there are restrictive land use regulations and not in my backyard. I N Y politics can be common. So to highlight that a few of these rental opportunities for households in these neighborhoods, less than 20% of housing units are either occupied by a renter or are vacant for rent. In contrast, I rental errors are at least 80% rentals where a mixture of neighborhoods fall in between the two.

The lack of multi family homes in these neighborhoods is like a significant factor in limiting opportunities for rental households and for lower income renters in particular, single family homes are much more common in rental deserts, which is Unsurprisingly given that single family homes have higher ownership rates than in units in multifamily buildings, kind of obvious stuff.

But it’s kinda interesting. Maybe, if you guys check out the video on this, check out some of these slides at Harvard university put together but moving on Arbor reports at small multifamily investment trends report of 2022 Q2, the they’ve got like a little chart of the action, the volume year over.

The record total represented both a wave of pent up investment in bands that sat on the sign lines during this pandemic. I’m searching for 2020 in anticipation of the monetary Titan. The 2020 ones, the original nation’s total, represented an increase of 5 35 0.6 billion, up 63% from the prior year.

Yeah, I would say, yeah, 2020. We lost half of the year because nobody was really doing business, ourselves included. But as the second half of 2020 went on and 2022 was a big year acquisition wise for ourselves. Key factor that led to an unprecedented search in ordination value volume last year was a wave of refinancing activity ahead of the federal reserve initiating its interest rate hikes. But I think a lot of the mainstream medias, it’s whoa is me, the interest rates, have gone up the last several months to a lot higher levels, everybody in the know, knew it was happening, in 2021 or at least this time of 2021, it really isn’t that surprise to any of us.

Now, how long is it gonna go? That’s the other question? But yeah, refinances and loan originations really took a tail off Q1 of this year.

but, I think the important thing for people who own real estate is rents continue to go up. And in this case, small multi-family asset valuations continue to grow at a robust rate. Best time the buy was yesterday, especially if you cash flow through it cap rates and spreads. Now this is comparing all multifamily with smaller multifamily.

I don’t know exactly what they mean by smaller multifamily. I gotta believe it’s like your 20 units that a hundred units. And then all multifamily is skewing in like larger complexes. Two to 400 units would be the way I would be reading the differential. Usually the smaller multi-families have a little bit of higher cap rate because they’re in less desirable areas which have higher caps and they’re just not as an institutional, they’re a little bit more effort required for those small multi families, but you can see there’s always gonna be a spread between the two, but what’s interesting here is in the year 2020.

Well actually tell end in 19 early 2020, there was like a little pinch where the way I read that is people started to really buy a little more of the smaller multi families. And then there was a little bit of pinch mid 20, 20, but then I think we’re getting back to the normal Delta between N two, how that impacts your regular past investor, who knows, but I don’t know.

I guess I’m interested in this stuff and looking for stuff to do with just sitting on our hands a little bit, waiting for the interest rates or the capital markets. To get on frozen. We actually were gonna sell some of these assets, which the bread was ready to take out the oven, but, unfortunately the buyer market dried up because nobody can really qualify for good lending options.

So it just froze everything and, just, it is what it is. I guess it’s good for people who are in deals and probably frustrating for people who are waiting on the sideline to deploy capital, especially now that they know they’re getting 9.1% of their money every year expense ratios basically like what are you running the assets at?

Normally normal rule of thumb that they always teach you is like 50% expense ratio with apartments. You can run that little bit leaner because it’s more economies a scale, this is showing how assets were performing. 2020 was a lower year than 2021, obviously, because I think like what we did a lot in 2020 is we didn’t have the staff running around.

It was just per appointment. If something broke we wouldn’t get in there and fix it. If it, unless it was absolutely needed because you just wanted to limitate the contact between your staff and your tenants. And it shows how drastically things have changed in two years. Whereas 2021 people are like, all right, fix my stuff.

I don’t care. Wear your mask. I don’t care if you wear your mask, get in there, fix my stuff. So things are went back to normal in 2021. And then, back to where we are in 2022 2020, I see it as a year was everybody was hibernating, like big fat sleeping bears.

And, that’s why the expense ratios were maybe 20% lower what it was in 2021, but all this is in hindsight. And it’s kind, as I looked through this, these big macro industry data, I can give you guys a little bit more insight on what actually drove things.

This is the discussion on loan to value ratios. So in 2020 2019, you had a high amount of debt given out, and this is typical, right? Like things get hot, which happened in, in a 2019. And then there was a, that natural thing called that pandemic happened and it cooled off the market.

And right now we’re in a bad part for capital lending too, where, it’s normally the banks will like to lend at a certain level, but they’ll give exceptions or this is how the commercial markets work. Thinking back on the whole single family home, you, I think what they’ll do is they’ll slowly, people will apply for loans and there may be some exceptions that change.

Something that I can think of is a member several years back, they required like a certain amount of cash reserves, like three months, six months. And at some point they, they loosened up restrictions and, these are the things that kind of play out over the years. For a lot of new investors, this is nowhere near where things were in 2008 where you just needed a heartbeat to get a loan.

Those ninja loans. And I think that’s a big, fundamental difference that it’s just not the same thing in 2008, as it is now. It’s actually hard for like responsible Americans who have a good job. So you even qualify for debt on even little rental properties top 10 metros for multifamily starts.

So this is where they’re building more stuff and you can look at it one or two ways first. So while there’s more supply coming online or which is, could be bad, if you’re there cuz more competition, but it can also be like why are they building more? Why are these smart institutions building more stuff there?

Because the freaking demand is there. So that can be good for you. But that’s Al there’s always kind of two sides. Multiple ways to look at data. Reading up from the top to the bottom New York city, Dallas, Washington, DC, Miami, Austin, Texas, Phoenix, Atlanta, Seattle, Los Angeles, Philadelphia, and you can see the percent changes and the overall total value from number one was New York city area up 20%, total value, 15.3 billion.

And number two, Dallas was 8.1 billion. So half that in New York city it just shows how expensive that real estate is up there. But Dallas went up 72% where New York only went up 20%. Phoenix is another one that people follow a lot of 53% and then total value 4.2 billion. So half that of Dallas and less than a third of New York.

Multi-housing news top 50 multi-family property management firms at 2022. So I just wanted to put this up here because we’ve jumped property management companies and, we started with a midsize small to midsize regional company. And lately we’ve jumped up to that next level of bigger property management companies, the match, better partner not equity partner, but partnership, like they need units and they wanna work with more of an institutional ownership group.

And so we wanna work with a company that is bigger, has more assets under management. One of ’em that we work with is Lincoln down there in Texas, which is number two, they’ve got 210,000 units, little property management companies, mom and paw in the residential world. I think they’re usually between a hundred or few hundred properties, but we’re talking 210,000 units is what Lincoln holds. From what I’ve seen, I’m impressed by a lot of their back office support. And, I think for a lot of us that work for big companies you can see the waste, especially if you work for the government.

There are a lot of things that I’ve seen that a larger property management company they’ll offer the back support. It’s not the they’ll do things and they’ll negotiate better contracts for like materials, or if you’ve gotta like procure, lawn share equipment, they just already have it in their own in-house CA catalog.

Where they’ll support the in the onsite management staff, cuz normally the manage, you would think the management staff is the one buying all this stuff and procuring and searching for the best prices from vendors. The nice thing when you have a larger company is the home office, does it.

And then the people who are boots on the ground at the property can focus on what they’re really there for, which is to help out tenants, customers, support and market.

All right, ya already matrix multi-family market outlook for July, 2022 rent growth, moderates as economy and demand soften remains lofty by historical standards. And I think that’s that kind of summarizes things. Things are slowing down a little bit, but they’re still growing folks. As they say remains lofty by historical a historical standards.

The average us asking rent rose 10, $10 to 1717 in July making the fifth consecutive month of deceleration and the loss increase since January year over year of growth. It’s so growth. Nevertheless Florida markets remain in the lead in rent gains, Orlando, Miami Tampa, San Francisco, Baltimore twin cities posted the lowest rent increases.

The overall trend is attributed to an return to the mean combined with the slowing economy. In addition to the slowing economy, consumer confidence in waning as the federal reserve has kept rising policy rates attempting to slow inflation. Now, again, that’s what I was saying earlier in this this video, but I always like to read it in multiple places.

And I’m sure you guys too, from, other, disruptable sources. Their next takeaways, occupancy remains at 96% for the third consecutive quarter. Now occupancy is, indicators, supply versus demand, and it is the second big thing you look at when you’re looking at the health and wellbeing of your asset.

San Jose, 1.7%, New York, Chicago, and San Francisco, all 1%. Those are your strongest occupancies.

Next, finding supply demand, imbalance sustains growth in the US currently has a shortage of 600,000 units. Another 3.7 million units are needed through 2035 to meet demand. I don’t know if that’s exactly what they said in the article we started out with in the beginning of the video, but still the same narrative, right?

That’s the important thing. The study took into consideration social factors, impacting demands, such as delayed marriage and childbearing, as well as the increased age of first time home buyers. And then the last finding here, single family rentals make the best of interest rate hikes. The asking rent for single family sector growth, 11.2% year over year 21 posted rent growth at 10% with Orlando national Miami in the occupancy degrees by 30 basis.

Point year over year in June, as the rate fell in 24 of the top 35 metros. The one thing I don’t like about when they report on this single family rental. I always question the validity of the data, because it’s so hard to get the data from like little mom and Paul homeowners, which is, who owns most of the little single family home rentals.

And it’s so much more spread in, in the, like in like rents went up. We all know that went up maybe 10% the last couple years across. If you pick any random Metro out there, but depending how sophisticated or how much C you had as a landlord, really determined if you really bump, rents up, Some people were just right on the ball and was able to get a hundred dollars, $150 under a thousand dollars a month.

Some landlords, a lot of these guys who, you know, they’re in, like our Facebook group and they’re just amateur landlords. They’re frozen, solid, they’re freaked out. And they’re like, they’re the ones calling their tenants asking, Hey, can we like pardon you on rent? Like completely doing the opposite, what they should be doing, which is raising rents.

But, I think that’s why single family home rentals are just all over the place due to the amateur status of the operators in that world. So whenever I see data like this, I’m always like questioning a lot. Wealth management.com reports at garden apartments remain favorite among multifamily buyers and garden apartments are, so there’s Highrise apartments, which I think mostly will think of, apartments, big skyscrapers or bigger, more than four or five stories. Those are typically your nicer buildings. But the garden apartments, a lot of these are more geared towards lower middle class families. And that’s what we like to focus in on. They’re typically more in a sub urban type of market and they’re a little bit more reasonable and, it’s, they’re great for pandemic, minded people who, it’s a little more spread out, you’re not on top of, all your tenants sharing, all the limited resources for like common areas and stuff like that.

Arbor reports, rental housing markets, exhibit cyclical, stability complaint contain structural questions. Yeah. So this is showing the implied possibilities of effective federal fund range. Target range by date Arbor is like a lender. So a lot of their articles are more geared towards more sophisticated operators, but I always put these on here. The passive investors we have are pretty smart.

At least you could, it challenges you guys intellectually. I think it least, maybe it challenges myself. So one, one thing that’s happening is declining spending power is having a tangible effect on the ability of consumers to afford data expenses. This is evident by taking fuel. Gasoline costs have gone up for your middle class, lower middle class people out there. Now that is a lot more impactful than the kind of wealthy people who probably don’t really care.

They may complain about it, but it sure isn’t changing people’s behavior. Very much. This is a graph of the relationship between rental vacancy, which is the dark green and the home ownership rate, which is the light green. And you can kinda see home ownership peak in 2020, not 20 2002 to 2006, which is part of the reason why that whole 2008 fiasco cause too many damn people who couldn’t afford houses were buying houses because I don’t, I think that was kind of George Bush’s thing was that they felt like everybody.

Owned their own house. So the home ownership rate went up to 70, 69%. Then in 2014, it fell to, in recent years, the low of 63 2020 was a time where interested were really low and people were able to save some money. So it jumped up to 68% temporarily, but it came back down to baseline, which is tied under 66%, which is about midrange right here, actually.

It’s funny, that spike in 2020, that’s probably, summer of 2020, that was when, a lot of our B plus a minus type of assets. A lot of those tenants who are, a little bit better off tenants, they, they used the opportunity to go buy a house and they moved out.

So we had some temporary vacancy hits during the summer of 2020 when this was actually happening. There I go with my little stories from the apartment world to bring some of this dry charts to life. So here’s another thing RA business online. Their prediction is institutions will own 40% of all single family rentals by the year 2030. I remember it happening in 2008 or 2010. And then what they figured out was it’s really hard for them to operate these single family homes, scattered all around the neighborhood, which is one of the main reasons I focus on apartments, cuz all your stuff is right there and your staff can really focus on a small geographic area.

That’s spending burning up most of their hours, traveling from one place to another. And looking for lost parts without all their stuff being there. But again, recently seeing a lot of institutions coming in, buying big chunks of single family homes and get into these built to rent projects. And it’s the, it’s pro yeah, probably are right.

I probably will agree that more institutions are gonna be gobbling up a bigger percentage of the single family home rental stock. Mom and pot owners still make up most of the single family rentals, but institutions are increasing market share with a heavy concentrate in the Sunbelt. So I don’t think it’s too late if you’re still buying rental properties, just know that the trend is coming.

Sad because maybe in a 50 years, a hundred year in the future, maybe, the doors are always closing and real estate is a nice way for the last, for the average person to become semi wealthy. Get above a few million dollars doing it. This opportunity called you know, being a landlord or a passive investor might be closing up as institutions are able to get more hands on using technology to operate these, semi cumbersome assets, but now use their institutional financing power to, just buy more and more of these things, pushing the small guy out.

We have a bunch of people on our investor group that, geek out on little mainframe computers, these days Amazon is just killing everybody, doing that stuff. You can’t really make it on as your little small mainframe operator.

Across the nation rising rent prices, increase interest rates, limit access to home ownership. I think that’s probably what you’re seeing. Some of the prices stagnant across the country, or maybe decrease a little bit. Certainly I don’t believe in any type of like housing crisis. Goodness gracious. But I guess that does do sell a lot of YouTube views.

Yahoo reports. Blackstone is preparing a record 50 billion vehicle to soup up real estate bargains during the downturn. Here’s how to lock it up in higher yields than the big money. So yeah, like we said, on the last slide, the big institutions are trying to get more and more into the game and this is the them taking up market share from the small mom and Paul, I.

But, I think take a page from these big smart companies like Blackstone. They’re not just sitting on the sideline, they’re in there actively buying stuff. And now they’re doing it a L and N reports and updated run down rent growth, rent growth kind of went up quite a bit. But it’s slowing a little bit stilling. The main factor impacting rank world since the start of last year has been a supply demand imbalance.

It is showing the the monthly Nett absorption and average rent change nationwide still, like big data nationwide, but it does tell the story a little bit. Of course, you always gotta dig into individual markets and more importantly, submarket. I think this is, these are the general trends.

Again, I’d suggest you guys check out the video on the slide, but don’t lose fact of in the last 17 months from March, 2021 to July, 2022 national average effective rent rose by 22%. Normally again, folks it’s supposed to go up like two to 3% every year. So I would say that’s almost like three or four times the average.

Re business online reports to Intel Brookfield to jointly invest 30 billion for the expenses of semiconductor manufacturing plants in Chandler, Arizona. These are the things as an investor you wanna invest in good stories like this, a new supply of good jobs in this case, semiconductors, which is a big deal.

I would check out some of the articles and YouTube videos on semiconductors and Arizona, but it’s exciting. And as an Intel is making a run to reclaim the semiconductor crown from TSMC and get us our independence from Taiwan and China. I. After you asked the question, wonder if the con continuation of interest rate rising will push out ineffective, inexperienced syndicators and operators.

So to answer that question, in my opinion, interest rates don’t really matter, right? Because if you’re already in deals, you’re you’re good, right? You don’t really have to worry about things cuz it’s not like your rate’s gonna really jump up. And if you’re doing any type of value, add strategy, surely in two years or three years, when your note comes due, you’ve created a whole bunch of value.

So it’s really an afterthought. What the interest rates are doing are impacting new in inexperience operators who don’t have much capital behind them because now they have to cough up more funds to close a deal. But I think what’s testing a lot of people, which really didn’t really talk about today in any of these news headlines, is that right now a lot of people are facing the backlash of a lot of the the rent moratoriums on folks.

Where previously in 2020 they froze all the evictions, right? Couldn’t evict people. Basic basically. There were still ways to evict people, but 20, 21, I believe, I might be butchering the timeline, but that was when they said, all right, you guys can, there’s no more moratoriums.

Somehow the CDC got involved with that. People can get evicted now, but it wasn’t, there’s always a slack in this stuff. How is the courts gonna interpret this? And so we really didn’t start to see it come out for six months to a year after. So talking 20, 22, maybe late 20, 20, 21, when you actually started to see these evictions go through the system, and now you’re starting to deal with the.

The bad debt where people just don’t pay and now you can enforce it. But in that meantime, you’ve got a couple months where you have a non-pay unit, then you have another two to two weeks, maybe even a month or more of rehabbing the unit, getting it back online and maybe another week or two to get it released up in the, and get somebody paying in there.

And of course, you’ve got another couple weeks or month of concessions you’ve made, varying levels of concessions, such as a hundred dollars off the first month or half months off the first month, the rest you have to count for. So that’s really what I think a lot of people ourselves included are challenged through now.

And it’s something that the, I think something like that will never get published in a regular type of publication, because it’s just complicated to, to keep track of. It’s it’s more complicated than your Monte Netflix special. For those people who are interested in a interesting story and wondering what was his girlfriend real?

I would suggest watching that video or it’s two hours long, but, getting back to the whole eviction moratorium thing, it is a little bit confusing. And, a lot of people just don’t understand how long it takes its way to actually to, for the problems that bring it’s ugly face and it’s right now.

I think a lot of that should be worked out maybe in the, in, throughout this year early into next. But I think that’s where a lot of the struggles with the industry which you get over, right? If you have enough capital reserves to get through it and your occupancy doesn’t drop too much should be no problem to get through.

Thanks Matt, for that. Wallet hub reports, 2022 is best real estate markets. So one through Tenco, Texas Allen, Texas McKinney, Texas, Austin, Texas Nashville, Tennessee, Carrie, North Carolina, Gilbert, Arizona, Denton, Texas Peria Arizona Richardson, Texas. I’m surprised Gilbert made it on the list. Cause Gilbert, I always said that Gilbert’s kind of on that that east side of Phoenix and it’s funny.

We fought like assets from like the north west corner all the way down to the north or south east corner. And it’s like a slash from upper left hand Northwest to the bottom. And we never picked up any assets. Gilbert. Yeah, but maybe the time might be coming up apparently, but this is just wallet hubs, another whimsical, top 10 less best places to buy a house.

Another one is this is their markets of seriously underwater mortgages. So they’re lowest ones are San Mateo, California daily city, California, Santa Clara, California, San Jose, California, Sunnyville, California, and their highest one. I guess these are the places where people are herding in terms of their mortgages per Illinois, S Shreveport, Los Louisiana, Columbus, Georgia, Bannon Rouge, and St.

Louis, Missouri median days on the market. So the lowest one, and that this is an indicator of how hot the market is. Once Mr. Colorado, Arva Colorado Renton, Washington, Gilbert, Arizona, Everett, Washington. So you have properties in those markets. It’ll go and it’s priced, right? It’ll probably go in like a day or a week.

The worst places where your property’s gonna sit there on the market is Patterson, New Jersey, New York, New Jersey, Miami beach, Florida, Yonkers, New York. So people just aren’t really buying properties out there or is not as much the best city to the worst city differences of differential, five X from Westminster, Colorado to New York.

But how occupancy percent is an indicator for kind of demand and filling vacancies for apartments or rentals. In the real estate transaction world, the retail world, where you’re buying and selling this days on market is the same barometer record setting rent growth in markets in the south and the west eight of the 10 markets with the highest rent growth.

In New York rents rose 20% year of year in the first quarter of 2022, a dramatic turnaround from the first quarter 2021, when rents fell 15% year of year. And in San Francisco, Boston, Los Angeles, Washington, Seattle, where rents fell at least 5% year over year in early 2021 rents were up 10% or more in 2022, which to me is a sign that things are bouncing back it wasn’t.

And this is like where the UTV is, are saying everybody’s moving outta California. Oh my God. Which they generally are, but you, I think it was definitely played up a little bit more and here’s a great chart. By Harvard university of the domestic migration. So the red states are the ones where people are moving out of the only three are New York, Illinois, and California, and the dark blue, the darker blue ones are the ones that people are moving into, which lot in the Southwest, Texas and Arizona.

This is more where international migration is coming in. And, I’m just not gonna really, I don’t know if I should really report on it because there, the numbers that are domestic migration versus international migration is I’m flip flopping between these two slides. It’s 10 X, the amount of domestic migration.

So as I read these states where there’s a. Net international migration, which they’re coming into. I think that’s New York. I think that’s New Jersey. I think that’s Massachusetts. And I think that’s New Jersey Virginia, or probably DC is what they’re talking about there. And then California are the places where you have a lot of international migration.

And then of course, Texas and Florida and New York are the big ones. But one thing that’s interesting that he says many more rural country counties gain migrants in 2021 compared to 2019. So normally you would say the gateway cities like your San Franciscos new Yorks would get a lot of the the bigger. International migrants, but it appears that the trend is moving more towards rural areas.

If you guys are interested in joining our group, first step is always signing up for our club at simple passive cash flow.com/club. We are primarily an accredited investor group these days. So if you guys would like to meet up in person, meet some of the investors, you have to get vetted first, again, going to simple passive casual.com/club.

And from there you can possibly apply to joining our inner circle mastermind at simple passive cash flow.com/journey. But I would say always educate yourself first, check out my book. The free audio version is on simple passive cash flow.com/book. Or I read it out aloud to you guys. And thanks for joining us and we will see you guys next time. Bye.