Aloha! Below is this month’s edition of the Da Real Estate Braddahs:
For more insights into investing on the mainland and my personal investing check out my monthly update here in the Greensheet.
- UNTOLD STORIES OF BEING A W2 LAWYER (#169) – https://simplepassivecashflow.com/lawyer/
- DO I NEED UMBRELLA INSURANCE? – https://simplepassivecashflow.com/do-i-need-umbrella-insurance/
- FITNESS TIPS AND VIRTUAL TRAINING FOR THE BUSY (#168) – https://simplepassivecashflow.com/fitness/
- COMMERCIAL MULTIFAMILY LENDING W/ JAMES ENG (#167) – https://simplepassivecashflow.com/167lending/
- JUST SOLD RENTAL 8 OUT OF 11!!! – https://simplepassivecashflow.com/saraashley/
- ENGINEER INVESTING IN SFH THEN MFH – JACOB AYERS – https://simplepassivecashflow.com/166jacob/
- LIVE COACHING CALL W/ ANOTHER ENGINEER (NON-ACCREDITED INVESTOR) EP.165 – https://simplepassivecashflow.com/165pat/
- SEC ADVISORY – https://simplepassivecashflow.com/sec-advisory/
- The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs – Bloomberg 19.09.4 – “Central banks and Basel III have more or less removed price discovery from the credit markets, meaning risk does not have an accurate pricing mechanism in interest rates anymore. And now passive investing has removed price discovery from the equity markets. The simple theses and the models that get people into sectors, factors, indexes, or ETFs and mutual funds mimicking those strategies — these do not require the security-level analysis that is required for true price discovery” – [Equities are intangible assets, same guy investing in water]
- Fannie Mae Eases Credit to Aid Mortgage Lending – New York Times – Throwback 1999 – “extend home mortgages to individuals whose credit is generally not good” – [Captain obvious]
- Trump signs executive order to tackle lack of affordable housing – Housing Wire 19.06.25 – “According to the Census Bureau, only seven homes were built for every 10 households formed from 2010 to 2016” – [We are undersupply from a housing standpoint]
- Stocks and Mortgage Rates Rise!This past week home loan rates ticked up sharply from the previous week leaving many wondering — have rates bottomed?Three things affecting home loan rates:U.S./China Trade Dispute: 1) Tariffs being delayed by the U.S. and China. With economies slowing, 2) central banks are cutting rates and introducing new financial stimulus to keep the economic expansion growing, 3) August 5 – Mortgage Bonds hit a 2019 price high and have been unable to break above that price, and subsequently slipped lower creating a tough “ceiling of resistance”
- Fed Cuts Interest Rates for Second Time in 7 Weeks – CPE 19.09.18 – “Clearly the Fed is concerned that the economy is more fragile than has been popularly thought,” Kelly told Commercial Property Executive. “That’s reflected in the rate cut, and also the ‘lite’ Quantitative Easing being considered.”” – [Politics at play here?]
- Construction Spending Slows, Reflecting Economy’s Pace – CPE 19.09.19 – “Nonresidential construction spending dropped 1.8 percent to $773.8 billion on a seasonally adjusted annual basis from May to June; although, spending increased 2.3 percent year-over-year, mirroring the rate of inflation. Of the 16 tracked nonresidential construction sectors, which range from office to highway and street to water supply, five recorded contraction: commercial (retail), educational, religious, communication and power. The commercial sector saw the greatest decline, shrinking 10.7 percent.” – [ITR is calling a 2019 slowdown and 2020 to get back and going up again]
- Caesars Agrees to Sell Rio Casino, Hotel in Las Vegas for $516.3M – ReBusiness 19.09.23 – “We are undersupply from a housing standpoint Caesars will continue to operate the property for a minimum of two years under a triple-net lease, paying annualized rent of $45 million. The buyer has the option to pay Caesars $7 million to extend the lease under similar terms for a third year. At the end of the lease term, Caesars will either continue to manage Rio or provide transition services to the buyer” – [Older hotels being phases out]
- Six predictions for 2020 and beyond – PWC Trend Report –
- The global investable real estate universe will expand substantially, leading to a huge expansion in opportunity, especially in emerging economies. World population growth and increasing GDP per capita will propel this expansion. By 2020, investable real estate will have grown by more than 55% compared to 2012, according to PwC forecasts, and then will expand by a similar proportion in the following decade.
- Fast-growing cities will present a wider range of risk and return opportunities. Cities will present opportunities ranging from low risk/ low yield in advanced economy core real estate, to high risk/high reward in emerging economies. The greatest social migration of all time – chiefly in emerging economies – will drive the biggest ever construction surge.
- Technology innovation and sustainability will be key drivers for value. All buildings will need to have ‘sustainability’ ratings, while new developments will need to be ‘sustainable’ in the broadest sense, providing their residents with pleasant places to live. Technology will disrupt real estate economics, making some types of real estate obsolete.
- Collaborating with governments will become more important. Real estate managers, the investment community and developers will need to partner with government to mitigate risks of schemes that might otherwise be uneconomic. In many emerging economies, governments will take the lead in developing urban real estate and infrastructure.
- Competition for prime assets will intensify further. New wealth from the emerging economies will intensify competition for prime assets; the investment community will need to think laterally to earn attractive returns. They might have to develop assets in fast-growing but higher risk emerging economies, or specialise in the fast-growing subsectors, such as agriculture, retirement, etc.
- A broader range of risks will emerge. New risks will emerge. Climate change risk, accelerating behavioural change and political risk will be key.
- Forever 21 Files for Chapter 11 Bankruptcy, Plans to Shutter 350 Stores Worldwide – Shopping Center Business 19.09.30 – “company plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America. The Wall Street Journal reports Forever 21 could close up to 350 stores worldwide, including up to 178 In the U.S.” – [E-Commerce is not destroying these retailers but its to much debt]
- Treasury Unveils Plans to Privatize Fannie Mae, Freddie Mac – GV Wire 19.09.8 – “The administration’s plan calls for returning Fannie and Freddie to private ownership and reducing risk to taxpayers.” Trump administration unveils plan to privatize Fannie Mae, Freddie Mac – USA Today 19.09.5[Unsophisticated investors get too excited when they see these headlines and brokers love to scare investors to buy. Don’t hold your breath on anything with the government]
- Occupancy stats
- Yardi Report
- Miami Real Estate Is About To Collapse – WolfStreet 19.09.26 – [Softness in high appreciation markets]
- SEC Considers Expanding the Accredited Investor Definition – Wealth Management 19.06.19 – “JOBS Act 3.0, meant to spur capital formation, prompt more initial public offerings and generally expand the public’s opportunities to invest. That package passed the House of Representatives last July. One bill in that package, the Fair Investment Opportunities for Professional Experts Act, would expand the definition of an accredited investor to include education and job experience” – [I hear that they are going to make Accredited investor definition 5M and market it easier to qualify]
- Home flipping profits are fallingHousingWire – 59,876 single-family homes were flipped in Q2 2019, up 12.4% from the previous quarter, but down 5.2% from 2018. This decline is primarily a result of rising home prices leading to lower flipping margins for investors. CBS News ROI of house flipping reached an eight-year low in Q2 of 2019, and while housing prices rose 4% since 2018, home flipping profits fell by 2%. CNBC “the average gross profit on a flip was $62,700, which then translated into a 39.9% return on investment, after renovation and carrying costs. That is down from a 40.9% gross flipping return in the first quarter of this year and a 44.4% return in the second quarter of 2018.”
Chron points out that the fastest-growing segment of home flippers are classified as inexperienced based on CoreLogic data: “Small-time investors—people who have purchased 10 homes or fewer over the past two decades—are increasingly flipping homes rather than renting them out.”
WCPO Cincinnati reports that a federal racketeering lawsuit has been filed against Build Realty—also known as Greenleaf Funding. The company markets itself as a “one-stop-shop for home-flippers looking for help with financing, including rehab costs, without a credit check.” In reality, the company reportedly scammed money out of hundreds of home flippers in the region.