Aloha! Below is this month’s edition of the Da Real Estate Braddahs:
Stanford Economist wise words
For more insights into investing on the mainland and my personal investing check out my monthly update here in the Greensheet.
- How to Fill Out the New W4 Tax Form in 2020 & Should you extend?
- Can I Get a Home Loan if I am Self Employed?
- Do Commercial Loans Count Towards the Fannie Mae Loan Limit?
- How to Pick the Right Coach for You
- Save Money on Taxes – eQRP Changes for 2020 – Extended contribution period
- Save Money on Taxes with this Trick
- How Much Downpayment Should You do on an Investment Rental Property
- SDIRA/401K Retirement Account Killer the QRP
- SPECIAL CALL (20.03.23) – Covid19 Investor Action Plan
- COVID19 Greensheet
- Implications for Commercial Real Estate (March 3, 2020) from CBRECommercial real estate fundamentals entered this crisis in an extremely strong position. Moreover, labor markets are very tight, and companies likely will maintain their employment levels through the crisis. Nevertheless, property markets will reflect the broader economy, which is expected to see a short-term slowdown. Should the spread of the virus prove to be only seasonal, impacts will lessen as the weather warms, allowing for stronger growth in the second half of the year. Capital markets transactions likely will slow for the time being, but capital values should be resilient. Additionally, there may be some impact on leasing, as decisions on new space are deferred until later in the year. With the 10-year Treasury trading at historically low levels—below 1% for the first time—low interest rates will be a positive factor for property markets. Hotels: There has been a reduction in business and leisure travel, both globally and domestically. Using the SARS pandemic of 2003 as an example, the hotel industry could be severely impacted for up to six months. Retail: Near-term impacts will occur due to reductions in travel, particularly for food & beverage establishments, entertainment venues and fashion retailers. Omnichannel retailers could see some near-term upside as consumers avoid stores and shopping malls, but consumer sentiment may weigh on the sector over a longer period. Industrial: Manufacturing and distribution facilities may be impacted by lack of inventory as supply chains are disrupted. Broader economic impacts could further weigh on the industrial sector as reductions in both supply and demand ripple across the economy. Conversely, if the virus prompts more people to shop for goods and food online, this would bolster demand for last-mile distribution space. Office and Multifamily: Impacts on fundamentals in these sectors likely will be secondary and more closely associated with overall economic activity.Construction: Building material supply chains are being affected with significant backlogs at Chinese ports. Imports from other parts of Asia are also being impacted. Multifamily construction likely will feel the most acute effects due the importance of Asian-sourced materials for residential construction.
- See covid19 cheatsheet here
- The rise of remote real estate investing – Housing Wire
- Public Housing Is Part of the Housing Crisis – MHN – [I think public housing developments like Trump Village in NY is the only killer to Value Class C and B housing]
- FROM CBRE – Oil
- Oil prices plummeted by more than 30% on Monday, the largest drop since 1991, putting financial markets on edge
- The U.S. 10-year Treasury fell to a record low of 0.32%, down by 80 basis points (bps) in one week, and the S&P 500 fell by 7.6%—its largest decline since December 2008
- Energy markets were roiled over the weekend by the failure of OPEC and Russia to agree on production cuts, which was followed by unilateral price cuts by Saudi Arabia
- A rare dynamic of increasing supply amid lower demand is responsible for the rapid drop in crude prices.
- Oil prices plummeted by more than 30% on Monday, the largest drop since 1991, putting financial markets on edge
- From CBRE – Interest Rate – March 16, 2020
- Interest rates cut to zero: The Federal Reserve cut short-term interest rates by 100 basis points (bps) yesterday to a target range of 0% to 0.25%.
- Quantitative easing to keep the cost of credit down: The Fed announced asset purchases of $500 billion in Treasury securities and $200 billion in mortgage-backed securities starting today.
- Domestic liquidity support to keep credit flowing: The Fed cut the discount rate that it charges banks for short-term loans during times of strain by 150 bps to 0.25%. Bank reserve requirements were cut to zero.
- Fed Slashes Rates Again as Coronavirus Pressure Mounts – CPE
- The federal income tax filing deadline is still April 15th, 2020. The federal income tax payment deadline moved to July 15th, 2020 for all tax balances less than $1MM. This means you still need to file or do an extension, by April 15th but you’ll have until July 15th to make your payment if you have a balance due.
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Okay, Hi everyone. Welcome to the Real Estate brothers Episode 26 April 28 2020 edition. We have a lot of great information for you folks. As always. You guys know too if you if you can’t catch us where else we also have a podcast? Yeah. So we’re on Stitcher, iTunes. But yeah, I know Lane you have a lot of stuff for us to talk about and I am going to try to come at it from a little bit of a warm and fuzzy I know you have a lot of
hard data, so maybe we did need a little warm and fuzzy, right?
Yeah, in these times. Exactly. Exactly. Now, so we’re gonna start off with talk a little bit about zoom. I think a lot of people got a, probably a quick crash course in that in the last few weeks talking about some interest rates. I know a lot of people been having questions about why the rates going up versus the Fed rate going down. I have some strategies that I’ve been trying to use to keep myself sane and get ahead. And always. Also, I have a quote to end my portion a Stanford economist has some wise words that I wanted to share with you guys and then we jump into lanes. Half Yeah. So anything you guys know me. I’m a real estate investor, been involved in about eight different states. All different types of investments turnkey wholesale, short sale foreclosure, and I’m also a full time real estate agent. Investor friendly. So let’s jump right into it. We’re going to stay away from some stats today. But I do want to talk about hot off the presses today. About 150. Our Honolulu Mayor came on the news and announced that he wants residents to wear cloth masks in public. These aren’t these aren’t the 95 or the medical masks, he wants us to wear homemade masks, I guess because that will be taking the using the inventory from our health care providers. So to some of you folks, I mean, this could be a could be a side hustle, right? There’s a lot of DIY stuff online now. on how to make these masks and you can a lot of people are making real fancy ones and stylish ones. So if you’re looking for a side, so maybe that’s something to look into.
It thought I wanted the one the Chinese protests one
Which one is that with?
Yeah, cuz so when this all came out, right the Chinese media was trying to censor everything. So there is like guys that walk have this. We will not be shut up or something under their mass.
Okay, I thought you met the one with the Chinese, the one that was standing in front of the tank. This is back in the What is that?
Oh, similar similar.
So yeah, that’s a lot of pop that I added that right in the last minute. But what I wanted to actually jump into first was, again, there’s talking about zoom. Right. So I think that’s been a hot topic for everyone. Everyone’s probably been using it a lot. My son has been using it for his drum lessons for his instructor, my daughter for piano, even hip hop. I know a lot of people including myself, I’m having drinks with my friends on zoom, you know, and it’s kind of fun and it’s being it’s being We’re staying at home and safe. And then of course, I know everyone is has a lot of training as well to masterminds, out of meetings, corporate meetings and things. So a lot of people are using zoom. And with that said,
Go into the late night, you left corporate america too early, and now everybody’s going to learn that we don’t need all these silly meetings anymore. Right? Right. Right. But thanks to
Larry of Honolulu as a contributor, he sent me some content today. And he said, you know, why don’t you talk about zoom bombing? I’m like, Oh, yeah, it’s a good idea. So yeah, with with that the surgence of zoom that has come these zoom bombings are these hackers that are jumping into these chat rooms or these conference calls and doing anything from posting pornographic things or, you know, putting anti semitic item whatever is on their agenda. So you No, we have hackers now in this, this area. So I wanted to talk about a few things. Again, thanks to Larry, he sent me some information. But we have a next slide talks about a few things and don’t use your company’s login to do your drinking parties on the week. Oh, that’s so very good disclaimer, but a few tips that I’m that are going out. And I’m sure you know, this is something that’s going to be even more run of the mill in the next few weeks a few days is how to prevent this now that it’s a big thing, but a few small things. First and foremost, is protect your PMI, which is your personal meeting ID. So that’s something unique to you. I mean, it’s like your login or password. I think you can do is require meeting passwords when you’re This is all when you’re scheduling your meetings. Yeah. So yeah, don’t share that PMI and don’t send it out and post it on social media or public areas because that’s what one one area that they’ve been tracking or been the hackers have been able to crack in on. Also. We have other information here so you can use it also in settings. Yeah. So you can control who you can share screen share with right so you can say host only our participants so we can start sharing when someone is sharing. You also can put attendees on hold and that allows you to actually kick them out of the meeting if they’re causing trouble. Waiting Room I think you use a waiting room really, as we did in pop in our I’m not too sure but
this this when we do these calls, we don’t have the meeting room, some people Oh, yes, talking in the talk.
Okay, we’re better watch what we say then. Yeah, that’s another option. So these settings if you see if you go into the zoom settings, there’s actually a whole bunch way more than this. And I think everyone is going to become if they’re not now a lot more familiar with you settings, because if I think the I don’t know if they added them on recently or what, but there are a lot of settings for privacy.
And so I’ve been using this thing for like, two, three years now. And there are a lot of settings and it keeps getting more and more
overwhelming for the new guy.
Yeah, and, and I think it’s, it’s more of a risk for the when you’re having, you know, really large meetings, and you’re sending it out, like posting it and giving it to a whole whole lot of people, right, because then it’s out there. And that’s when it’s at risk, because then it’s no longer as private right? So then you don’t need to restrict things. So maybe for smaller meetings, it’s not as essential for these things, but might as well to get get used to them now because I think the you know, these these kind of zoom meetings are going to be become more than norm more than anything else.
Yeah, a couple of quick tips that I use is like whenever I’m not talking here, like I just press my mute button. And then when you use the Zoom chat, and you’re kind of talking to somebody, make sure you you’re being cognizant if you’re doing all panelists are just one person. Or maybe if you’re if you’re one of those trash talkers, just text, the person just might be safer.
And that’s good etiquette to write because you don’t want to be. It’s almost like when you’re on the walkie talkie to CBS when you’re stomping on somebody else. So that’s a good point. So, yeah, lane. I know, I think you had this question. I’ve been getting this question, too. And I think we’ve addressed it in the in past meetups and discussions, but you know, everyone’s asking, or some people are asking why have interest rates increased when the Fed rate rate went down, right. So the, the, there are a few reasons. The main reason Well, I have three here. So the first one Is that the Fed rate is not? There, we mentioned that before the federal is not directly related to the 30 year amortized loan. So it’s actually the target rate for overnight loans for his financial institutions to make in between each other. So mortgage loans are priced on the longer term. So that’s why they’re not directly related. Also, one big thing, I think, is that, you know, the rates have been really low since January and February and the financial institutions and lenders are getting bogged down just from that. So with that volume, they can’t handle the capacity of more apps coming in. So what did they do? They just, you know, they raised their rates just it’s like supply and demand, right? So they can’t, they can’t service everyone properly. And then I mean, you also have the appraisal appraisers and everyone else trying to keep up with that, too. So it’s all like this big pipeline. So, on the retail side, they’re also adjusting the rates that way. And then the third reason, which I’m the least familiar with, is that prepayment risks, right? Because for the mortgage backed securities, which are what’s used to fund these mortgage mortgages, they’re a little bit they’re different from the from treasuries because they’re, they have prepayment risk, right? Because, you know, a lot of the time majority of times 30 year mortgages don’t go all the way to maturity, right? People refinance, where people sell and they buy and I think the one of the statistics they see is seven years is the average life of a, of a 30 year loan before it’s either refinanced or closed out because of a sale and a rebuy. So
that’s another reason why
these 30 year or the Retail, Fannie Freddie loans aren’t going down, even though the Fed rates had such a drastic cut almost to zero. Yeah.
Yeah. I mean, basically, most times they’ll follow the Fed rate. But you know what you’re talking about the third week of March or second week of March, the Fed rate went down to almost zero, but the interest rate jumped up. And basically, it was kind of like number two, they’re like you’re saying, like the support, there wasn’t enough. There was too much demand, from customers trying to refinance. Therefore, the rate bumped up
is that and I was sure if you’re familiar, but you see that on the commercial side, too, or maybe you don’t look for financing as much as the rest guys do. Yeah,
the residential guys are a lot more like emotional, right? Right. But the commercial guys, everything’s kind of frozen right now. And we’ll kind of get into that. But yeah, the agency financing Fannie Mae Freddie Mac HUD loans, they are required by law to Lend even in these kinds of like really strange times. It’s just a small short period. But if you want to, you know get a loan now you’re looking at like mid four or 5% where previously you know we we locked the rate on March six for a deal at 3.23% 15 year term 30 year amortization, four years interest only just think that you could have timed it better. And a nice thumbs up like a almost a full point from there.
Because I locked in about a month ago for my four Plex and that was at 4875 I think I was bummed but apparently it gets underwritten with almost like a commercial from the standpoint of I mean, I still get a 30 year I’m work but they tack on all these these premiums because it’s more than a two to two, two unit or, and, you know, it’s investor loan. So, on top of whatever maybe was like three points CIC 2.5 for owner occupant loan at that time the tech on all these premiums. So yeah,
like, you know, auto non owner occupied at a quarter tough point and then not a single family home or a duplex or quad at another quarter. Yeah, yep.
And that’s it. And now that we talk about financing, I mean that they are, they’re dynamic, right? So they’re also looking at on the read side anyway, they’re looking at their underwriting Real Estate Investments differently to from the standpoint of, they’re already anticipating, you know, non payment from the tenants. So let’s say you had X amount of dollars coming in for income from the, your rentals, they’re probably going to discount it more from the standpoint of you know, that trying to cover your debt servicing, because they’re expecting a lot more unemployment as we’ve seen today from the stats that came in on the national level, but so underwriting is Changing as we speak to you. So be wary of that, as everyone is looking for for refinancing or for money, cheap money, right? So how to get ahead of this try to get rid of out of the negativity? I mean amongst everything, I think to me, it’s always mindset. We didn’t we always talk about mindset, right. And I think I mentioned in the past to where we came up in the morning and I try to come from a mindset of gratitude, you know, wake up, open my eyes, and I’m happy to be alive. My kids are healthy. You know, family is where we have a house under roof to live on food to eat. You know, considering our current situation, I tried to look at the positives. Yeah, I am. I get to homeschool my kids right now, temporarily. So I’m appreciating that family time and I actually read visited faith a little bit, you know, a lot of things online or online. So one of my, my college friends, my college buddies, he became a pastor at a local church. So he let me know that their, their mass mass ceremonies or their mass is online. So I tuned into that on Sunday just to to get back, you know, retouched back into my feet. I was, I was baptized Catholic, but I’m non practicing now. But anyway, the whole point is, you know, mind, body and spirit, you know. And, of course, you know, the whole pyramid of needs. You want to make sure your personal life is order you and your family be ready for self quarantine if it comes down the line because you never know y’all had one investor, friend who went to South Korea got stuck there because of the timing. finally was able to come back right after you got off the plane, you know, CDC put a mask on him and they escorted him On a daily basis for 14 days, they would randomly pop in on his house and say, No, you can’t leave the house. So he did pop in at any time. And so fortunately he had someone to help do shopping for him. But yeah, be ready for for potentially being self quarantine we’ve seen it we’re seeing it pop up so many places, right? and checking with family members you know, that you don’t live with I think that’s really important families and friends. I have my children call their great grandmother every other every few days. And check up on her, you know, tell a few jokes. See how she’s doing just to keep her in good spirit and she’s 9094 years old, I think now so, you know, they’re alone. You know, a lot of the older older ones are alone and don’t have, you know, family to talk to you at home. So you know, think about all those people, your your friends and your family that maybe in that situation And reach out. I’m trying to stay away from the news. I don’t know about you folks. But um, I listened to, like Fauci I listen to him. I like to listen to him. On a daily basis, I listened to see what the wahoo stats are in terms of if we’re slowing down that curve. But um, so that’s kind of stuff I listen to daily, but I try to keep the social media news from being on you know, 20 471 second.
Yeah, I mean, I don’t try and see off social media to hear and what I’ve been telling my guys is protect your mind, protect your body. Make sure you get some activity and you see work out. And then, most times, for some strange reason, it seems like the algorithms for Facebook, Instagram, they kind of prioritize things that usually sort of bring you down. I’ve seen a study on that, Oh, interesting. So and then you got the kids there, right? That’s no, that’s every time I talked to one of my colleagues or partners, they always got the kids in the background and Safari life, man. Yeah.
extra nice present this year.
I know, right. And you know what we, it makes us appreciate educators too, because I think they’re, you know, educators are, are under, they’re not respect as much as they should. So props to your wife. And, yeah, so, also, you know, find out your financial situation, you got to make sure you’re healthy, right. So, look at your balance sheet. Look at your your cash flows, make sure your reserves are set up. And when you say cash flows, I mean, typically that’s like your job if you’re a W two employee rate. You know, try to see how that’s going. I mean, some peeps, some you can’t help it. You know, a lot of especially in Hawaii, we have a big tourist industry. So I know a lot of people are Are hurtin and things can be helped but I also hear of being people being proactive and applying for
other jobs that might not be in their wheelhouse but they’re trying.
I’m hiring man. Oh, okay people need a job work from home all right. Yep the time to get after it. Yeah.
And then your businesses right and you try to bulletproof your businesses. For for me on the real estate side, I’ve been reaching out to my property managers. I’ve been reaching haven’t started I reached out to a few lenders but I haven’t reached out for my to my lenders to ask for forbearance or or to push back any payments yet, but I’ve been talking to my property managers and to see how collections for this coming April, April 2 today So now is the when the property manager working hard to hopefully collect our our APR. rents are looking at your liabilities your mortgage is you looking at, you know, can you refinance, tap into additional equity. Or maybe you know, if you haven’t done so if you’re at a higher rate, maybe you want to try to go back to get a little bit lower rate, looking at your investment portfolio, whatever it may be, you know, I called my financial advisor to just to talk story with them and, and I probably they probably don’t want me to say this, but I mean, because they’re, you know, everyone’s getting bombarded all the service providers, rather, whether it be a financial advisor, property manager, I don’t know how you’re seeing it in terms of the operators on the syndications. Hopefully, you know, your service provider is being proactive and reaching out to you or to their tenants or whoever it may be to be proactive with this process. One of my property managers, the last month was being proactive for seeing this and reached out to tenants. sending them information on local resources where they could possibly get short term funding where there’d be not for profit churches or, you know, some kind of relief for for rent. So they were sending that out and letting them know, you know, they’re still responsible for rent, but if not, then let them know. And, you know, it’s important to have that communication. So I’m glad now’s the time you’re seeing your service providers that are shining. Yeah. So whether it be your financial visor, property manager, operators, realtors, yeah, if they haven’t reached out, then reach out to them. And I say be locked and loaded and ready, meaning, you know, get your cash reserves set up. And you know, now is is the chance may depends on what’s out here. I know, on the research, you seem to be corrections on the in the stock market and you know, every day goes after the big hit, but two hits, it’s been kind of going up, down up down a little bit. So, the volatility is kind of interesting and if so, I’m The day traders are absolutely loving it. I’m not a day trader it’s kind of exciting 401 K’s so are you w two employees there’s there has been a lot of dynamic changes for 401k plans recently whether it be from that allowing you to make changes in terms of contributions to you know, being able to take loans from it things like that. So looking to to that in terms of you know, if you need more cash flow then maybe you can reduce that. If you don’t need it, maybe you want to increase it because now you can dollar cost average into your mutual you know, into your funds at at discounted prices. I know, Lane you and I we go back and forth about 401 K’s and the high fees and financial advisors and the fees, but for you know w two employees who, who aren’t doing anything else We’re not gonna go into real estate, and the counting on that as part of the retirement then, you know, think about that, you know, 2019 IRA contribution was extended with with the tax extensions. So if you want to open up a IRA for 2019 still can do it until I think what June so
to summer so you know, all these things. I’ll say the opposite he cares act is allowing you to take 100 grand out of your 401k penalty free and I’ll talk a little bit more about those in later in the presentation. But right, this is the, the sign to get out of, you know, yeah.
I’m being agnostic in terms of the real estate versus the stock market. So, I mean, we’re, you know, but yeah, that so back to my point of being locked, loaded and ready. If that’s what you want to do, then, like you said, now’s a chance to take from it and use it, to be ready for, you know,
Warren Buffett’s is the time to be greedy when as everybody’s fearful, yo, yo, in the streets. I’m a I’m an introvert. So I actually don’t mind this time, I don’t have FOMO that I’m missing out on something on the weekend.
So this is like my random slide where I started, like throwing stuff on. Right and just more just to let everybody know, you know, we’re gonna get through this. So all those families that have stocked up on 10 cases of Costco, I mean, that, to me that mindset of I don’t know, you know, what, I think people are, are have are anxious. Yeah. So we need to, like you said lean, you know, be of sound mind and commit from from a different mindset. tenants, you know, there are going to be tenants that are not going to be able to pay because the last job, I had some tenants that I was just, just last week, we were just trying to Get a lease extension. And so from the week before my property managers asking me about, about them. And so I said, Oh, yeah, I’m not thinking of increasing the rates at all. So just just request extension. So the email came back from the tenants and they said, Oh, you know, considering this current situation with the owner be willing to reduce the rent rates for the for the next lease renewal. So, at first I got kind of, like, taken aback, but then I said, Well, you know, what, have they had the property manager find out, you know, what’s their situation? So she went back in she was asking, so one of them was a nurse, and another one was, I think, police and this is on the mainland. But what after she had inquired, they came back and said all, you know, disregard regard, I request, we will renew and so I think And there’s people who are you know, people aren’t thinking straight you know? Because you know even for you know if you’re trying to get get away with not not just getting away but if you’re not gonna, if you can’t pay rent that’s one thing but if you’re trying to get out from paying rent and that’s another right Same thing with if you’re not if you’re trying to get out from paying your mortgage but you can if you can, I think you should because it’s just gonna you’re gonna have to pay for it later. So same thing as a tenant right? And if you need to yes ask ask for relief. But if if you’re doing okay then I would say just not because that you know, that might just make the relationships poor with your with the other half later on down the line, you know. So, I also wanted to point out there’s no such thing as over communication in my mind, right. Like I said, I’m reaching out to my clients, to my my service providers and talking story with them. Finding out how things are going, you know, multiple states today are asking, oh, how’s it in, in this city, how’s it in this state and then seeing how everyone is handling it in their locality. And again, that’s when you know, the good service providers are shot will shine out. Talk to your loved ones, as I mentioned before, talk to your clients. To me, reaching out and talking to people, for me is more is cathartic. You know, it’s kind of great to see how everyone’s doing, making those connections that we can’t do in person anymore. I know lane you had mentioned you’re more of an introvert. But for me, I like to get out there. So I’m doing it to my kids and my family, but I’m also trying to,
and that’s the thing, right? It’s not about me, it’s about everybody else. And then I mean, I’m trying to have as much as I can have with my investors because most people are shook up right. Let’s face it, most people lost 30% of their stock market portfolio. Yep, yeah. No, that’s Yeah. So
So and with my portion with Oh, I want to talk about that the SBA loan I posted on the bottom. Yeah, a lot of my counterparts, friends stuff, we’re reaching out, everyone’s sharing information about the if you go to sba.gov for your business owners, but it’s nothing for business owners, not for profits, homeowners and renters you can apply. There’s two different loans. If you go to sba.gov, it’ll tell you more about it. If not, you can reach out to me We’ll I can talk to you about that offline. But the federal government is part of that $10 billion dollar stimulus package that Trump passed. Yeah. So there’s relief out there. So let’s keep on looking out for you. And I wanted to end off my section with a quote from Stanford economist Paul Romer. And he said, crisis is a terrible thing to waste. So you know, when emergency hits the There’s actually opportunities that pop up, right. So resources become more available. Right? priorities become clear, right? We know what we need to do rigid rules and regulations suddenly become pliable. Right. I thought that only, you know, death and taxes were were the only things that were guaranteed, but the taxes got pushed back, you know, so things change. Leaders pay attention and are accessible, right, we’re seeing our president, we’ve seen our mayor governor on the TV so often being asked questions. So, you know, we’re seeing leaders are pay attention to what their constituent constituents need. And lastly, I want to say to you know, change, even forging change is possible. So, it’s so important to have that right mindset and to be locked, loaded and ready with with our, you know, our liquid cash so that we can invest Yeah. So that’s that’s what I wanted to see.
Okay, and we have my
kids, and I’m sure if you guys are looking for some help give Dean a call. And I’m sure he’s willing to chat with you guys because he’s anytime. Yeah,
I love Like I said, I love talking, talking story and I’m trying to get that proper mindset that we should all be having.
So we should jump into your section so that I can go on
All right. So if you guys haven’t checked out my podcasts, it is a simple passive cash flow. We all talk about turnkey investing, whether that’s single family homes or syndications. So you check out the YouTube channel too. And then we have Dean and I have Rei aloha.com, which is our local Meetup group, which we’re not meeting up and up lately, obviously. So I’m going to take everybody through a little recap of what’s happened this past month, just so we can really understand what the heck happened to us. So earlier in the month, probably the end of February. Dow Jones was, you know, having these huge decreases because of the COVID-19. But not a lot of people realize that he was also because of the oil price war between the Saudis and Russia. So the COVID-19 crisis is sort of known as what we call a black swan event. As you know, most swans are white. But once in a while out of a genetic anomaly, you have a black swan. So we basically got hit by two black swans right now, oil, if you just look up the price of crude oil, it’s trading in like the 20s or 30s. It’s just like, it used to be in the 50s. And, you know, it’s just, it’s just not realistic for it to be in the 20s. And right now what’s happening Russia and saw the Saudis are trying to wait just price war against the older or the smaller oil and gas operators. I actually went into one of those deals in December but not too bad. I mean, we still have the equity there and the assets. So, you know, we didn’t use debt on that deal. But the whole idea is to, they’re trying to price everybody out and, you know, have the smaller operators in America hurt.
And the frackers rate.
Yeah, well, I like to call it stimulating the well, but yeah, if you want to use the F word, or the shale that Yeah,
they’re trying to get those guys to go
broke. Right. Right. So two big things happening. I think most of the news is on the COVID-19 Coronavirus. And I put this in here for those of you guys we’re gonna blaze through this pretty quickly, but if you guys are on the YouTube channel, you guys can read all the articles and check out all the graphs and pictures. But I put this in here this was early in March 3 CBR e released this Sutter summary and you can see that the tone change very quickly from you know, in the beginning of March, there were words used like, oh, the virus proves to be only seasonal impacts will lessen as weather warms stronger growth in the second half of the year. You know, sentiment like that was early and earlier in the month and then obviously, like around mid March 15 things starts to tilt to now the same reports from CBR E. are, you know, more of a doom and gloom? And you know, I don’t think I don’t really see it more doom and gloom I’m, I usually see things pretty factual, but it just shows how media and even these very reputable news sources kind of
they change your tone so quickly,
is why I don’t really trust them for the first place. So this is one of the biggest days I was watching. 2000 points down and dow um, what do you think, Deena? You are you like so all the amateurs Right, they all say, oh, now’s the time that by right, what’s your thoughts? Um, I can’t say I’m a pro. So I’m an amateur too. But um, what? I
have a feeling it’s gonna go down again, once more of the reports come in from the, you know, the corporate quarterly reports start coming in. But I, but honestly, I’ve been jumping in because now this is still a discount from the Dow when it was what 29 five. So, but my understanding is that, you know, you’re from the technical standpoint, you’re looking at price or any ratios that are still that still appear to be higher than what’s, quote unquote, reasonable and, or healthy. So I’m kind of waiting for that, that second correction, because and so what I’ve done is my 401k I think I mentioned I would put put it into capsule in January and I just went back in a few weeks ago when the Dow went back to
Oh, wow. 21 for you
21 I know I went I went in about 15% Okay, so so
because it’s, it’s, it’s 401k money, I only can put it in a few few mutual funds so and so and I can just, you know, allocate percentage wise, so, I’m just, I’m still waiting. I’m still waiting.
You know, me. I don’t have any stocks. I don’t believe that stuff. Yeah, I don’t. I stopped believing in the Easter Bunny A long time ago and believing in paper assets. But yeah, if I were to buy something I buy like the vanguard Energy Fund. I mean, crude can be 20 $30. That’s not that’s
listed. Yeah. So I mean, to your point, like so many things are trading at a discount that um, why not buy but I mean, it’s already Relatively
easy come easy go. I don’t invest in anything where I don’t have a clear advantage. Yeah. Yeah. So kind of falling on this timeline March 16 came around. This is at a point where things kind of tilted where things were going bad for maybe a couple weeks, and then the Federal Reserve cut rates. And everybody thought that the interest rates would go down with the Fed rates, but in this strange instance, which we talked about earlier, the 10 year Treasury and interest rate decoupled and, but this essentially what happens here is called quantitative easing, where the federal announced asset purchases of a 500 billion and Treasury securities and 200 billion mortgage backed securities. And just to give some context, and remember in December 2007, the Treasury was at four point too. And December in 2009 19. Before this COVID-19 was even a thought Treasury was at 1.7. And then all this is nonsense zero. That scares me. Yeah. So we’ve kind of used this analogy before, right? The Fed rate is sort of like drop dry powder. When economy is going well, you want to increase the rates. So in troubling times, you can use that dry powder to stimulate the economy a little bit. But in my opinion, I was actually surprised when they cut rates on March 16, that they just blew their whole load. And and
yeah, it’s really weird because that’s only there on like, a Sunday, right? They didn’t even wait to I think the the next announcement was only like a week or a week and a half later, and they decided to do it on a Sunday. So it was it was so much I thought they would have been maybe like, you know, 25 basis points. Yeah,
you normally get 25 or Yeah yet the very last but they just I don’t know maybe somebody dropped dropped at all i don’t know i mean what do we know right we’re just we’re just recording the news here
Yeah But to your point is they and that stat just now is is a key we’ll we don’t really have any any dry powder for if and when right
markets do you know correct again So you knew you knew something was coming out and we’ll get to that here in a little bit okay um some some news for everybody here the tax filing deadline got extended past April 15 federal tax payment deadline move to July 15 2020 for all balances less than 1 million. This means if you file you need still need to file or do extension but you got pushed back to July 15. But me and most of my investors we always just fall in October anyway. I mean no sense to fall early in April or even July in my opinion. It makes, you’ll see some I’ll talk about some changes that where you can go back to some previous tax returns, based on some cares act, relief put in for rich real estate investors, which is always nice. And that’s why you always wait for the last second.
And just as important as the or for the state. I mean, I’m before the tax returns at the Fed, but it’s important that your state tax return was extended also. Because if not, you need to do your federal tax return to get your state tax return. So if your state is wasn’t extended, which I believe they all have been, you wouldn’t. Your tax preparer wouldn’t have any relief, because they still have to prepare your federal tax return before to submit your state but I believe all the states have also extended so like Like you said, we’re Hawaii is July 20. Yeah,
yeah. And this is a good time to remind everybody that we are not giving tax legal or professional advice out here. We are just giving you ideas to go to your professionals. And, you know, read this stuff for yourself at the irs.gov. website. Don’t there’s always one guy who like says, Oh, you guys said there’s no taxes due and you don’t extend and like, Well, you didn’t think for yourself, buddy. Yeah. So as you continue along in the second half of the month, Federal Reserve cut the rates to zero. And the idea of the cares Act, or this what we call the stimulus plan, a lot of names out there that people are using. And at this point, a lot of the blue states like especially like California, we’re putting halts on evictions. And this is why I always say, you know, I don’t know why you would want to be a landlord in a blue state where this is going to happen. So it was this was happening and, you know, going back to how you’re dealing with your, your tenants, um, you know, the way we i don’t know i mean, I think it’s a case by case basis. But what I’ve been telling my investors who have rentals and blue states is maybe you don’t say anything, you don’t draw attention to it. Or maybe you, you, you, you hit it up upfront. Because people in California a lot of those tenants have that idea. I’m just being really general hear that they’re entitled to not having to pay rent, where what’s nice about our tenants in our red states is they don’t get all these, you know, self righteous ideas. You know, they don’t know crazy ideas.
And then like, like likho we mentioned, I think it comes down to people acting irrationally. Because if you think about it, if you’re a tenant that can pay rent, and just doesn’t want to, and you don’t, because of if there’s a law that or a loophole that allows you not to because my understanding is if you can’t pay then you that’s that’s one thing, but if you can pay that’s another so Keeping in mind that if, you know if that’s the case, you could potentially just, you know, assuming you like the place that you live in, you may ruin your relations with your landlord or property manager, or whomever. Because, you know, after all is said and done, then and and then they’re now allowed to, you know, after this passes, and you can they can kick you out, then you know, they may very well may kick you out. And so, I mean, you get people need to think in terms of the long the long run, and I just think Okay, today and don’t get me wrong, I understand there are people that are in financial crisis and financial burden, but they, I my example is if people are thinking irrationally, because short term that may be nice, but if they can pay I would say they should because you know, they may get kicked out when they’re when being kicked out. is allowed, you know? So, and I and you can’t really, as a property management, you can’t really communicate that to people but I think just through time, people realize, you know, as the tenants are talking, oh, what if, what if we, you know, we can pay but what if we don’t pay, and then what’s gonna happen next month or the month after that, and then you know, it kind of comes, there’ll be talked off off of the, off the ledge eventually. And again, this is not to say, the people that are truly having financial burden. That’s why for those people just communicate to your landlords, so that, you know, the communication is there and something can can be negotiated because, you know, our owners owners, we, we have mortgages and bills association fees to pay to so everyone we’re all in this together. So that’s why communicating with is the best
alternative in my mind,
and that’s why these conversations Good even though they’re, you know, we’re kind of all over the place a little bit. But you know, like, That’s why, you know, you kind of join a community of other like minded investors that are kind of doing the same thing. So you have these kind of conversations because every situation is different. So here are some other headlines. We’re not really headlines, but things that happened the last couple weeks that kind of kind of got brought to my attention. So Marissa and then started to furlough two thirds of their domestic force. Cheesecake Factory, you know, those guys they notified their landlords that they will not be making their month, their their month’s payment this month, the rent gap, Macy’s, Kohl’s announced separately that they’re planning to furlough a majority of employees so we’re starting to see the layoffs for sure happen. And then on about the end lat this past week Coronavirus relief package, the $2 trillion stimulus plan got created and I’ll be breaking that down for Sure, but I’m in another mastermind with probably the top two of every MSA out there in the United States. You know, these guys flip over 100 houses a year. We have calls every week and here are some of the activities that they are doing because these guys are right at the forefront. These are frontline soldiers. Maybe not the things that you and I would do especially passive investors. But just to get some insight of what these guys are thinking they’re thinking fill vacancies as soon as possible even though you have to reduce rents five to 10 15% call your property manager and ask them to do what they can do just to get butts in seats or heads and beds. lock people up on month a month leases or Eb be flexible go to six nine or 12 month leases in I wouldn’t really suggest this for the average person but these guys are getting their credit cards and paying their vendors out of it and just hoarding cash. Cash is oxygen to get you through the situation. And mind you these guys So the guys who sending who are sending you landlords, those annoying postcards, and yellow letters to have you sell their house and these guys ad budget, they usually spend anywhere from 5000 to $25,000 a month. So they’re cutting that and but they’re keeping their TV ad and pay per click their online ads because most of us are stuck at home watching TV or scrolling on social media. They are sent there are firing people, unneeded people and decreasing their overhead and I think that’s something we can all emulate.
You have a captive audience now on social media.
Yeah. Other things that they’re doing is they’re getting their he locks in cash now so I call that monetizing your he lock. Because you never know that’s the bad thing about these he locks things get sidewards and the banks pull those he locks. You don’t have access to that anymore. You take that money, you monetize it in your bank account. They can’t really touch it. Get quotes to refinance any properties and I Quote, your insurance rate to help lower your expenses. If anybody needs a couple referrals actually have three insurance guys I refer out to, if you guys are looking to recoat that, let me know I’ll shoot you over to them and should be prepared. At this point. I mean, I have 3000 units. At this point, we’re using the weight NC model right now, like we said, we don’t want to show our tenants that we are going to be overly forgiving on this. And we think that it’s a big deal. And we take this very serious and we know it’s a big deal, but we do not want to communicate that this is a big deal to our tenants. As far as they’re concerned, the way from our outlook is like it’s business as normal, your rents dude. We’re going to be going into a whole bunch of small business and parts of the stimulus package and I’m going to be having a webinar where I get my lawyer, we’re going to go through these things in April 15 so if you guys are interested in that, shoot me an email and I can introduce you to that but I also have a living guide to all this stuff at simple passive cash flow.com slash COVID-19 but this first SBA benefit is you know if you applies if your gig economy work in the gig economy 1099 worker, independent contractor you work for hire self employed you’re eligible for a payroll protection loan as long as your business does not have less than 500 employees and you know in our in our mastermind they were kind of telling us look every single LLC you got you should be applying for a loan. I’m actually going to after I get done with this call, I’m gonna actually sit down and try and do mines I might have my lawyer do it, I might pay him because I don’t like doing that stuff and I’m lazy doing that the paperwork, stuff like that. So might have him do it and you know, he’s willing to kind of do the same. You guys are looking for a referral from them. That.
Take a look at it the lane I did. My understanding is there’s two SBA loans one is online. And another is you need to go through the bank to a bank, I’m sorry, but when they first rolled out that first that 10,000 forgivable loan, it was very complex and it was a little bit of a pain in the butt. But then the, the, the sba.gov site crashed, and they came back and they redid it. So when I went to
the forum, right on Monday, yeah, it Yeah.
And it’s a lot more is I think he’s like to two pages, and they don’t ask upfront for you to submit anything. In terms of supporting documentation, so yeah, it might be just two pages, take a look at it. I would suggest and go through it yourself. It’s relatively simple. The other one though, the payroll one, the or there’s another one that’s above and beyond 10 K and down my understanding is you need to go through a Bank almost like you know, like how you go through a getting a normal business loan. So that one might be a little bit more challenging. But yeah, it. I mean, if you guys need help ping me too. We can I can help walk you through it that. That first one though. The other one. Yeah,
that yeah. So the purpose of this stuff is to get the money in people’s hands and get have them spend it and put the catches you can’t you can’t fire anybody but the good news is, it’s not all or nothing, you know, if you got somebody on your team who’s dead weight, you know, you get rid of them and supposedly they can kind of pro rate it as thing goes along.
Yeah, I think you need to be in business during this time to right if you’re shutting down. I mean, I don’t know if they’re gonna allow that. Right. Makes sense. Right.
Right. But as far as I’m concerned, the way I read it, I mean, if you got a heartbeat, you’ve been impacted by this COVID-19
Yeah. And they’ve been trying to roll this thing out so quickly, and it’s so dynamic to your point, Lena I’m not too sure how You know, there’s some consistencies in terms of,
there’s no way they’re gonna regulate this. There’s no way.
So, to your point, yeah, I would, if you’re unsure if you qualify or are eligible apply, because, you know, the worst case is they’ll say no, or, or maybe they give you the funds and say, No, you need to pay it back. But, I mean, if anything, I think they wouldn’t say no, first. So yeah, the worst case is they’ll say no, in theory,
it’s a it’s actually should be like a tricky way of doing the 2020 census. If you got a heartbeat, I would, I would consider applying. Don’t just wait, don’t just wait on your 1200 dollar check. That’s for everybody else, you’re gonna get that too.
That’s a guarantee. You gotta
get you got to put your name in the hat for the 10 grand grand
action plan. So at our properties now we’re on the institutional side, you know, I’ve got 3000 units. We don’t have the time to, you know, calling talking start with each individual tenant or each property manager. So here are the things that we’re doing. We are sending out all the letters to our tenants saying that Yeah, we’re cleaning things making things sanitize and we’re telling them to stay at home for guidance, the CDC and government agencies just to stay in line there. We still are addressing work orders, but we are conserving cash at this point. We we are trying to do more of the safety related and emergency reporters at this time. We’re cutting back on our property management staff are possible and we’re still showing properties and but trying to direct people to do the more websites and then just having do self guided tours where we require ID so don’t screw up the property. And of course, like I said early, we’re kind of reinforcing that the rent is still due.
Are you do you have section eight? Yeah. Yeah. Are you finding that some of those six You need, they’re not doing inspections or things like that. How are you? Like, I know, that’s the case for a few jurisdictions that I’m invested in this way.
Probably, I mean, like everything and like in terms of that that’s deemed non essential, right. So yeah, I mean, I’ll talk about it later on, but like, you know, if you have to get some LLCs because you’re doing a deal, get it done now, right? Because all that stuff can be cut off all those, you know, I mastermind, those holes, bunch of wholesalers and flippers, they are freaking out because they can’t the courthouse is not working on their deal right now. So I pulled this wallet hub article in here and has a list of the most over leveraged cities and underleveraged cities just to see who’s the most in danger here and on the most over leveraged cities, that’s the ones that you don’t want to be there are good old Ella beach, Hawaii and Carlucci.
And actually I have a like oh, to email for distressed properties to hit send to me. And yeah, now that you mentioned that I do see a bunch of distressed property sales listings popping up in that ever beach area. So yeah, interesting.
So some tips of being a landlord, you know, listen to the story, ask for information request an offer for the tenant, you know, don’t be the first person to say, Oh, well cut your rent by 10%. And I heard that recently, I was like, that is not good negotiation skills, buddy. You know, you want to hear them out. And you want to say what do you think is fair, and sometimes maybe they might say something that’s, you know, less than you’re willing to go? communicate and we’re taking the stance of trust, but verify if they, if they’re saying that they lost their job. I want to see pay stubs to verify this. And luckily, last week, I was actually a little worried last weekend. I’m not going to lie that my 10s are going to pay rent and we’re, we’re all going to die. But I guess the fed the after the cares act really saw the stimulus. The government agencies, Fannie Mae, Freddie Mac, released guidance on forbearance. So that’s what’s nice about getting these agency financing, as opposed all these portfolio loans where you’re the, you’re subject to the bank’s rules. So the Fannie Mae, Freddie Mac forbearance options are, you know, they’re they’re willing to hold forbearance for 90 days, but the catch is you can’t evict anybody. So it’s, it sounds good, but you know, a lot can happen 30 days you can effectively turn your property into a non paying Class D property pretty quickly. So that’s the other downside to that. And then so
what my understanding, I’m not sure, but I heard that the way that
it’s If you don’t pay, like for those three months, they just tack on those three payments to the back end of your mortgage. Is that is that
something? Yeah, yeah, you’re not it’s a forbearance if they just tack it on at the end. It’s just putting pause on on life basically. Yeah. So those of you who are individual landlords and you want to be very proactive, something that we are now we’re kind of taking the wait and see. Here is a sample letter that you can possibly send out to your tenants or something of the sort to communicate your standpoint and reminding people that their rent is due. Other things that I’ve heard people doing is they are offering like a $20 gift card for people to pay early. Because the thought of people are running out of money, they don’t have much more than 1000 bucks a cash reserves so if we can get the rent out of them 15 days early before the net script net Flex subscription comes in, etc. You know, that’s we can pop up, you know, collect rent where we otherwise wouldn’t. But the problem is when are you? When is that optimal point that you’re just wasting money on gift cards? We don’t know. That’s why we we we are personally not doing that. Figuring out your ROI. Yeah. All right. So other changes going into the future. I’m personally staying away from class C deals, because these are the most vulnerable part of the population, especially in this case, because these are the guys who are the first to get cut. These are the hourly workers, and a lot of them are in service related jobs, non essential, and especially smaller deals. You know, I’ve I’m done with anything less than 100 units because you just don’t have the scale. When we underwrite we are using a 4% interest rate on our commercial loans. I would use a 5% interest rate on single family homes. And, you know, we’re only using two years of interest only underwriting um, that said, you know, we’re being conservative that nature like, you know, a couple weeks ago, we got 3.23% 15 year term on a 30 year amortization and four years of interest only phenomenal loan, but we just want to be more conservative. Another way we’re doing that is increasing our assumed economic vacancy just add a little bit more cushion into the model.
Be more conservative in your
forecasts. Right. Right. And this is, you know, going into the future. Yes. next quarter next year.
For future deals are
just updating to deal Yeah, future deals. Yeah, passive investors. Some potential action plans that I’ve been talking with my passive investor accelerator mastermind is number one, evaluate your job status. Do you work for the government? Do you, you know, you’re going to get laid off what’s happening. I would be really uncomfortable being in a 200 $300,000 oil executive right now. I mean, especially with the With all the oil crisis that’s happening once you figure that out, and you’ve kind of figured out how secure your your current cash flow situation is, number two is to cut costs, you know, this is 2008 2009 all over again, I don’t think it’s that bad. And, you know, it’s trying what you try to do what you can do to redo insurance quotes, save costs, you know, don’t spend money on things you can’t. You don’t need monetize those lines of credit. So he locks and if you guys are interested in Geeking, out on what happened with the interest rates and the federates decoupling, go to www dot mortgage news daily comm they had a great podcast in early March,
explaining just that.
So I did it a survey with my investor group, most of which are accredited investors. So keep that in mind. And I was a little sad because the a minority of the investors who are the non accredited guys you know the guys under a million dollars net worth. And Dean those guys are dropping like flies. I mean, you know, that’s like you and me in our, you know 20s right like they are hurting right now. They are scared they are dipping into their savings. And they are like they don’t want to invest right now. But they’re living
their species they’re living paycheck to paycheck banking on the future cash flows from their, their, their jobs.
Right? Right. And they just don’t have the net worth right. They don’t have the available cash too, as I call it have an opportunity fund to ready to get after which the accredited investors like 80% of them are like licking their chops right now. The way they see it if this is a true Black Swan event, there was nothing wrong with the economy before this will happen. I don’t know if this is going to be like how they say like a V correction we come right back out of or more of a Nike swoosh but I am definitely bullish. In the second half of this year and the beginning of next,
right, and then the different markets are going to be affected differently, right? Like the Wii may very well be more potential for the stock market versus the, you know, the real estate side is is has a little bit of a lag and the reaction time, maybe slower and not as not as deep potentially right on
where you invest. And it’s so strange because this is unprecedent because such an industries are completely out of business. Some are still in like, you know, construction is deemed essential. And that’s, that’s going like gangbusters
right now. And I’m guessing Amazon must be doing really well from I mean, people who may have never purchased on Amazon may be looking there now right? And creating a Collinson. Yeah joining prime to get the videos so I mean, you opened up like you said, unprecedented were some people maybe I don’t know if it’s think the older folks who who never even did Amazon Maybe even you know reaching out and trying trying to buy products but like yeah, it very interesting times and Soho opportunity right for those who who view it that way. Yeah,
I mean look at like zoom right I mean, it’s like that kind of company is they’re blowing up. I was trying to buy you know those peloton bikes yeah I went there’s another competitor that’s a lot cheaper that I think is just as good. So I’m with them. I’m Echelon, but their bikes are sold out for the entire month. I had to put mines on order.
What about that other one that mirror or something I saw you’re looking at that too. Oh, yeah, I got that one
too. You got it? Yeah. Because if you get both of them you use the same monthly subscription for both. Kava Oh, they’re they’re affiliated. Yeah, they’re affiliated. So I like going better there.
Yeah, it looks more appealing to me then because there’s seems to be like you could do a lot more types of activities versus just being on a bike.
Yeah, yeah. I mean, I want it like the yoga And my wife can use it. And
yeah. Are you affiliate affiliate rep for that?
No, they I don’t think they do any of that kind of stuff. But you’re welcome to come and work out. You know, maybe not the yoga.
I heard you can go on YouTube and do it at home yourself. Yeah.
Um, and I think, again, this is where the negativity comes in. Like, I think most people, especially amateurs, they’re all trying to, like predict the next recession or, you know, this end of days. And appeal to that. It’s like, you know, it’s kind of cool when you predict predict it, right? You’re kind of the guy. But the trouble is a lot of these guys called Param bears they predicted for for the last two recessions. Right?
Yeah, I mean, if you don’t jump back in after you, you call it and prep for it, then what good is it right?
I mean, we had we had a lunch a couple weeks ago with our partners had lunch with this kind of old school developer and he said like Dude, this is like Jimmy Carter years again this is like he sees it as a complete Black Swan to and he said this is where I made a ton of money this is where I made legacy wealth right here. This is the time
everyone should be excited. Yeah.
Well form energy sooner than later in case the government closes offices are deemed those type of things non essential. And, you know, be on the lookout for rent control.
Economic Outlook moving forward.
Um, again, like, you know, government at $2 trillion oil trade cannot sustain 20 to $30 a barrel and remember that the economy is doing very well before this whole Coronavirus and oil trade issue came about might be opportunity to find deals. People are trying to make sense so like what’s happening with The real estate on the on the right side here I have a picture of four chairs. And for people, I call this the great musical chair game. And luckily found a picture with four chairs because they sort of represent a B, C D, class housing. The basically what’s going to happen here soon, people will potentially lose their jobs and they’re going to be displaced, they’re going to have the A’s are going to move the B’s, B’s and the C’s, for the most part, and for a time, there’s going to be sort of what’s depicted here, everything is going to be up in the air. And there’s not going to be butts and seats or heads and beds and landlords are going to be paid, which I feel like is temporary, which is why adequate cash reserves is necessary to kind of wait this out,
write it out, you know,
here is a list of some of other notable Black Swan events. You know, one time events that just happened out of nowhere, nobody could have predicted it. And then The decline and Sep how many months and then the how we came right out of it. And some of these are like the Russian crisis y2k 911 terrorist attacks. They said, the guys who came up with this or I try to report that I subscribe to it’s a paid subscription. I would recommend it to anybody who’s listening who’s looking to, you know, cut through all the garbage out there. In terms of the media. These guys said that the 911 terrorist attacks are pretty similar, not not in terms of like the trigger what it was, but in terms of what they believe how will come out of it. Aren’t you glad you didn’t invest in hotels or, you know, this is why I don’t like short term rentals, and all that stuff is gone right now. I put this little graphic together to depict what exactly happens in a demise of economy as you viewpoint from a real estate investor. So first here, the Black Swan event, which is the Coronavirus in the fear sets in stock market retracts 10 20%. And that has already happened. business income decreases that has already happened. companies start to cut jobs now that is starting to happen. And what we don’t know in this first week of April while we’re doing this webinar is can tenants pay rent? Why did we we remember we invested in workforce housing in the beginning, because housing is the last thing to stop paying. And this country had a housing shortage to begin with, but many people live paycheck to paycheck. We are kind of at this stage right now, we don’t know if this is going to happen. And once that happens, or if it happens, that we need to see market vacancies go up, decrease market rents and this happens over a period of months of this type of environment. Then lower operating income which which will then impact the higher cap rates, which is what drives commercial real estate. Now, as far as your world deemed the residential properties have You’ve seen any kind of softness in pricing or as what’s going on there.
On the wholesale side, you’re seeing more things pop up. I guess that’s from, you know, people can’t buy things cash anymore, right? So the deals that I’ve been seeing and this gets getting forward me from my partners, is that Yeah, because people are you they’re wanting to hold on to their cash or not, you know, getting gun shy, they’re, they’re holding off because you know, the deals might get even better later. On the retail side, volume has definitely slowed down in terms of what you know, as a realtor. We were we can’t have open houses anymore. And so, my understanding is we’re still essential. But you know, we can’t, there’s a lot of things we cannot do, and it Some things are deemed you know, if you’re interested Already then maybe you can have activities to close it up but you know we’re still trying to keep everyone safe so with that said volume in terms of people showings and people looking at potential listings are it is slowing down but you still have people who need to sell and people who need to buy But yeah, I think we’re and I didn’t talk about any stats for Honolulu this month because the march stuff March data won’t come out till in four days
and it’s all a moot point given this next one right I mean,
yeah, like you said, I mean, I think it’s gonna be the the one it’s gonna be like, you know, May, April and Mays data that comes out that and, and to see what’s happening and by that time, we already know right based on on our volume in the amount of
people reaching out to us potential buyers and sellers. So
exciting times that the following night
Yeah, no but like you said to it’s an opportunity, right? So Right,
right. I mean, a couple of deals came back to us. Not for any reason that like another, another buyer couldn’t perform. But we’re in the situation where like if we go in with a good offer, you know, we want we don’t lowball people. You don’t do that in commercial real estate. It’s just silly. But if you go in with a little bit of a discount, you go and strong You know, people most people are wanting to sell these days most sophisticated owners. So other shares some good news, some tailwinds. You should be looking into the unemployment benefits and what we’ve been doing actually some of our property managers have been sharing the links basically spoon feeding their tenants how to get their unemployment benefits. I’m giving them the the state and local URLs to file for that. It’s tax time for you know, most people filed their taxes in April and a lot of our tenants should be getting a tax refund. So hopefully They have that money to pay us rent. Ah, red states are not restricting evictions at this time. And future government programs, as we said, and here’s a little breakdown of the cares act. So, again, we’re not giving any financial advice. I have my lawyer giving a webinar on April 15. Let me know if you would like to join us on that to break it down but here are some of my interpretations on it first $100,000 you can take out from your retirement account penalty free and I think you have like three or six years to pay back the you know, it comes it shows up as active income and you have to pay the taxes on that. But great opportunity if you’ve been looking to get out of your your equities and get into hard assets.
Number two here.
cash checks are coming out via the graph on the right side shows you how much you’re supposed to get. Dean, you married filing jointly with two depends, you got a check for 30 $500 coming. I hope
unless your wife had a really good year this year
is there’s a quick phase out between $150,000 and $200,000. adjusted gross income
that’s based on 18 then
I don’t know how they do it. Cuz Yeah, cuz things aren’t finished yet. Yeah.
I should. My AGI is nothing. So I should get something for sure.
But not in 18, though. Oh,
I think it was less. I don’t know. I don’t really you know, I you know, this is what I’m gonna pay my lawyer just to do, right. Just to do the paperwork because I I have a I feel bad about doing it. You know, doing all those kind of the free handouts. So I don’t have like, I’m not motivated to do it. I just rather just pay someone to do it for me. Even to the specialists, I’m conflicted, ethically. FMA is getting additional leave there. So if your employer gave you an extra week to stay at home? Well, it’s not because of them because the government gave it to them in the cares act. SBA loans, we talked about that credits for retailing employees. And this is a cool one qualified improvement property. So those of you guys who have passive losses from your rental properties or syndication, there’s a change with the hundred percent bonus depreciation for costs associated with the interior improvement of non residential property by changing the tax life from 39 years all the way down to 15 years made retroactive for improvements after September 27 2017. So you can go back a couple of tax returns and refile any comments on that one Dean.
I just was thinking maybe vacation so you’re gonna have a lot of them amended tax returns back to 18.
You know, you know what your here’s what, here’s the things I see. I think a lot of like CPAs are rolling their eyes right now and they’re like, what a bunch of work. I really hope my client doesn’t have a clue what this is. So I can just be another lazy CPA and not do it.
Oh, I mean, it’s I mean, cheaper service, right? The service providers you get paid.
It depends, right? Some some CPAs you just pay on the refiling fee. If you do it per hour, not everybody does it per hour. Or Yeah. Yeah, I don’t know like the sun. I wasn’t a CPA. I was more of an engineer. Right. And you know, when your boss gives you something super complicated to do at the end of the day. This is like one of those that just makes me cringe.
Yeah. Oh, well, yeah. Whenever you’re doing tax depreciation, it’s already a pain in the butt. So, I mean, I think once they get it down pat, then you know, it’s systematized like anything’s and then so hopefully there their, their tax software will be.
Yeah, but there’s a little bit of
a judgment call, right? The CPA needs to use a little bit of like brain power and strategy. Like, are they going to take this all the way back to certain years? Does it make sense
to take it upfront? I mean, it’s all about just, you know, you’re taking advantage of up front versus spread out. Right. They’ve been so you’re doing? Yeah.
But yeah, I mean, I would say most CPAs would just kinda be quiet. Like me my last year of work, right? Yeah, you don’t say much, and want to create more work for yourself. But maybe that’s how you I shouldn’t have a day job like that.
Because, you know, if you open your mouth, they’re just gonna say, okay, they give you the work, right. But
yeah, exactly. Yeah. So just to recap, you know, this is a breakdown of the $2 trillion. I’m not going to read it you guys can read it on your own but the New York Times came in with this article Bonanza for rich real estate investors tucked into simulus plan out i would i would agree with this. I mean yeah, it was I think everybody needs to help out and everybody’s hurting but there are definitely a lot of things put into there for real estate investors and the wealthy so definitely, but I call them Bart bipartisan
in order to get it both sides to pass right quickly, they all have
to take a hit. Here’s my analogy. It’s like you know, when you take your kids to Oh, you don’t take them toys Toys R Us because not there anymore. But you tell your son Oh, I’m gonna buy you the Nintendo Switch. Can you take them and that sucker goes and throws in all these games in the car GM
So this is a kind of negligible But they added in a $300 above the line deduct deduction for charitable donation.
skip some of these.
So this is a chart from costar data house. They have a they pretty much all the data they have on apartments calm, there’s a big conglomerate behind them. But they put together this chart on absorption they can see and this is what I like what these guys do is they put together different snails and this is their forecasts of severe downside or the heavy doom and gloom. So they see us they see vacancy going from currently like 6.5% and going up too quickly up to eight as high as 8% later on in the year, and then that should taper down after So, you know, they’re acknowledging that there’s a recession. On Green Street advisors is saying senior housing student housing are ones getting absolutely killed in the real estate sector. But you know other good notes as we mentioned less meetings. We can we’ve hopefully we’ve proven after this month or two that we can do things virtually more family time less sports there’s almost nothing about watching ESPN other than last you guys play around the toilet paper at home more time to exercise this COVID-19 economic survival guide is what I put together you guys can get it simple passive cash flow calm slash COVID 19 that’s a living guide um, I have a book club if you guys are you know folks like Dean that you need some social interaction. Check it out simple passive cash flow calm slash lane hack, a reading the go giver book. Also, I read this. I guess maybe it came from this book, but I just decided To give everybody my ecourse for free for the month, I was like, screw it. I mean, it’s like, I usually sell it for like $900. But I just because this book just says give gifts stuff away.
So how do they sign up for?
Um, they can go? They need a coupon code. Okay. And the coupon code is kokua and it will turn it into free.
So I probably have to spell core for the or non. Oh, yeah,
yeah, no, I had to google it too. I think it’s k Okay, you
get to Google it. I did. I don’t know.
Is kakui to the Maui.
Well, I didn’t spell that that was came from the article. Oh, really? that wrong? Oh, God. Yeah, I was like, Where’s that at some big island or something?
But yeah, so simple passive cash flow, calm slash. Course is how to get that for free. And that’s only for this month because I’m trying to be a go giver. alohar I did sign I see over 100 people sign up and wow, I could have bought a lot of peloton bikes for you, me and the family. Yeah. And I mean, I think I just think like you and I are especially are very fortunate that we don’t have to worry about like getting fired from our day jobs because we don’t have day jobs. Right. And I think a lot of people out there are hurting and we’re all in this kind of like situation together where it’s a big like traffic jam, right? Like, it sucks. And I think a little bit of compassion for everybody is definitely needed in any way you can.
Yep, very, very well put.
Yeah, we’re not gonna watch your kids though. Dean.
Tries you for that. Oh, man. And let me check the other half that maybe she I think Yeah,
I don’t know. I don’t think she’ll do it.
And then we had we were going to do a may a live seminar for folks. Yeah, the URL is Rei aloha.com slash Rei one on one dash 2020. But this has been postponed. So we will let you guys know when we plan to do that while you just wait a month or two before we
have this. Yeah, looking forward to that though. So hopefully Stay tuned. Yeah, hi, everyone.
Yeah, simple passive cash flow, calm slash, join Team. I’m hiring. I don’t think you’re looking for people to help. Right? Right.
Support admin support.
Right. And here are a bunch of articles um, if you guys have any questions, type them into the question answer box. I know we went a little long today but
this is excited. We actually have news nowadays, and no
This is all on our YouTube channel. And, you know, here’s our legal disclaimer. But um, yeah, I wanted to ask you, I, I’m thinking that they’re going, I don’t know how long this COVID-19 crisis what will occur? I know there’s a lot of I’m sure people talk about it, and it sort of gets political sometimes for some people know what, what policy should be taken. But I mean, I think if this thing goes longer, I think there’s going to be a stimulus to package coming out.
That makes sense. Yeah. Yeah. Especially if it yeah, that that. That sounds very reasonable, especially when you’re when you brought politics into it.
And I don’t know if it’s gonna be like another 2 trillion or what but it’s
sounds unsustainable. Or,
and here’s where I’m going with this I base. People get really upset when the government creates fake money. Like how they’re doing And the way that it works, despite what your economics teacher tells you is the the way to get rid of the debt is just to inflate the money supply,
then our debt is worth less.
Right. Right. So like, you know, your parents bought a house 30 years ago for what? 50 Grand 50 grands nothing today, right? That’s essentially what we’re, you know, we have a $2 trillion bill we just added to our balance sheet. Well, hopefully in 10 2030 years, that 2 trillion be nothing.
And it’s not unprecedented to you know, he had a look at there’s other I think Japan, there’s other countries that are have been doing the exact same thing. So
right and, and I think
I’ll make a bet way you do. I think that this I think there’s a good chance like a maybe a 5050 chance that we’re going to see negative interest rates this year.
Why that’s interesting.
Um, ah, I’m 100% sure if Trump gets a second Which I think he will I think we’re going to see negative interest rates in the next four years after this. Okay, so people need to realize is like you put money in the bank, the bank charges you to hold it there. So it’s a total situation where gravity is reverse.
And so you
Yeah, you’ve heard it here first. Listeners lien Nostradamus, Coco has predicted the negative just streets. What a appropriate background you have there.
Just trying to get away from all everybody and do my part and flatten the curve, man.
I like it a lot. I like that.
What do you what do you think? I mean, is that
it’s not on her. I didn’t think of it. Yeah, I wasn’t even thinking that it might possibly going negative but a legitimate point Aye.
It’s very interesting. Good point and I put a bid on it just for fun for lunch when we can Yeah, in person.
I’m, I’m pretty confident in that. Cool, quiet. And it’s not like the end of the world. You just have to play it the right way. You just have to buy assets and don’t keep your money in the bank because savers are losers.
Right? Right. Yeah. And so should be interesting how what happens to the you know, the ones that you know, cash is king, which was always the case. Yeah.
Yeah, I mean, works for some people. I don’t do that mean either. Yeah. Anything else you want to share with folks and anything you’re going to get done this next month or calling for you’re watching? Oh,
I just know just a message for everyone to you know, come with the right mindset of gratitude. And like you said, lane compassion. Communication is Important and you know if you have free times on your on your hand use it to to better yourself you know learn a new skill read a new book invest exercise but do something you know we have for sure we have one month ahead of us that we’re stuck at home so use it to your advantage and so that at the end of this month you’re ahead in some way and you’ve bettered yourself in at least one way I think would be my my message to everyone stay positive.
Yeah, and if you guys want to reach out my email is Lane at simple passive cash flow calm or if you want to book a call, and we haven’t chatted before go to a simple passive cash flow. COMM slash contact I think, yeah, slash contact.
All right. Oh, we got a last one. Okay. Okay. Says awesome. You go, Dean.
All right. Take it easy. See you next month, guys, right
Free real estate investing, check out our ei aloha.com
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