December 2019 Market Update "GreenSheet #8"

Summary: Latest news headlines and commentary

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Unknown Speaker 0:00

Are you busy professional overwhelmed and misled by the stock market dogma saving and work into your 70 I like to help you out and get to know you a little bit better with a quick 15 minute strategy call. Hurry as I'm only opening my schedule for a limited time as I take it easy the rest of the holiday season and get going for a busy New Year. But good call by going to simple passive

Unknown Speaker 0:20

cash flow calm slash talk.

Unknown Speaker 0:22

Hey guys, I'm traveling at the moment going down to the collective genius mastermind at San Diego then off the Huntsman Dallas. I'm really enjoying the real life of a professional investor without that day job. This week, you're going to be listening to my monthly market update webinar, which you can join us live by joining our email list or check out the YouTube video online. And while you're there, subscribe to our YouTube channel which we're giving away free course subscription for YouTube subscribers. Also, if you want to check out the video form of this webinar, go to simple passive cash flow comm slash investing letter aloha Maybe we'll try to rent them out. And then he became one real investor maybe you guys haven't subscribed to the podcast simple passive cash flow comm check it out. And also check out the YouTube channel. I've been getting a lot better adding more videos there to you guys want a free version of my ebook, text ebook 25873176099 and join our Facebook community if you have not already. So our first article here is Apple committing 2.5 billion toward California housing crisis. So they're saying that they will commit $2.5 billion towards efforts of solving the obvious affordable housing issue in Northern California. I used to work for a city and these are Always there's always a negotiation to give permits. That's the leverage a municipality has over big companies like this. And you know, these big companies, they would like to build infrastructure like sidewalks, curbs, and not have to do ridiculous the tension tanks under new construction and different stormwater. Anyway. The municipality has leverage over them. So this is a way that that the business of how it can kind of negotiate things for the community. And it seems like it's a Oh, it's a wonderful thing that Apple has done, but no, they probably it's a deal deal between them and the municipality just like how Google did this. And Microsoft had first hand view on what Microsoft did in their city. And this is this kind of shows failures for markets and public policy to meet the housing needs. I wouldn't want I live in Northern California, unless I had a huge tech salary. Yep, that's a, it's in the chat window cronyism. That's what you're talking about. Next article here 3019 rent growth chart here from mid November. This one they released pretty often multifamily rent growth is back and in the black, increasing $1 to an average of 1400 bucks about per month. The takeaway is that the rent growth are still happening. Class B and C investors are circling secondary, tertiary markets. And this is no secret to a lot of us simple passive capital investors targeting non primary markets for the cash flow and not having to compete with dumb money, to say the least. So there and I'm co here. It's fueled by Strong employment and a growing group of renters by choice, investor exuberance for multifamily properties is spilling over into older properties as well as secondary and tertiary markets buyer older properties and renovating them, meanwhile, can offer better returns. I think we all know this. But you know, not everybody in the world thinks like this. there on the bottom, we had a chart that I took from the last apartment.

Unknown Speaker 4:30

You know, those are the typical class BNC rents that you're going to see in a lot of the secondary and tertiary markets, anywhere from 550 a month, up to $800 a month. Definitely a culture shock to a lot of us that live in poverty markets where you're used to seeing houses cost 300 $400,000 or more, and paying $2,000 a month rent for a little studio. For those of you who want to kind of come back to this presentation you guys can do this later, but this is the third quarter 2019, United States multifamily capital markets, they do a good job of just running down the high level of what's kind of happening across the nation. And it's interesting to track this, each quarter that each quarter no surprise yields are compressed nine basis points, which isn't very much year over year. And that's consistent with what I'm feeling, but it's nothing like I think a lot of people are like, Oh, no, the sky is falling, and will never be able to get yield. There's yield there. The gap is closing very slow, slowly, but it's still there. But you're not buying the average. You know, they come up with this number where they average probably million deals out there. You're trying to find that one needle in the haystack and, you know, if you're patient, you'll find it rent growth. You know, just like the last publication I just mentioned, they're saying that the rent growth increased 3.2% nationally. Which is up 60 basis points over last year article about those impacting those doing Airbnb and short term rentals. Jersey City joins the push the block Airbnb, where what they're doing is they're going to borrow renters from listing the apartments on the site as well as owners who don't live on site. And this is another reason why I don't like short term rentals at all. I prefer blue collar workforce housing, long term rentals, just boring stuff. article titles multifamily rents rise as a vacancy, Titans, effective rents for institutional properties and what they mean by institutional properties are like these are the big ones typically the a class because it's easier for them to get data on this. They're saying rents grew 3.3% which is, you know, mimics kind of what we very close to what the last news source mentioned. Up 1.6% over the previous quarter. So that's almost half of the annual growth in the last quarter, which makes sense because right growth is pretty cyclical. When you get into these cold or slow months, you don't have as much demand on people moving. So that makes total sense from a logical standpoint. vacancy rates declined by 20 basis points to 5.8%, even as the apartment stock continues to expand, so they're building new units by 2% a year. More than 4400 buildings providing almost 800,000 units are currently under construction. But remember, this is Big Data comprised of the whole United States, which is insightful yet not really useful, because when you're an investor, you're trying to key in not only in a certain market but a sub market. You know, is it going To be West Irving as opposed to just the Irving Texas for example or the DFW market. I took a couple pictures here of you know, everybody loves these like the top 10 happiest city, which they said it was Miami, Florida, Oakland Austin send it to San Jose, Philadelphia, la Boston, Honolulu, Portland, San Diego. And America's top 10 dynamic cities which is San Francisco, Seattle, Denver, Aurora, Grand Prairie, Oklahoma, Fort Worth, San Jose, Atlanta, Georgia, Miami, Florida, where they get this data. I don't have a clue. Me I don't really need much into it. But people like these type of news articles and so that's why I put it in here.

Unknown Speaker 8:51

Other than the 27 weeks of curated content for the passive investor, the new mastermind will offer bi weekly power calls with the following format. first week of every month we will dial in on being a direct investor for simple passive cash flow 1.0 I call it which is getting your first rental negotiating sourcing operation etc. second week of every month we will discuss holistic wealth building topics or what I call simple passive cash flow two point O plus, which is holistic Wealth Management syndications private placements, tax legal lifestyle design etc. Get a sense of this forum by checking out the guide to taxes video at simple passive cash flow calm backslash tax, I'll be honest, some things I can't see the general public because it's too personal. And it's not to say bad things about others. Unless you're in the mastermind. One rule we have is what happens in the mastermind stays in the mastermind. To get in go to simple passive cash flow.com backslash journey.

Unknown Speaker 9:51

Don't be left out and join the day. If you've

Unknown Speaker 9:54

been waiting on the sidelines. This is your moment and not to be taken by an institutionalized education

Unknown Speaker 9:59

program.

Unknown Speaker 10:01

update on the whole China trade deal as of November 11 2019. Now the home loan started higher. But we were kind of save middle of the month when the reports came out suggesting that a delay of a phase one trade deal was about to be signed. So it was a disruption to relay to the trade citing was the reason for the rates to improve off the worst levels mid week. There was worried that both the United States and China would roll back terrorists as a deal with push through. And this push stocks to all time highs as the expensive the bonds and the home loan rates low and on the same level. They were back on July 31. When the Fed cut their rates for the first time in 10 years. co working spaces a little bit if you haven't been watching the news and heard about headlines About the company we work. But essentially, if you read between the lines and here's my summary of the whole thing, we work along with many other tech companies, their venture capital, and they have a lot of money backing them, which can power a lot of marketing and make a company look good. But like in any business, if you don't have organic marketing, to create new customers for you, your business will likely fail. It just matter depends on how much artificial capital you can burn up to keep this thing going. And just like any business, you have to kind of feed the beast until you kind of take off and go on your own. But we work they kind of got to a point where they realize that they weren't making money doing this and then they had a another infusion of cash. Here of sort of the percentage of CO working spaces on a graph. I'm still less than 4% even in Manhattan, and where the mark the vacancy rates are. For those real estate usage, the trend line is showing the higher amount of vacancy. The lower amount of percent coworking. So New York, Manhattan, Brooklyn, they have a low vacancy rate, which means a high demand. And that's why they have more percent of CO working space. But most of these, these cities follow the trend line. I'm not really too many outliers here. More than half of the world's richest investors see a big market dip drop in 2020. So the UPS survey and this is from the good old CNBC news station, whether that's good or bad or not. So they're saying they surveyed 3400 high net worth investors How they got those people? And what the heck kind of high net worth investors are going to sit on the phone for four minutes and answer surveys My other question, but they said 55% of respondents expected a significant drop in the market at some point in 2020. And they also said that the super rich have increased their cash holdings to 25% of their average assets. Put this in here mainly to kind of show people a little measuring stick, like you have high net worth investors or people here, maybe. And they're still not sitting on any more than a quarter of their net worth in cash. And here's my message if you're not rich, if your net worth is under $1 million, $1 million is really not that money. And oftentimes, I see those under $1 million net worth sitting on a large huge majority like almost 75% money in cash or stuck in lazy debt equity in their home or other rental properties paid off. I mean, you would think it'd be the opposite right high net worth investors should have more cash on hand because they have you know, they don't need to get yield, they don't need cash flow to eat, eat from that was my takeaway that 25% level for cash flow sitting on the sidelines from some random survey of of high net worth people. Me I'm kind of more like, I don't know like 10% or something like I invest aggressively maybe part of that is because I feel like I have good deal flow. But I invest in majority cash flowing investments that are cash flowing today.

Unknown Speaker 14:50

So this next chart here is taken from Arbor who is a direct Fannie Mae Freddie Mac lender. Orange graph is showing the court debt which is going up. And the household debt which peaked in 2008 2009, obviously, is on the decline, which is, in my opinion a good thing. This is similar to the levels of two top 2000 were corporate debt was at 46% ish. And household debt was a little over 70% hill-wood to develop a 1 million square foot Amazon fulfillment center in North Mississippi, put this in here as just a you know a lot of people they look at all these headlines of this building going into Seattle or this building going in San Francisco, frankly don't really care about any of this stuff I look at more of these type of articles here is like a class and choke campus going in. Next, the US Highway 78. More importantly next BNSF and Norfolk Southern Railroad lines. This is a similar play to people going into Memphis for the old FedEx and UPS, transit hubs. You know, these days you're looking for yield you can't really go to secondary markets your Kansas City's your Memphis says because they've been picked over since 2012 2016. You've really got to kind of go into these more tertiary markets that nobody ever really is talking about. Not saying that this is a good market to invest in, but maybe look into some of these market like in northern Mississippi. Again, it is in DeSoto County CBR he industry preps for the new Eb five regulations. So those of you who aren't aware of Eb five, this is the old way to if you're International, you want to become a US citizen. Well, you can pay to play because we'll take your money and we'll give you citizenship so we can get money. You have to invest in an asset that My understanding is that it helps the United States economic or its benefits America, I see it as sort of like a donation in a way to get citizenship. But they used to be, they're going to increase the target that you you're supposed to put up from $500,000 to $900,000. And it's supposed to pace inflation. And the standard minimum investment will rise by the same percentage going from 1 million to $1.8 million. So I've heard of a lot of people coming into the country this way. Again, a lot of the international money people coming in, they're not the 1% of their country. They're like the point 01 percent. So just plunking down a million dollars on something like that is think about it if you're going to the airport, and you want the Fast Pass, but the Fast Pass is way better. But it was 10 times the price and money was no object to you, you do it. These charts are talking about millennial renters. They ask these millennials, why do you expect to always rent? And some of the excuses? I mean, some of the the reasons where I can't afford to buy a house was 69%. The next one is I like the flexibility that renting provides. Third with 37% is I prefer to avoid maintenance and edit costs. And then last summer was buying a phone is financially risky. And then they asked millennials who plan to buy your house. Why are you waiting? What's your excuse? And 70% said I can't afford to buy right now. 33% said I'm not ready to settle down yet. 24% said I'm waiting to get married probably to share the costs and the Then there's another chart that they put in here and they split up the different demographics. Not going to go into that you guys can check that out later by going to simple passive cash flow, comm slash investor letter. And you guys can download these slides there.

Unknown Speaker 19:17

Those are the news articles I dug up this month. Here are the new simple passive cash flow articles and podcasts that I created this month. The first one was a lot of my investors, they they might be totally on board with financial freedom and investing in alternative assets but they may have a reluctant spouse in an In fact, this is in most cases call this reluctant spouse syndrome. So I pinged and surveyed a few people in my tribe and put down some useful tips on how to get your spouse on board. possibly create some kind of Midway there, too. You guys can check out that article at simple passive cash flow comm slash spouse. I'm starting to build a legal guide just like the tax guide, tax guide you can find a simple passive cash flow calm slash tax. But this legal guide that I've been creating a simple passive cash flow comm slash legal. I'm not a tax attorney I'm not a CPA, I'm not a lawyer. But here are some notes that I've been keeping for myself that you guys can also review I have my last rental property on the market and I am showcasing what's happening with that one at simple passive cash flow calm slash A l four l for because it's in Alabama and it was my fourth rental in Alabama. I interviewed at least it's on you guys can check out that interview there. Also I interviewed a doctor who is doing short term rentals. And if you're a doctor, I would go to that simple passive cash flow. COMM slash doctor and there's all other tidbits and thoughts for doctors and you know if you're a new Doctor, what are some tips to for financial freedom there and and other mindsets even if you're probably a higher paid profession I would recommend checking that out. For those of you who are still buying turnkeys we did a webinar last week where we talked about the mortgage lending requirements in 2020. And moving forward with Graham can check that out simple passive cash flow comm slash turnkey. The E course went live on Black Friday for those of you who took advantage of the that special launch pricing. It's that simple passive cash flow calm slash e course. And if you guys buy that we can credit back to the price you paid if you choose to go into the mastermind, at any point, we currently have 55 members in there. We do bi weekly zoom calls, we do networking similar to how we kick this meeting off here. Great way to get around. accredited investors quick going to The local Ria or the free Facebook group. So the forums, you're just going to find a bunch of book people there. And I launched the new investor portal for those of you who are in deals with me to access it, you have to create a login, then you can access to all the monthly updates there just in case you miss an email. Once we all get a lot of emails these days, and if you guys want to sign up, go to the website, and you create a join the deal club, you guys get access to the first three modules of the E course those of you who are not verified with me and haven't set up a call with me yet. After you do that, you can get access to the past do webinars to review and further your learning. They're just going to go over some updates that I've been doing personally. Man November was a quick month so I think put this down really quickly. I've had a little bit of downtime to plan for 2020 I'm starting to make key hires to help the group and simple passive cash flow, notably a membership director for the mastermind group. So what we're doing now is we're going through all the members and kind of building a little matrix and who's doing what, who we can connect with who, and then we're going to kind of forced the matchmaking to happen. contribution. I felt like the whole addressing this reluctant spouse syndrome was a big issue I needed to sort of help people with. The graphic I have on screen is what we're all trying to avoid. This guy was wearing like one of those Apple watches and it just happened to be the day that he got fired. So about 10 o'clock, he got the news that he got laid off his beats per minute, went up spiked up 220 from a resting heart rate of 85. It kinda went down. He had a meeting with HR Little around two o'clock and it spiked to

Unknown Speaker 24:04

110. And then he left work at 530 went right back up as probably he went home because he didn't want to tell a spouse, that his supposedly job that was keeping their family alive was no more. And then he went to bed at 110 beats per minute. So you don't want that to happen. And that's why you invest in alternative assets and you do something that everybody else doesn't do. Not because it's going to create the future one, but it's going to avoid situations like this. And maybe that's the pain that willingness pain will speak to you more than the financial rewards. Some cool things that I get to talk about here, my significant slide, I counted up the real estate control $216 million. Guess that's almost a quarter billion 3000 units or so 24 million diverted from Wall Street from Other passive investors in the squee. So we are currently up to 226 live investors today.

Unknown Speaker 25:10

Thank you, for especially you guys have been waiting for quite a few deals. This next side is uncertainty because you're always trying to find ways to make things a little bit a surprise in life as I'm planning 2020 for myself, I made it a goal not to go to real estate events where I know everybody and it's like cheers and everybody knows my name. And I don't have to get out my comfort zone. Because everybody already knows me. I'm going to go to start to go to more private entrepreneur type of events where nobody knows me and different coaching groups just do something a little bit different way I'm going to get certainty in my life. I'm starting to look at like doing asset management, taking that over from a third party and some of our deals and doing this in house. I don't know why I didn't do this in the past. Maybe because I didn't like doing it as a job as a project manager, but I'm sick and tired of seeing these accountants or computer programmers or non professionals be project managers when this is exactly what I did at my job for 10 years. And maybe even though I didn't like it, or I didn't think I was that good, I can do a lot better than all these amateurs. What I did for relationships and connections and love, I took my wife out, and we use the hundred dollar gift card that somebody gave us. It took some time for that. So I'm always trying to identify what is the resistance in my business in my life, and try and eliminate those. And we had a webinar in our mastermind going over INTERNATIONAL TRUST. And if you think LLCs and two layers LLC are cool, this is going to blow your mind. It's all about getting over charging order protection. This fraudulent conveyance much better Domestic trust. Again I have a lot of those notes and simple passive cash flow calm slash legal. You guys want to check it out and and part of this is like there's no worse feeling than being in a lawsuit and even if it's a stupid one, that somebody else can control your assets and do like a charging order, which is basically freeze your stuff and stop your ability to find future deals, or even getting a home loan for yourself or you maybe even getting a credit card. Creating complex events, legal entities is a way of getting some leverage in those situations. And for me, it's money well spent. Other other frivolous things. I think my coffee sucks. I'm going to stop using that key cup after my lot of 144 remaining k cup pods are gone. Probably gonna get one of those $50 special machines and Thanksgiving is always tough for me because I don't like to hear about people's jobs because is most times is people complaining all the time. My attitude is if you don't like your job then do something about it. Thanksgiving is over, thankfully. And Christmas is here and I bought myself some air pots. These are finally the good ones actually stay in New Year. And gunk doesn't get stuck inside of them. Some lessons learned I'm reading. Well, I just finished this last night The Richest Man in Babylon. A lot of people have recommended this book to me in the past for the first couple of chapters, there was a big takeaway. It was like this really rich guy, he's he's teaching this this younger guy who's not rich at all like a man How do I get rich and then the old guy tells them put aside 10% of your money and go and buy assets or go into deals that make you money. One of the first deals he goes into he goes to like the blacksmith who's going to buy like spices from wherever. And then the old man is like, all right, well, that's cool. Like Yeah, that can possibly make you money for why the hell are you investing with the blacksmith that doesn't know anything about spices? And then you know, that's the lesson learned the guy didn't make any money. But eventually he moves and he goes into a better deal. And now he starts to see the this proven concept. And at that point, after I read like the first 10 minutes of this book, it's written in Old English, sort of like the Bible, and it totally puts me to sleep, which is why I didn't get anything out of the book, and I eventually gave up on it. But now I can say I read it now when people talk about it, because they get the gist of it. Well, thanks for joining. And we'll see you guys next month on another monthly update right?

Unknown Speaker 30:01

This website offers very general information concerning real estate for investment purposes every investor situation is unique. Always seek the services of licensed third party appraisers and inspectors to verify the valuing condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained herein information is not guaranteed as an every investment there is risk. The content found here is just my opinion and things change and I reserve the right to change my mind. Above all else, do your own analysis and think for yourself because in the end, you're the only person who is going to look out for your best interests.

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