The Real Estate Espresso Podcast

On today’s show we are talking about the shortage of construction workers that has been widely reported.   From our vantage point, we are seeing a number of contradictory facts. There is a shortage of workers in many of the trades. At the same time, we know of workers who are sitting at home right now, looking for work. We know this because we are being continually solicited for work by subtrades. We also know of architects and consulting engineers who are being laid off because of a lack of work in some markets. It’s a strange dichotomy. There is no question that the industry has experienced a slowdown of new projects after a few years of elevated investment. However, we believe this situation is temporary. The problem is demographics. People are retiring out of the construction trades, faster than new young people are entering the trades. ------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking at a study that was authored by three researchers at Purdue University, The College of William and Mary, and The Chinese University of Hong Kong.  The purpose of the study was to examine the impact of short term rental bans on the long term rental market.  There are many different type of ordinances affecting short term rentals. But the truth is, most municipalities do not enforce these ordinances. The end result most of the rules are ignored by landlords.  This particular study zeroed in on Irvine California which is one of a few communities that actually does enforce its ban on short term rentals in properties that have residential zoning. If you’ve spent any time in southern California, you know that the entire area is essentially one continuous city. The only way you know that you’re now in another city is because there is a sign welcoming you to the new city. Otherwise, there is no obvious boundary. If you work in Irvine, you would happily drive from Costa Mesa, or Newport Beach, or Laguna Beach, or any of a number of communities in the area if you can find a place to rent at a respectable price.  The study found that the actual contracted rental prices reflect the supply demand equilibrium whereas the asking rents are generally higher than the actual contracted rent.  The study found that in the case of Irvine, the number of Airbnb listings declined by 27% within two years of the ban.  The study also examined short term rental activities in the neighbouring cities where there was no short term rental ban in effect.  The study found that within three years of the ban, enough new supply had been brought back into the market that there was an observed decline of contracted rental pricing of 3% or the equivalent of $114 per unit across the entire market.  The academic paper is about 32 pages in length, and no doubt will be cited by numerous advocacy groups around the nation as a quality piece of research.  The authors of the paper were very focused on reduction of short term rentals as  the primary source of supply entering the market. As developers, we know that construction is another source of supply entering the market.  It is possible that maybe Irvine had more rental housing constructed during that time period compared with the surrounding cities which contributed additional supply to the market. We just don’t know because the researcher failed to consider that aspect. We know that rental pricing follows the laws of supply and demand. If you’re going to look at the supply side and assess the impact of the STR ban, then you need to look at all sources of supply entering the market, not just STR to LTR conversions.  Unfortunately, the paper made no reference to new supply. ----------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about the importance of hiring a surveyor for every step of the building process.  The first case study is of a property located in Hawaii on the island of Puna.  A construction company has reportedly built a half-million-dollar house on the wrong property. The second example is a public road that was built 20 feet off center and is encroaching on the neighbor's property. ---------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking at what I consider to be a double standard. There is one set of rules for the average person and another set of rules for the government.  We know that using funds from new sources of funding to pay off existing investors is the very textbook definition of a Ponzi scheme. These are highly illegal and the likes of Bernie Madoff should rot in jail for stealing from people. But there is another form of the same thing which involves investors and is sanctioned by the SEC. Have you ever heard of a Naked Short Sale? On today’s show I’m going to be quoting directly from the SEC regulations. ----------- Host: Victor Menasce email: podcast@victorjm.com

Our book this month is “Radically Condensed Instructions for Being Just as You Are” by Jennifer Matthews. ----------- Host: Victor Menasce email: podcast@victorm.com

Ben Spiegel is based in Greenwich, Connecticut where he specializes in design and construction of luxury RV Parks. This is an asset class that is often overlooked. To connect with Ben, visit redwoodcapitaladvisors.com ---------------- Host: Victor Menasce email: podcast@victorjm.com

Hayden Crabtree is a storage developer based in Atlanta, Georgia. On today's show we are talking about a project in Fort Myers that went sideways in the approval process. This is a powerful story packed full of lessons. To connect with Hayden, he is @haydencrabtree on Instagram. His book "Skip The Flip" is available on Amazon and his cost segregation business is at remotecostseg.com ------------ Host: Victor Menasce email: podcast@victorjm.com

While the US Federal Reserve has made very few signals about what is happening in the economy, there are many more alarms being sounded by central banks elsewhere in the world. On today’s show we are looking at what those other central banks are saying and some of the policy changes that have already occurred.  The most visible signal we are accustomed to seeing in a recession is job losses. So far, while job losses have increased, most would not consider recent job loss data to be an economic calamity. But the signs of economic slowdown are not limited to the economies in North America.  There are numerous Countries in recession right now. Germany, Italy, France, the UK Japan are all in recession. 

Today’s question comes from Chandler who writes: I was turned onto your podcast a little over a year ago and have received tremendous value from your insights ever since. Thank you for your consistent efforts to deliver information about the nuts and bolts of the real estate world.  A little over a year ago, I purchased my first storage facility. After completing a fairly substantial facelift on the property and aggressively managing the rates, I've been able to double my gross revenue from the time of purchase. However, even with the increased rates, the demand for my units continues to outpace my supply. I have no previous experience in construction, so the idea of an expansion project overwhelms me, but I don't plan to let that stop me.  The property adjacent to mine is a large tract of vacant land. I'd like to approach the owner about purchasing the property from him, but I don't want the potential price or terms of the deal to be influenced by the fact that I own the storage next door. Is there a way I can find out how much he wants for the land and make an offer on the property without disclosing my identity? Would this strategy even be appropriate, or am I overthinking the whole thing? Thanks again for all of your help! ----------- Host: Victor Menasce email: podcast@victorjm.com

Today’s question comes from Jonathan who asks. Your recent episode on the NAR lawsuit settlement left me with a question. From what I understand, NAR recently settled the class action lawsuit and buyer’s will be required to hire and pay their own buyer agents. You mentioned in that episode that the practice is now matching what was already the practice in commercial real estate. So when you are buying commercial real estate, do you actually hire buyer representation? As a commercial investor, should I pay for buyer representation? ------------ Host: Victor Menasce email: podcast@victorjm.com