The Real Estate Espresso Podcast

The statistics are clear. Inventory is rising. But what does it mean? On today's show we are looking past the numbers alone. ------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about the danger of reading headlines and making decisions based on those headlines.  A few months ago I reported on the podcast about the Corporate Transparency Act. This is that new regulation that requires millions of companies across the USA to disclose additional beneficial ownership information to the government.  In a new ruling from last week, the Corporate Transparency Act was ruled unconstitutional. But the ruling was very narrow and only applies to the plaintiff who brought the case, and the roughly 60,000 members of the National Small Business Association. It would be a mistake to think you don't need to comply with the Act, just because a narrow decision deemed the Act to be unconstitutional. I'm not here to offer any form of legal advice. You need to ask good questions of your own legal counsel. -------------- Host: Victor Menasce email: podcast@victorjm.com

A number of high profile commentators have demonstrated that very few professionally managed equity funds have outperformed the market average. Fund managers are active investors. They analyze each company. The interview the CFO and the management team. They perform due diligence on the company and determine whether shares in that company fit within the fund mandate and they then make an investment decision for the fund’s investors. This is what is considered the active component of the stock market.  The second form of investing is what is called passive investing. This is where you put funds into an index fund and there is absolutely no intelligence being applied to the purchase. The index is computed according to a formula and if there are 500 companies in the index as in the case of the S&P 500, you’re buying a tiny sliver of 500 companies simply by investing in the index fund.  There’s a lot of evidence that passive index funds have outperformed the active over the longer term. Now passive funds have not been around that long, but over the history passive funds have outperformed active funds.  So if that’s true, then why take the risk, pay the premium fees associated with a stock mutual fund, and the still end up with inferior performance.  ----------------- Host: Victor Menasce email: podcast@victorjm.com

There is no doubt that the lock in effect has reduced the amount of mobility in most forms of real estate. The higher interest rate environment has dramatically reduced the number of people who are willing to give up their low interest rate mortgage and move to another property where their cost of borrowing is going to be much higher. Some have chosen to move and put the house that they own on the rental market and in turn to rent at their new location. In these cases people are often moving for work and the decision to move is entirely based on financial considerations. So we know that fewer people are selling. But what about in the rental market? Is absorption and mobility up or down in the past year? Well all of the data that I have seen suggests that rental moves are down as well in most markets. For landlords of existing stabilized properties, the lower unit turnover can translate into higher profit margins. While rents are not increasing as they did in 2021 and 2022 and to a lesser extent in 2023, the lower turnover means lower turnover costs. ------------ Host: Victor Menasce email: podcast@victorjm.com

Zach Jensen owns an acountng firm in San Diego, Califrnia. On today's show we're talking about the beneifts of being classified as a real estate professional and what it takes to qualify for this. To connect with Zach and his firm, visit taxwisecorp.com ------------------- Host: Victor Menasce email: podcast@victorjm.com

Pasha Esfandiary is based in Los Angeles where he established himself as a professional poker player. Despite being successful at poker, he pivoted into the world of real estate investing and has applied the lessons of poker in his new career. On today's show we are exploring those lessons. To connect with Pasha, visit https://www.evokecapital.net/ -------------- Host: Victor Menasce email: podcast@victorjm.com

Our book this month is called Scary Smart by. Mo Gawdat. Mo was the Chief Business Officer at Google where he was responsible for much of Google’s global expansion, country specific localization and the introduction of translation and voice recognition all over the world. He’s a super smart guy and he has been an insider when it comes to Google’s AI projects. Prior to Google, Mo was at Microsoft. When I heard a podcast where he was speaking on his perspectives on AI, I knew I needed to read this book.  Computing has accelerated according to Moore’s Law which predicted a doubling of the density of circuits on a chip every 18 months. That held true for a long time. We keep thinking that we are reaching the fundamental limits of circuit density. Merely shrinking the feature size of the transistors is starting to approach fundamental limits like the number of atoms needed to make up a circuit. The advent of accelerated computing in the form of graphics processing engines of the type that Nvidia and AMD create has enabled the backbone of the AI revolution. Machine learning is the second dimension of acceleration. The pace with which machines are able to learn is also accelerating. Think of AI like fuel that will amplify and accelerate virtually every aspect of life. The super rich will get richer. The lazy will get lazier. The security system and law enforcement will become more vigilant. The weapons systems will become more ruthless. Marketing will become more targeted and more sophisticated. Loopholes in the tax code will become easier to find. The list of accelerated aspects of our lives is extensive. ---------------- Host: Victor Menasce email: podcast@victorjm.com

Storage is an industry segment that has been growing rapidly for the last few decades. But this has been impacted by the recent decline in the residential real estate market in the past 24 months. Across the United States there has been a decline in storage occupancy and operators have been offering increased incentives for their retail storage offerings. So the question is why the sudden drop in prices? Is the industry over supplied? Are the traditional metrics for storage space as a function of population density no longer valid? ----------- Host: Victor Menasce email: podcast@victorjm.com

On yesterday’s show we looked at a couple of the hedonic adjustments that the BLS makes when computing GDP and the consumer price index. On today’s show we are going to take a look at the real estate component of the CPI. Part of the contribution to elevated inflation over the past couple of years has been the nearly white hot acceleration of real estate prices. That’s partly a function of purchase price. But the BLS doesn’t factor that into the cost of housing. Instead, the treat the entire real estate marketplace as if it consisted of landlords and tenants, despite the fact that home ownership represents about 66% of households across the nation.  What I will reveal on today's show would be funny if it wasn't so tragic. ------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a closer look at the various components of the consumer price index and how it is calculated. Today's show will probably shock you. ------------ Host: Victor Menasce email: podcast@victorjm.com