The Real Estate Espresso Podcast

On today’s show we are examining the ways in which energy efficient systems are not achieving their performance goals due in part to the way traditional systems have been used. As we are getting deeper into the winter heating season this is an important factor when it comes to energy efficiency and saving money in particular. To understand this we need to take a closer look at how energy use is charged to the end customer and the interaction between the customer behaviour and the billing process and the third variable in the system which is the thermostat. There is a very clear trend towards eliminating traditional heating systems replacing them with heat pumps. Heat pumps are theoretically more efficient than traditional counterparts like electric heaters, or petroleum based furnaces.  Increasingly the electric utilities have introduced a multi tiered time of use pricing model. The rate that you pay for electricity use varies widely based on when you use it. On today's show I will show you how to avoid some traps that can cost you a lot of extra money for no good reason.

On today’s show we are looking at Florida’s Live Local Act. Florida is an example of how one state has taken real steps to create the incentives for new affordable housing to be created. This legislation is a series of incentives designed to stimulate the development of workforce housing. Many of Florida’s high priced communities have become impossible for the people who work in those communities to live in those same communities. The result is that service staff that work in restaurants, clean  homes, cut the lawn, teach in schools, work in hospitals are commuting from a long distance away.  Cities like Miami have very unusual characteristics in their housing market. There is very expensive new construction, and much less expensive housing that is quite old housing stock. The average is somewhere in the middle. But the averages can be misleading. There is virtually zero housing at the average. It’s almost a bipolar distribution with nothing in the middle. Many cities in Florida are increasingly experiencing this phenomenon. Cities like Palm Beach have virtually zero workforce housing.  The Act provides for a comprehensive, statewide workforce housing strategy, designed to increase the availability of affordable housing opportunities for Florida’s workforce, who desire to live within the communities they serve. To date, the funding program has enabled housing for about 13,000 families. That comes to an average of about $15,000 per household. ----------- Host: Victor Menasce email: podcast@victorjm.com

Today is another AMA episode. Today’s question comes from J who writes: I’m performing due diligence on an investment opportunity for a conversion of an existing property into a multi-unit property. This is essentially a repartitioning of an existing 3000 SF property into multiple units. The total investment is about $1.5M and the deal sponsor is estimating that the property will be valued at $3M based on the income approach. It’s in an area that is not known for the most expensive properties. What questions should I be asking from a due diligence perspective? -------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking at real estate in China to try and understand some of the factors that have molded that industry into what it has become today. Private ownership of property in China began in the late 1970’s and accelerated through the 1980’s and 1990’s. At the same time, there was a mass migration from the farms in rural areas to the cities to work in factories.  In North America and Europe, when you buy a new condo apartment, you might give the developer a small deposit to show your commitment to purchase the unit when completed. But in China, buyers give typically a 40% downpayment and then secure a loan for 60% of the purchase price. The developer then gets the downpayment and the loan proceeds pre-construction and the new owner starts making payments to service the loan immediately, even though they might not take possession of their home for another 2-3 years.  Over the last 10 years the population has continued the shift from rural areas to the cities with the urban population growing by 200M people and the rural population shrinking by 146 million people.  So just like in the US where some cities have been shrinking. I’m thinking of cities like Detroit which has lost more than 50% of its population since the peak in the 1970’s, many small Chinese cities are getting hollowed out.  Some estimates put the number of vacant homes between 60M - 80M empty homes.

Ray Heimann is based in Pittsburg, PA where he is a principal with Terra Capital. His firm specializes in redeveloping historic properties in mature neighborhoods and converting them into luxury class multi-family properties with old world charm. This is a unique angle on multi-family investing and redevelopment. To learn more and to connect with Ray, visit usaterra.com ------------- Host: Victor Menasce email: podcast@victorjm.com

Anna Olin and Weina Zhang are based in Las Vegas where they manufacture unitized building structural systems that embed the buildings structural elements in the core which correspondingly simplifies the building facade construction. The labor savings of 40% means significantly lower cost compared with other conventional systems. Connect with Anna and Weina at zlifeco.com or visit their most recent project at midtownvegas.com. ------------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are talking about the law of supply and demand. This is one of those principles that I treat with the same reverence as a law of physics. It’s a little like gravity. If you try to fight gravity, you’re probably going to come out on the losing end of that battle.  Back in the 1950’s we had explosive population growth in North America. This was the so-called baby boom. Demographics following the apocalypse of WW2 meant growing population and the associated economic boom that comes with it. We no longer have these conditions in our society. Many western economies are experiencing aging populations, declining birth rates and falling demand for housing, along with shifting demand for services.  If populations are growing, it’s the result of immigration. ------------ Host: Victor Menasce email: podcast@victorjm.com

On yesterday’s show I speculated on some of the reasons why the Fed might have pivoted. These reasons all sounded pretty plausible. Then I listened to an interview with Chicago Fed President Austan Goolsbee, who was on the Fed’s rate-setting committee this year. He spoke with the WSJ’s Take On the Week podcast host to discuss why “all things are on the table” when it comes to interest rates, including potential rate hikes, and why he thinks there is still a risk of recession. Plus: what’s keeping him up at night, and why he says it may be time for the Fed to shift its focus from inflation to the slowing U.S. labor market. Naturally, Austan Goolsbee was careful not to make any predictions. But he did provide some meaningful insights as to why the change of heart at the Fed. He was asked about the spectrum of opinions across the members of the Fed. While all of the FOMC board members and all of the regional bank presidents have a voice at the table,  not all members have a vote. There is a rotating voting structure where each board member serves a term on the rate setting committee.  In retrospect, I totally missed what was an obvious reason for the change.  The Fed is well known for relying on the so-called Phillips curve as one of the core financial models when it comes to understanding the economy. 

On today’s show we are talking about why the Fed made a surprise announcement last week which involved the potential for several 0.25% rate cuts in 2024. This seems like a dramatic about face compared with the rhetoric from the Fed only a few weeks earlier.  So the question is, what did the Fed see that caused them to change their tune?  ----------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are taking a look at a new report issued by the staff at the US SEC to the SEC and to the Congress. The law requires the SEC to undertake a review of the accredited investor definition, at least once every four years to determine whether the requirements of the definition should be adjusted. This 53 page report is packed with tons of interesting data. Based on the findings, I'd be shocked if we don't see an amendment to the definition sometime in the first half of 2024.