The Real Estate Espresso Podcast

On today’s show we are challenging some conventional wisdom. Subtrades are pretty set in their ways about how things get built. They have their preferred suppliers. They expect materials to be packaged in a specific way. They have familiarity with a regular and repeatable process for installing materials. Any deviation from those tried and true methods is going to disrupt the normal flow.  The key to building cost effectively often requires creativity. That can mean alternate sources of supply. Some materials can be purchased in lower cost geographies and shipped all over the world. The problem is that some materials have not been tested or certified to US or Canadian standards. Building codes are international in nature, but they are also highly localized as well. Many local jurisdictions point to the national codes and standards. But they often have local regulations to meet as well.  Importing products that are not certified has risks. The most famous example is Chinese drywall.  We have been scouring the planet for high quality materials that can reduce the cost of construction while still meeting the requirements of the building code and materials certification standards. ------------ Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are making a distinction between new supply and value added opportunities. Investors over the past few years have focused on two different investment theses. Thesis number one is the traditional value added project. This is where you take an existing project that was built a number of years ago. It’s getting tired and the lack of modern amenities and finishes makes the property less desirable and therefore it attracts lower rent.  The idea is to vacate enough of the units that your can improve them over a period of time. The second involves new construction. This is where developers come in. They are adding new product to the market. These gleaming new buildings have modern amenities. They are generally very desirable properties.  What these two approaches neglect is the real needs in the market. Where are the gaps? Is there a business opportunity to fill those gaps?  --------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show, we are looking at a market effect that could have been easily predicted. In fact, we made precisely this prediction on the show back in 2021. When markets over-shoot the long-term averages for demand, it is reasonable to expect a bit of a boomerang effect on the tail end of that demand. I have long maintained that second homes are a discretionary investment. People will do everything they can to protect their primary residence and ultimately sacrifice when it comes to a second home. In 2021 and 2022 we saw the surgeon demand for vacation properties whether it was a lakefront cottage Ski chalet in the mountains. There was absolute white hot demand for what seemed like scarce number of properties. Many buyers of these properties, finance their purchase by tapping into a home equity line of credit rather than getting a fixed rate financing pacifically tied to the new property. With the rapid increase in interest rates, the carrying cost associated with these vacation properties has increased dramatically. Owners of these cottages are looking to unload them for a variety of reasons. Some have discovered the cottage. Life is not for them. Some have decided that living in a rural area, not fit their lifestyle. Install others simply cannot afford a higher caring cost at today’s interest rates. The market averages seem to obscure what is truly happening in the market. Paradoxically, sales, volume and prices, in the luxury segment of the market appear to be largely unaffected. These buyers are more sophisticated. They are typically paying cash, and therefore they are largely unaffected by the recent spike in interest rates. we are seeing softness in demand and pricing at the lower end of the market. Lower end properties in less desirable locations are sitting on the market with next to no activity.  Some brokers are reporting price drops of nearly 30% on these lower end properties. 

On today show we are looking at what seems like a huge paradox in the world of energy. On this show we look at energy from time to time. Why is that? Because energy is the economy. If the economy is cooking, then energy consumption will rise. If the economy is faltering, then energy consumption will fall.  There is normally a correlation between prices for gasoline at the pump and the price of crude oil. After all, gasoline is refined from crude oil so it only stands to reason that if oil goes up in price, then so too the price of gasoline should increase as well.   Gasoline prices are falling off at the pump in addition to following in the wholesale market, at the same time as we have seen an increase in the global price for crude. I’m not talking about the recent spike in prices as as result of the conflict between Hamas and Israel. Israel does not produce oil, nor does Hamas. But Iran does, and Iran is believed to be an architect of the attacks in Southern Israel. Saudi Arabia has cut back on production and so has Russia.  So what does this mean? ----------- Host: Victor Menasce email: podcast@victorjm.com

On today show, we were talking about the supply chain in construction, and how certain seasonal effects are clouding the picture of what is happening in the real economy. At this time last year lead times four windows and doors were running incredibly long. Many window manufacturers were quoting delivery times of 16 weeks for specialty windows and sliding patio doors. By March of this year, those lead times had reduce to no more than 3 to 4 weeks. And by late spring manufacturing lead-times had reduced to a very respectable two weeks. It seemed like the post pandemic supply chain crunch was finally over. In the past few weeks, we have seen lead-times extend for many different products. Standard lead-times for windows remain short at 2 to 3 weeks. Specialty windows are now five weeks. Patio doors are 16 weeks vinyl siding as a lead time of 6 to 8 weeks.  Cement board siding is six weeks.  The spike in lead times are a function of a localized surge in demand to complete building envelope prior to winter setting in. Construction crews want to use the time during the colder months to complete the interior work without having to worry about the building envelope.  ------------ Host: Victor Menasce email: podcast@victorjm.com

Gabriel Lajeunesse is a wealth advisor with UBS and is based in Burlington Vermont. On today's show we are talking about investing in the current market conditions. To connect with Gabriel, you can find him on LinkedIn and on Twitter. https://www.linkedin.com/in/gclajeunesse/ -------------- Host: Victor Menasce email: podcast@victorjm.com

On today's show, our guest is a full fledged CPA who specializes in Tax and real estate investors To connect with Cherry, visit realestatetaxtips.ca -------------- Host" Victor Menasce

On today’s show we are talking about the marketing of new development projects to city officials. It’s difficult to know what is the best way to communicate with bureaucrats and politicians who have a say in determining whether your proposed project is going to be approved or not.  Cities have well defined templates for submission and they try as much as possible to make all applications look the same by sharing the same format.  When you talk to city officials, they will often offer guidance on what is required to get a project approved. Zoning codes  define things like the building envelope, the height, the setbacks from the property line, parking ratios, density, and so on. But the politicians who ultimately approve the project are going to answer to the local residents who will be forever angry that a politician approved an ugly building.  But what constitutes and ugly building?  ------------- Host: Victor Menasce email: podcast@victorjm.com

Today's question comes from John who writes: "You have answered a question for me in the past and is was well received for me. Next question is I have heard a few different people say that back in the 80s, the debt was inflated away.  I only know how to pay down debt.  I don’t understand how debt can become inflated away? " --------------- Host: Victor Menasce email: podcast@victorjm.com

This question comes from Sam who writes: I have 7 acres near a major boat ramp North of Houston that I am looking to develop.  The area has grown 4.11% per year for the last 2 years according to the Census. With a major development up the road I expect this trend to continue. I am having trouble finding info on income growth do you have any input on where to find this data? Do you have a Development Pro-Forma that I could look at? I don't know what I don't know and would love to learn for your experience/mistakes. The land does not have many trees, ground is relatively flat and the lot will be crushed concrete.  -Are Contractor Garages a good option to add to a storage facility/what is the typical square footage per capita needed? -With Shipping Containers are you able to refinance the property once it's almost full or is it best to sell and buy something with Real Property? ------------- Host: Victor Menasce email: podcast@victorjm.com