December 2020 Monthly Market Update

https://youtu.be/U0vG0WrEZX8

All right. let's get going here. so starting off with a few teaching points and I diving into the news to wrap out 2020.

So the teaching bike here is now, this is the time to invest is what this chart is showing because as investors we invest off of the spread between the interest rates. And the cap rates. So the cap rates is the light blue. The interest rates are the dark blue right now. The interest rates are so low. The cap rates have come down a little bit, but the interest rates have come way down as of the last couple orders and you know what everybody's afraid and everything I'm like, this is the time to invest right now.

The spread between the interest rates and the cap rates is larger than what it normally is. see this kind of moving up and down, when it's like this, when the spread is smaller, that's when ideally you don't want to be investing as investors. We make money off of the Delta between cap rates and interest rates.

And of course we apply a, usually a four to one, five to one leverage, and that's how you make money as investors.

who are our renters? John Barnes broke it down and we'll charge here. Most of which are 25 to 34 years old, broke down their house. So income over 50 and under 50 K I rent, I think it's a good idea, especially if you live in a high priced area like California, Hawaii, Washington, New York.

Maybe, I don't think it makes sense to buy. Of course the caveat is most, I guess most people fall into this caveat, like mostly bar irresponsible with their money. They can't seem to save it effectively. So houses have forced savings account. but if you're listening to this podcast, YouTube channel, you're probably a little bit better than the average cat would saving their money.

These conscious of it. That's why it's a, just take the money and invest.

No, this is just a little diagram of which States are the most restrictive on the COVID

constraints. Not making any political statements here. But, Hawaii is down there. One of the most restrictive and on the other side is how much, is it working, right? , currently hospitalized per a hundred thousand? So if you want to see your state, you see where they fall.

so starting off with the news here, this is something that's going to be slowly developing in 2021, but the library , which is what a lot of interest rates are governed offered. you might get a commercial loan based on, quarter point higher than lie bore, but they're going to be changing it to Sofer, I think is what they're called.

S O F R. And that transition is going to be happening throughout the year. The reason why they're changing it is because , I think it has something to do with the library being so low or things are already so low. They need to fix it to something else. That's a little lower. and supposedly the library is a little bit more erratic, but I don't think it makes that much of a difference.

It is what it is. And it's changing guys. That's the takeaway, John Malone, reported by CNBC is, buying hard assets like housing to bet on currency, devaluation, or inflation, which is coming. yeah, this is why buy real estate. It's fixed art assets like housing, and it's a commodity.

We need more of it. And he sees substantial interest in multifamily housing. We'll get into that a little bit here in this Alna article, where through the first 10 months of 2020, the only price class to lose ground in average occupancy among stabilized properties were class a. So those are the luxury type of properties that we stay away from.

these are like the build 19 or. Probably built after 2005, 2010, in my opinion, it's hard to save by date, but that's probably the best numerical differentiator of class. A, with a 1.3% decline to 92%, average occupancy. This is not an alarming little figure, but it is a few percentage points below the other three pricing classes, B, C and D, which all finished between 94% and 95%.

Class C actually went, improve. So a lot of the culprit was negative demand or, new properties coming online that Warren white absorbed, which makes sense. people are staying put through the first half of the year and even plead a second. So takeaways stick the class VC.

Out. This is, development that's, the state of California, which you may or may not care, but I think it's, sets precedence to what's coming down the pipeline to California had these two big statutes, prop five and prop 19. The presidential race. Wasn't the only thing here. It was like B that they had to, the state was split on

so California proposition 15 , which would raise taxes for commercial real estate failed. So top 15 would put further downward pressure in real estate during an already difficult time for real estate in that state. Contrary though prop 19 would allow former 55 and older, disabled or victims of natural disasters to transfer a portion of their property tax base when they sell their home and buy a new one.

And that looks like that will probably be passing at 51%. So very close, proposition would offset. By closing other people's specifically, it eliminates unfair tax beholds used by East coast, investors, celebrities, wealthy non-California residents and trust fund hairs. yeah, I think it's, it shows like what's coming down the pipeline in there.

You just can't inherit the lower tax spaces. a lot of people in California that have inherited houses in their family, the one to sell and yeah, they're getting killed on taxes, but they might be sitting on a one to $5 million estate and a real estate, and they just don't want to give up that good tax.

So prop 19. kind of gives up that incentive in a way. if anything's, it takes a while for the California's to go through it and then, think of like marijuana, right? So the rest of the country gets impacted by this, or we see it in our backyard, but it's, coming down the pipeline.

Star Wars would read by $645 million of affordable housing. They are getting into the affordable housing workforce space and I think to get into alarm, but, I watch what the big guys are doing. Like the Blackstone's. And I follow them closely. So 950 units in Jacksonville, Florida, and 28 communities with a total of 3,600 units, primarily in Virginia and North Carolina.

And they're buying this stuff because it's stable, occupancy and rents didn't change too much of all things to a pandemic. John Burns came up with the chart, a us single family rent index. So they modeled and you can see the recession periods where it went through in 2007, eight, nine in the trough.

It's peaked. but demand is still very strong for single family home rents based on this chart. Again, if you guys are checking this out on the YouTube or on the podcast channel, you can take it on the YouTube and all the nice graphs and graphics. Read this stuff for yourself that I put on the screen.

commercial property, executive reports that the pandemic accelerates rather than starts commercial real estate trends.

so one of the big trends is this live work play concept one question that came in, is there going to be a recession in 2021? I don't think so. Madly, chillax, they've been S people say that every single six months doesn't mean crazy

I think that you got to be careful people saying that because likely they're trying to sell you both collect their commissions on that and you offer the gold salesman. It's easier to sell doom and gloom than to prudently, be buying cashflow that's for sure. so what are the trends live?

Work, play concept were, people want to be able to live in less central areas, more of the suburban areas. there's a urban suburban divide , mostly gateway cities, high costs. Areas like New York, San Francisco, Chicago, any of these people have lost occupants during the pandemic, the evolution of cities.

So the inner ring suburbs have also grown a bit by the desire for people to work and live in places with city like features, but not in the urban core district. maybe like 20, 40 minutes outside of the downtown area. So the pandemic didn't really start in trends, but just accelerated all of these trends, commercial property, executive reports that, construction has launched on a Houston Hyatt hotel that is associated with the Houston's Texas medical center.

So it's their first hospitality brand. Very interesting that a hospital that was getting involved with this type of housing, but I guess they're seeing it as a lot of the people that come for their care, like cancer, Shimon, or whatnot, need to stay in a place. So why not, double dip.

Some trends that are coming, that I think are cool or a Chipotle like plans, their first digital restaurant, their online sales tripled in the third quarter. So they're some of the are winners as reported by shopping center business. some of the losers are just the general shopping balls.

So while owners see VL and associates falls for chapter 11, bankruptcy, does it mean that those. Shopping malls are going anywhere. Although I do think shopping malls are not as popular, especially like the not high-end ones or the middle range ones as popular multi-housing news reports at senior housing, occupancy drops, inventory increases.

So a lot of people, they all get excited and new investors get excited by like trends like the silver Wade, people are going. Need places to live when they're gold. I want to invest in the city living developments. All right, buddy. I'll tell you, I haven't found a one really good reliable operator quite yet.

even though all the trends point that way, I wouldn't be messing as a passive and I sure as heck, wouldn't be investing as an operator in assisted living. That's where you get these doctors or nurses. They think that they know medical stuff. Assisted living. It's not really medical stuff. You just hire a doctor to do that stuff for you.

It's more of a facility management and a marketing and sales thing than a technical medical thing.

so we take a break here. The Easter egg this month is. Check out the newly branded family office, Ohana mastermind. So this is the group with the, a credit investors in, or if you would like to be a credit investor, this is the way to get around. A lot of you guys are asking, how do I find syndication deals?

How do I find like good people to work with? you got to build your network with the right people. If you're tired of screwing around at the local Rhea. Or going to the free Facebook groups or the other free forums out there with just a bunch of folks under a quarter million dollars net worth all day long.

now's the time to step up, see what we have to offer simple passive castro.com/journey. And we are about ending our first incubator group, which is the little mini group coaching group, where we help people get their first remote investment. that one should be wrapping up this next couple of months.

And, we'll be looking to do another one early in 2021. So if you guys are interested in that, please let me know. But, yeah, transitioning to some of my personal stuff that I've been working on. if you guys have any ideas, some things you're working on. Let me know. My email [email protected], but, first is growth.

So we changed the mastermind to a more of a virtual mastermind. last year we did it in Hawaii for a few days, but with everything that's going on, I'm moving this virtually. So we're calling this the bubble. If you going to get more details of this, go to simple, pass a castle.com/bubble, and it's gonna be awesome.

it's going to be primarily networking with other participants instead of just death by PowerPoint or death buys, random sweepers pitching their product. Yeah, trust me. If you're not happy, I'll refund your money. I'm super confident with this. Like I got some tricks up my sleeves. You guys will see those.

You guys do attend over the weekend. It's going to be a half day on a Saturday and Sunday. Martin Luther King weekend in January of 2021, contribution, yeah, rebranding the family office , mastermind to be more of a collaborative thing. We've got some new initiatives there to keep older investors around.

they might've learned everything, but they just want to meet new people, grow their network with new high quality working professionals. and then this I added just a little while ago about. having some success for the shade line hackers. If you guys haven't tried this, I've got a simple pass, a castle.com/ straight-line.

But yeah, we had an investor that tried it out since, began in may 15, 20, 20 great thing to do when you're stuck at home, you get your credit cards together and start renting out authorized user slots. He made. $1,800 and just over a few months, and he's got $750 left in pending commissions.

So it's coming back to him. Awesome. significance, it makes me more proud of, what we're doing as a group is that we are not letting fear get in a way, and we're seeing the data for what it is. And this is what it is. I started at the talk with the teaching point. Of the same slide investors make their money on the Delta between the interest rates and the Tapper.

It's simple as that. Of course there's outliers, right? You want to pick up properties that are already under market that exceed the cap rate here and have multiple opportunities for value add. But yeah, if you're picking up existing cashflow and even in tough times, you still cashflow. a lot of the deals, the stabilized assets, you can stay above 50, 60% occupancy are still in the black, a lot of the assets that we had through the pandemic for 200 units.

we're still making money on all of those. none of them came down to the red level, out of probably like 25 projects, maybe one or two of them kinda got close, but. I think that's pretty good. All things considered being a pandemic. some things I'm dealing with in terms of uncertainty because in search needs not necessarily a bad thing, but, yeah, just investing when everyone is waiting for COVID or the election to be over.

I get it from one perspective, but you got to keep moving forward at the tenants are cash flows, the cash flows, and you can do your sensitivity analysis, still cash flows through tough times then just to keep buying cashflow dollar cost average. and then a lot of the uncertainty is what's going to happen next year.

I'm seeing it as I want to get traveling. I want to have some fun. when's Pfizer going to come up with their vaccine, is it they're saying it's here, it's 90% effective. Of course this is from the fires or websites that you can't really believe, but they, it says, but, yeah, , hopefully this thing works right.

So we can get back out there. Let's get stuck in our homes all day long. how did I, my creating certainty in my life while I'm creating another infinite banking policy for myself. I probably had four or five deals, went full circle and cashing out, and I'm going to take some of those profits, put it into an internet banking policy and pull it right on and start investing next year.

I like this because it adds life insurance, but that's not the reason why I'm getting it, but it makes a nice little yield four or 5% tax-free because it's life insurance and. Because it's life insurance, it's often table creditors or litigators. So that makes me feel a little bit better from an asset protection perspective.

if you guys, haven't learned about this, go to simple, passive castle.com/banking and, on the last 10 years, love and connection, you know what things slowing down here in December and, things will definitely pick up in January. I, got an invitation out to your folks.

If we haven't connected, let's get on the phone. let's do your onboarding call to the week club, put it simple past castro.com/gift. And for those of you guys who I have connected with and our current investors or of, in our deals, if you haven't connected in the last year, let's get on the phone.

let's talk star, let's see what's going on and see how I can help, see what's coming on the horizon. some of the resistance and verus distraction noise that I've been working with is pushing out larger projects in time. I got the syndication eCourse coming out soon. Hopefully it'll be out during Christmas time.

I was trying to get you guys some kind of cool like promotion for black Friday instead. I didn't get it done. So I think the, probably the next couple of weeks we'll see the eCourse for the syndication and it's going to be amazing. I'm still confident in this one, again, that. I got that money back guarantee on it.

the fun stuff here. So do dads, I bought two dishwashers cause I want to take all this stuff out of one. And when I make dirty dishes, I've put in the other, so they never have to put my dishes away. these things are big and they're a little annoying, but that's just an idea.

You guys to create your lifestyle. That's it simple, passive cashflow is all about. Now. Let's go to these questions. interest rates for the next two years at interest rates have popped up a little bit. I would say maybe a 10th of a point, but. I'll ask the question to you.

Like, why do you care? what does it really matter if the cap rates are going to come back up and interest rates will go back up and again, as an investor, you're just making money on the Delta work difference doesn't matter. but, and I don't know what interest rates are going to go, but if you were asking me everything I'm reading and everything I'm hearing, I think interest rates are going to be probably both for the next couple years.

It might come up. No slightly border point half a point during that time. But I don't think they're going to see interest rates on commercial debt in the five, 6% range for quite a while. But I do think inflation is coming. how else I'm going to pay for all this trillions of dollars stimulus and then the last stimulus plan is definitely coming.

Okay. It's for sure. It's coming. We need it. And I think for sure. It's coming. Just like how you joke about the government shut down. I guess it's not a joke that the government did shut down, but we all know it's a joke because they'll just create some kind of bill that extends the obligation.

Isn't often rolling again. It's just like the stimulus plan. it'll come. and then when it is. Also as investors are going to be the ones who benefit the most on it. I guess what I'm seeing, I was reading an article yesterday about Fannie Mae and Freddie Mac on the commercial side for the large non-recourse the agency loans that we get.

They're creating their quotas for next year and it looks good, man. they didn't hit their quarters this year, obviously because volumes of sales transactions were down, which is why they did a lot of refinances. The refinances were awesome. They're being very lenient on refinances. because they needed to have that quote, but yeah, next year is when things start to open up.

it's probably going to, because a lot of that ending is it's very free and flowing. when is a good time to buy REITs, never, it's a good time to buy, reach beats, or retail investments you didn't killed. And something I learned recently. we did a , three hour webinars and there was like the one tidbit in it that I learned was like REITs.

, they have a timeline where they have to crystallize, so return and exit and everybody else. So they don't make good decisions. They don't make long-term decisions and they have to pay 90% of their revenue or their income to investors, which sounds good. Wait, what if it wasn't, it made more sense to put the money back into the assets so that the acid is more secure and so you can bump rents and do that type of stuff.

And that's just the one way, like the reeds are confined there and read such as retail investments. You've got good stealing because the only and middlemen they're not touching her, she feeds I'm not a retail investor. that's for the average Joe out there by investments. All about share market performance.

I don't understand that. Or shouldn't be tied to that. any promising markets if 2021 when compared to 2020 and not really. there's some places in Tennessee, like Chad and Duka the Carolinas always keep coming up. Florida, Jacksonville, but, I'm a little scared that I think Huntsville is finally coming on the map.

A lot of people are finding out about Alabama. but yeah, mostly it's the stain big storylines, Texas. Everybody's getting the heck out of California, Chicago, New York, all these high price, postal markets going to places that make more sense. this was always happening and again, had the pendant.

I did not create new trends that accelerated trends such as people getting the heck out of those overprice areas and into more like the secondary tertiary markets. but that's, doesn't mean that you can't find a deal in Jackson, Mississippi. I don't want to, not Jackson knows if he's not a good bike and I don't think it is, but that doesn't mean that I wouldn't invest there and deal with that undervalued breakfast is what I'm saying.

If you invest at Jackson, Mississippi, I'm sorry. , last question here. Can we expect a foreclosure due to vendor random thinks of anything silly? I'm sure. I just personally don't buy. Unstabilized assets. So if a property is going through foreclosure apartment, then I wouldn't be buying it in the first place.

So I don't care. I'm sure it is, but it's at one point it's just Biden's going to kill people. That's making over $400,000 taxes, but I don't care because I don't, I'm not going to make my HCI that high. I'm going to put away lower. so it's a moot point to me. I don't care. that makes sense.

I don't care if there's foreclosures coming. I don't really, I wouldn't buy those properties. I don't buy problem properties. I buy properties with sellers, we have problems. and maybe a foreclosure does expedite that, but yeah, the occupancy would probably did and I wouldn't buy it, but if you're a single family home investor, Number one.

And what the heck? Why are you doing that? yeah, if your net worth is under half a million, that's fine. But you got to build your net worth and putting your sweat equity to doing that. But if you're a credit investor, like most of us in our group, that's just not a good use of your time, in my opinion.

but for some of the younger kids that are listening, yeah, I'm sure there's going to be a lot of single family home foreclosures coming out. I'm sure. just. As there always is nothing new. I don't think they're sending any new, and like some kind of housing crisis. I think that's just like people like celebrities trying to sell you two views and stuff like that.

I just don't really see it happening. again, there's always people trying to sell, like on fear, like the world is coming to the ad, these human forms, or, what's worse is the people on Facebook. They always just relayed this. Long, like texts about the world is coming to an end. then you look back at that was from like 2012 or 2016, or whenever it had never happens.

I just buy for cash though, and just . Don't get ahead of your skis and they'll be all right. That makes sense. but yeah, if you're house flipping, I don't do that, but I would be afraid potentially. I don't know. But hope that helps. thanks for, questions and, we will see you guys next time and check out the mastermind [email protected] slash bubble.

And thanks everybody. Bye.