podcast Archives - Page 11 of 29 - Simple Passive Cashflow

February 2021 Monthly Market Update

https://youtu.be/T-la1Hyc5Gk

This is the February, 2021 monthly market update where I go over the news and what’s been impacting the economy and our real estate investing Easter egg just to start out. So I put together all the recordings for the turnkey rentals. In a little turnkey download tab for we guys that’s all past the cashflow.com/turn key slash download.

The reason why I did this because a lot of the stuff I’ve forgotten yeah, we have the incubator group and we have the remote investor eCourse for new investors, but now I’m moving off to syndication deals and more accredited investing type stuff. So I thought I would try and archive this all in one place before I forget it all.

So if you guys are starting out low on the net worth side, check this out, but let’s get into it. If you guys don’t know who I am. My name is lane I still have my PT license. I don’t find it. Go back to the day job. So habit, because it took so long to get , if you guys want to check out my podcast, find it on iTunes, Google play, and also the YouTube channel.

All right. First thing here, we’ll start with a few teaching points for folks. First thing first, Biden’s in charge now and some of these tax changes might be coming down the pipeline. Currently corporate rates are at 21%. Biden’s looking to push set up with about 28%. They always talk about removing the 10 31 exchanges.

Frankly, I don’t really care, 10 31 exchanges. Doesn’t really impact us sophisticated investors who invest as private places in syndications and diversify. It only hurts the sucker buyers who are distressed buyers. I love 10 31 buyers because they’re distressed and they pay a hundred, five, 110% of asking price because they’re distressed.

They have to move. So you don’t want to be that person don’t say no to 10 31. And so two might be taken away. Which is fine. So other things that’s going on is, the other than the corporate tax rate possibly going up is he’s he looks looking like he’s going to whack those people over $400,000 AGI.

But for a lot of us, we’re able to use these passive losses and manipulate her AGI to fly under the radar with that type of stuff. You don’t know how to do that. Check on my tax guide. It’s simple. Pastor cashflow.com/tax. Okay. But yeah, a lot of cool charts here. I got this Ernst and young report that they put out.

You guys want to see some of the visuals here, check this out on the YouTube channel or I have all the investor letter, all the monthly reports on my website@simplepassivecashflow.com slash investor letter. And you guys, can I catch up on plus individual form? So other things he’s going to be looking to do is it’s going to create like a maiden America credit, 10% towards revitalizing and between manufacturing facilities and bringing production back to the U S I’ve definitely looking at some industrial vestments.

Dean stays, did diversify myself. I still like what they found. They still like mobile parks. And office space, but yeah, I’m always looking to diversify my personal portfolio. Nope,

of course. Biden is a big greeny guys. So you’re going to possibly see a lot of the solar credits maybe restore the full electronic vehicle tax credits for, in terms of housing, looking like that they might bring back the $50,000. First time home buyer credits. Everybody freaks out every time, something like that comes out saying that it’s actually going to impact a lot of things to me.

Like I stopped caring about all of that stuff. Cause it’s a drop in the bucket really. Yeah, some people might be buying a house and it might make things go up for a month or two, but even big $15,000 tax credits for first time home buyers. I just seen it, not really move the needle, the longterm.

But if you are like me and you rent, Hey, it might be a cool way to pick up $50,000. But if you’re buying a one to $3 million house, what’s 15 grand. That’s not much as far as childcare 8,000 tax credit for childcare, 5,000 tax credit for informal care givers aimed at elder care. Most of the stuff is still in the works and I’m sure it will change, but when we figure out what’s going on, I won’t let you guys know.

Of course we strategize best practices behind closed doors in the family office for Honda mastermind. If you don’t know what you’re missing, like you guys don’t want you to miss them, but it’s good stuff in there. All accredited investors and it is what exactly what it is. Mastermind of multiple family offices coming together that are under our umbrella.

So learn more, go@simplepasscashflow.com slash journey, but enough for the commercial. So more teaching points here. I was working through the development deal that we have going on in Huntsville, and we just signed our guaranteed maximum price contract on that. And for those of you guys still doing the birth strategy and flipping houses.

The way we did it. This is a $20 million project we’re working on. We’re trying to build 200 multi-family class a units. So workforce housing, class A’s kind of synonymous with new builds. We are put in place a guaranteed maximum price contract to shelter. The movement on the price where.

We’re also incentivizing the contractor to find us cost savings. So I pulled this out of the wash dot standards when I used to be an engineer up in the Washington state. So back then, or if you followed the wash dot standards, there’s a former like year. Saying that if the contractor finds a cheaper way to do it you could split the cost savings with them.

So it’s a way of incentivizing them to be a good steward of your money and find cheaper ways to do it in the private sector. We use a 25% profits split, but yeah, just a few ideas for you guys doing the birds. Take some tips from us. We want to be aligned with our contractors as much as possible, even though it’s very hard, if I’m going to do a construction project, it’s going to be on the bigger scale with these bigger, more professional construction firms.

If you guys hadn’t heard, the whole game stop thing, I’m not gonna beat this to death and show you’ve read about it in every single publication out there, but. If you haven’t, basically a bunch of folks on Reddit banded together and manipulate the price of gain stuff. And look, this is what I personally don’t have any paper assets.

This is what happens when a bunch of kids have access to an asset. And this is why I’m out of something that everybody has access to. There’s a reason why we’re like real estate. Not everybody can save up 20 grand to go buy a hundred thousand dollar house. Certainly not many people can go and buy a 10, $20 million apart.

There is limited access. There is a barrier to entry. That is why I like it. And I try not to do anything where I don’t have that unfair advantage. But if you guys are on the rollercoaster of stocks, mutual funds, that type of stuff. It took me a long time to get off of that bandwagon, but I’m so glad I did getting into real assets, especially that cash flow,

On this chart is 30 or 40 things that can go wrong. Ranging from weapons of mass destruction, price, instability, digital inequality. Some of these, I don’t even know what they are likely of a crisis, infectious diseases, climate action, failure, human, environmental damage, extreme weather in it.

Ranks everything on a chart, which if you guys go to the YouTube channel, you guys can take a look at what I’m looking at, but. Frank it on the chart between how much impactful it is to the global outlook and how likely it is. I’m sure we have about half of these on the private placement memorandum of in capital letters, but in this life, there’s risks, right?

You’re always going to have risks. But I think if you figure out ways to mitigate that risk is the important thing. And I think diversification is that will personally the way I do it. And going into things that perform well in recessions. Not hospitality, not restaurants, not those things like travel and leisure.

We touched upon this earlier, potentially impact the Biden’s 15,000 home buyer tax credit out of the list. This is the, probably the one that’s likely to go through is what I’m reading. It’d be cool. The residential real estate market is very hot right now because of the whole supply.

Not necessarily, I think there’s super high demand, but it’s more because of low supply, but maybe when this gets put into the money supplier or out there, people start to get, see this. Maybe it might take the real estate market even further.

John Burns we just had him on the podcast a month and a half ago, but he points out some cool things, developments that are happening migration from urban to suburban locations, people are seeking less density, larger floor plans or outdoor space. The low mortgage rates, relative affordability and shifting from working and schooling from home supports the suburban migration.

So examples of that are Bay area. Worker’s going to Stockton or Sacramento Seattle folks moving out to Tacoma or, like to the East sides. If you’re familiar with that site, Bellevue. Migration from gateway cities to secondary markets continues to be on the rise, such as Boise Spokane, Charleston, I don’t necessarily like those specific markets, but this is just what John Burns is saying as a general training.

And they advise to a lot of institutional investors. Another development is luxury and second home sales sword. In locations drivable from nature, coastal markets. So those people run away from those high price areas, such as Seattle and San Francisco, Los Angeles. You’re seeing new home sales peaking in places where people are trying to pick up that second home or that nice luxury home

just outside where the populated areas. So places like Naples Lake Nolan, I in Orlando salt Lake city and Las Vegas, or people in salt Lake city and Las Vegas are benefiting in daybreak. In Summerland. For example, you have home sales in the top 50 master plan communities. Now these are like the big suburban development.

So track homes. Largest year of your growth. You’ve seen in nearly a decade, we expect lower mortgage rates and buyers since urgency improved living situations. And John Burns will advise for a lot of those types of clients, the big home builders out there. They’ll use their data to make the right picks of where to go.

I’d be telling you this guys, because these are the smartest minds of the business and we are lucky we get insight in what their information is, so we can make decisions as a mama thought investor or a syndication, private placement investor, and follow where the smart money is going.

Not where the dumb money, which is typically in these primary markets, just the flipping houses locally, because they need to feel it, touch it and see it. New home prices Rose 8% year of year, according to the proprietor builder survey, I will bust the man in limited supply at driving prices up and up.

And they say that they do not see this forecast really changing any taxing, but are some of the barriers to be on the lookout for. Should they come to fruition? Finished inventory per community remains low are restricting sales at 28% other communities, nationally three align with production capacity and lots of supplies.

So they’re still moving forward, but it’s going a little bit slower. Finished lot supply runs, low builders are scrambling to find new land deals and develop additional lots after selling far ahead of expectations. Some of the new lots of pipe, won’t be ready until the second half of 2021, especially in markets with difficult approving processes, building product delays, and shortages, continue to play the builders such as appliances, or, we’ve been facing a little higher than normal lumber.

So we’ve been forced to buy lumber as we need it. Resale home supply remains though in most metros. So this is encouraging even more consumers to consider the homes.

Yeah. Joint center for housing studies of Harvard university. Real next findings. That’s definitely not an article that you would scroll through on social media feed here. So I didn’t put it on the Instagram channel. There’s no one who would read this, but I started reading this article and I was actually.

It’s actually pretty good. So they’re saying, during the downturns, the expectation is that the housing prices with the client not increase and certainly not increase as such extraordinary high rates as it has. Some of the causes is the tight labor markets. The unemployment rate after peaking at 4.7% in April, we came down to a still weak level and 6.7% in November.

So some room to improve, but. You got to remember before this whole thing was not an economic issue was a health crisis before the health crisis that threw everything out of whack. We were at a super low level, 3.5% unemployment high inflation that consumer price index has been running for years, but only up 1.1% in 12 months ending November, 2020.

Therefore strong housing prices increases are not simply reflection of inflation. They’re extraordinary high on real inflation adjusted basis. So what is it like four to $6 trillion when I dunno if that’s true, but it’s somewhere on that magnitude. At least two to $3 trillion got pumped into the money supply, which is likely causing the stocks to stay at these all time highs despite.

Going to 14.7% and not 6.7% unemployment. People will say likely what’s happening next is inflation. But if some of the readings that I’ve been doing through Richard Duncan and other economists out there, what they’re saying is a lot of the inflation is not tied to the money supply these days.

Essentially America can print whatever money they wanted and nip delay the interest rates and. Can do this all by not precinct inflation. Not yet. That is there was still a loose lending mortgage bubble. The average national lending of a single family of whole mortgage debt divided by the market value of the whole is still an extremely low at 34%.

There’s no mobile skies. People are paying down debt, especially in this 12 months. If you have a job consumer debt is on the decline. So it’s not a repeat of 2008, that’s for sure. It’s a couple with ultra low interest rates. The fed pushed down interest rates to very low levels in early 20, 20, and promises to keep it they’re ultra low for years to come.

As a result, Walter’s rates have dropped to a record low level of 2.7% 400 points bait lower than it was a year ago. Housing production shortfall prior to 2008, housing production was cyclical with volumes that went significantly above long-term growth, but that’s not happening today. And bill we’re building as we need it. It’s what’s going on. Fewer houses for sale. The pandemic has been noted for the bowl level of houses for sale. Like I said, Low supply potential sellers do not want to risk inflection with buyers, wandering through their houses for showing and open houses.

That’s what these guys say. I don’t know if I wiped by it. If, to me, , if you need a house, so you don’t care, if you were walking through it, you need it soul. But in recent years, as an evidence that the baby boomer generation supporting onto their homes longer than their predecessors, it’s creating that log jam.

There is no more fundamental economic rationale for prices to go up. Shift and family spending moving towards housing, everyone’s stuck in their house. And this is all the, see why people are rehabbing their houses, de Paul renovations. People are nesting. They’re less traveling.

They’re stuck in their house, putting more money and more percentage of their net worth into their house.

Maybe because people can’t have house guests now, maybe the whole keeping up with the Joneses isn’t around anymore, but there’s certainly data is showing that they’re certainly putting more money into their houses. A pandemic induce acceleration in the purchase of second homes. So this is a lot of the wealthier guys, they’re trying to. Buy other properties in other areas like we mentioned from the John Burns study this is a list of the top 50 master plan communities of John Burns. The takeaway here guys is you look at the list, , what are the States that keep coming off Florida? There’s one big one.

The Howard Hughes in Summerland, Las Vegas, Utah, South Carolina, Florida, Texas, Florida, Texas, Florida, Texas. I mean it’s and then Phoenix. There’s a couple in California. There’s one Houston, Texas, but it’s always the big three, right? Florida, Texas, South Carolina, that these are the places where people are moving.

Do you have notes? Top 10 emerging markets. If you are a multi-family general partner apartment buyer, please cover your ears because the top three are Huntsville, Alabama, Pensacola, Colorado Springs. These are the top emerging markets and these are the smaller markets. So these are not secondary markets like a Dallas or a Phoenix, Arizona.

Those are that. I thought the mid tier in terms of population we’re talking about is emerging markets. So a lot of these are considered tertiary markets. So again, in order it’s funds for Alabama, Pensacola, Florida, Colorado Springs, Omaha, Rena, Savannah, the points you Orleans, Birmingham and Knoxville, Tennessee.

Maybe that whole Huntsville, Alabama growth is spurred on, or actually this got released pretty recently in the last month that the secretary of the air force has selected Huntsville, Alabama as the preferred location to post the us based con. No, I don’t know what the heck this is. Back in the day, these guys would launch the V2 rockets.

I don’t know what they’re doing all in space, but whatever they’re doing, it probably costs a heck of a lot of money and it was all the smart people and everybody else and a lot of tech stuff. So that’s going on in Redstone arsenal in Huntsville, Alabama. Why I liked Huntsville a lot. Patty may release a press release economic growth, expected to accelerate as vaccine deployment quickens, and one brother approaches like a dog here, but they’re saying the U S economy is expected to grow 5.3% in 2021 is substantial improvement from the currently projected 2.7% contradiction in 2020.

So they’re saying it’s a green light. Commercial property executive also echoes that to their headline on January 11th was vaccine to trigger order three CRE recovery with an economic turnaround expected to begin around mid 20, 21. I gotta say, guys is what were you doing when that Bicheno was about to burst here’s fatty maids right out of the report.

That’s their GDP estimation. So exactly what they’re saying to hit 4.8% in Q2, 2021, 7.5% in Q3 and 6.1 in Q4, and then the kind of re level off in 2022. Yeah, a lot of action. Prices are still low for large commercial assets. And , I don’t think that . The prices are better RV.

No, that long a Freddie Mac C’s improving multi-family sector for 20 and 21. So this is Fannie Mae’s brother or sister or whatever you want to call it. The other pseudo government agency predicts rents to increase in most markets and originations to rebound after a very slow year, 2020 for obvious reasons.

So the U-Haul report has come out guys so that you have all report is something I really liked to follow, which you guys haven’t used. The U-Haul in awhile. You’re probably too rich to use it, right? The you haul is what all the blue collar folks or the broke college kids use to move themselves.

So this is a great indicator where the blue collar workforce are moving and the top. 12 migration growth is in this order, Tennessee, Texas, Florida, Ohio, Arizona, Colorado, Missouri, Nevada, North Carolina, Georgia, like in saws in Indiana. That border Texas is always on the top here. It’s always a dog.

Like a Texas has been like the top, like the last half a decade at least, but a surprise or one is Tennessee. And I think a lot, a few slides ago we had Knoxville. If you’ve been up there, so there’s something going on, but yeah, Tennessee used to be 12th on the list. Now it is shown to be number one of Florida was number one, but it’s down to number three in Texas is number two.

Like I said, I, Joe Biden just passed his $1.9 trillion relief bill. It’s like stimulus three or stimulus four. I don’t know which one we’re on now. But this one went into effect in right as he took office January 15. What is it? How does it impact multifamily investors will of that big bill? What it did was it extended the eviction and foreclosure memorandum student end of September 30 billion in emergency rental and utility assistance, $1,400 similar checks for qualifying adults.

Increasing federal weekly unemployment balance. And it’s two, $400 through the end of September at 5 billion in emergency assistance for people experiencing homelessness. And it’s, people are like, before this happened, they’re like, Oh my God what’s going to happen.

We’re going to fall off the cliff. People’s welfare checks are going to be running out. And this happens all the time. Guys. Like the government has shown us time and time again that they are just going to print money. that’s just what they do.

Some of the biggest surprises of 2020, where the rapid innovation safe in the housing industry via virtual tours, exploded private appointments, drove conversion rates to levels of federal stimulus. They’re saying that’s a big surprise to me. It was no surprise. People were repairing and remodeling their houses.

Single family home rental operators competing for land. A lot of these guys are building with the build to rent model which included amazing 8% in the South East surprise of rocks. And.

The midway point here, guys, just take a little break here. If you guys haven’t checked out our offerings of what we have in our ecosystem and simple passive castle.com. Check out the website and our two groups of masterminds are the family office. Ohana mastermind the phone for short, simple, passive casel.com/journey.

If you want to learn more. Probably in the next couple of months, we’ll kick off another key beta group. Now this is the group for newer investors under Porter, mainline under half a million dollar net worth. You’re trying to pick up that first single family home rental. And that’s what I did back was 10 years ago, myself.

And that’s what started this whole journey. If you want to learn more about the equity simple passive cashflow.com/incubator, check out the revolt investor. E-course. If you want to buy that, and when you sign up for the incubator, we can be funding for their purchase there. That way you can get a headstart on the e-course, the academic learning.

And then when the group starts up, you can jump right in everybody, but a little bit of a personal updates on my side, as I always try and break things up in the six eats. But Tony Robbins first growth. Like we had our virtual bubble. I thought it was awesome event. I was pooped after two full days of this.

We had about a hundred attendees virtually. It was a paid event, so it was awesome. People who were there were serious about connecting with others. It was not a death by group PowerPoint. It was, I would say 60 to 70% was breakout room times. Building organic relationships with other passive investors.

So I’m saying it was great for me because I’d never done one or I never hosted one. So it took me a few hours, but I really got the hang of the virtual breakout rooms. And I think a lot of people were able to navigate on their own. So that was cool contribution, new members that came to the bubble.

I didn’t realize how many people I guess they don’t listen to every single podcast or they read every single article I have@simpleclassiccastle.com, people say, Oh yeah, I’ve seen that infinite banking thing. I didn’t realize it was such a thing everybody’s doing it here. Or, yeah, let me see it was really cool to see people seeing the light on some of these wealth building strategies of the wealthy and how supple they are, but how counterintuitive they are to what you normally see out there.

Again, it seems like we’re heading off in life is to create a contribution to the world to create more of a cheek. I was watching a YouTube video today of what’s the difference between McDonald’s in and out burger. And McDonald’s when they conquered the world to do this big business.

Whereas in and out burger, they’ve kept things small and a boutique, and that’s my vision for simple passive cashflow. Hopefully you guys will stay a part of it. I do I get a little significance in my knife? We close this sucker. The Jacksonville’s tallest building in the bank of America tower.

I was built in 1990 and we just bought it as a group. It was a $75 million deal on an appraise the next week for like low eights. So we just made a few million, at least right there. And it’s a biggest and skylight, who doesn’t like to be the biggest. How do I get a little uncertainty in my life?

This has been the theme for the last six months, right? What is the world going to open up again? Then we just showed you like three articles of how everybody’s saying what are two quarter three, 20, 21 is going to go like gangbusters, but it hasn’t happened yet. We’re still waiting.

I’m seeing a lot of listings go up by brokers. A lot of these brokers are finally getting the sellers to say, yep, now’s the time let’s put it on the market. Let’s move it. We held back in 2020, but let’s get it moving. We know that the world’s not okay,

but we don’t know if we have another six months at prices at this level. Which is why we’re pretty active and which is why it was great that we were still active last year, because all these other guys who just sat with their bare hands under the butts, they don’t have the broker relationships at this point.

How do I get a little bit certainty into my life? We sold three deals in the past month. One in Atlanta that one we a hundred percent return investors’ money in two and a half years. Sorry guys. The first checks in that are going on, I think in a week two on that. And then we’ve got to wait for some, the final bills that come in, but we should get that out shortly.

Another class C in Huntsville. So 60% return for investors in three years, that’s like a 33% time. And then another one, a hundred percent return in three years on another Huntsville property. But yeah. It’s done certain how do we build a little loving connection in my life? In the bubble, it was a cool thing.

On Saturday night . Some people were invited their spouses and we have those spouses panel. My wife was there. A few other of the investor wives were there and we demo dive into, how do we work as a couple to make financial decisions. So I want the testaments to go.

And how do you run your family household? And the finding was everybody’s lives a little bit differently, you’re not going to have the ideal, we make decisions and tent and maybe that’s how it happens, but that doesn’t happen in my family. So it was great to get people together and it was really appreciate the spouses for coming out to that.

The spouses and somehow, or listing. Such good sports, listening to this book, passive cashflow podcasts, as they are driving around, or maybe reluctant Nicholas thing. Cause their spouse is making you listen to it. But let me know. I don’t like that’s shortage.

If you guys came to the Saturday night thing, I got shirts for you guys as a prize and thank you for coming. Cause not many spouses come most don’t so if you guys truthfully came, let me know. We’ll get you a shirt. Some fun things I bought because what’s money for it and to buy some cool stuff.

So I bought a workout bench and I bought this cool punching Bay, but not like the punching bag you fill with towels or sand that like ribs for hands up. This one’s like you put water in and, punching water is still can break your hand. But so there’s a column of air. And so it’s like just soft enough, you get that snap, but it’s just soft enough.

But, that can be found on Amazon. A couple of cool things I bought this month. Yeah, the, again, the Easter egg guys, if you guys want to download all the audio trainings for surrounding single-family home, remote rentals, turnkey rentals, hopefully you can use this to get ready for the incubator.

If you want to join us on that and get Rolodex access to the people that we work with, go to simple passive cashflow.com/turnkey dash. Download. Or share this with your friend, right? I think that’s the common theme I hear all the time is that my friend does it. I tell him about this all the time and I just waste my time.

In fact, that’s how I created this podcast. So my friends would ask me how I buy all these rental properties and they never do anything. Some of these guys still never done it. But, you can lead a horse to water, but you can’t force them to drink something like that.

But for those of you who jumped on live, thank you. If you guys have any questions on typing in the question, answer box, we’ll try and get to it, but I here’s the legal disclaimer and not, we will see you guys next month.

Do it Yourself Cost Segregations w/ Bill Smith

https://youtu.be/3gF1se6dpXk

Hey Simplepassivecashflow listeners. Today, we have Bill Smith here who is going to tell us all about the, do it yourself, cost segregation. For those of you guys who own single family homes or rental properties on your own, this can be a great cost effective means for doing a cost segregation, but hey Bill help me.

Let’s start at the top. No investor left behind. What is a cost segregation before we start drilling into this, do it yourself one. Okay. Okay. Essentially a cost segregation study, a real estate asset, mostly residential. What you’re dealing with is 27 and a half years or 39 years.

And so that’s your straight line depreciation. You can take that deduction every year to reduce your. Tax liability. What cost segregation does is we break down a building, essentially dissect it into its component parts, like when you were in eighth grade and you’re in biology and it does dissect a frog and take everything out.

all those parts, we put a different life to them. So those parts have a different life. And by short life, in those certain components that the IRS allows you get greater deductions upfront, realizing time, value of money. And then you can invest in more properties. So essentially that’s what we do is.

Dissect the building assign a new life. They call reclassify that property. And then you have higher deductions in earlier years. Very elegantly said. and if you guys want to learn more about cost segregation, go and check out podcasts. One 37. We did a little bit more deeper dive into the topic.

And I have a master cost degradation guide. If you are more of a reading and on your free time type of person, go to simple, passive casel.com/cost SEG. And while you’re on the page, you can also put it in your email and sign up for the newsletter to get the free Gootee there at, which is the K one tracker form or those syndication investors who have all these K ones all over the place and keeping track of your deductions, which.

You get those deductions by doing these cost segregations and on some of the larger deals, I can see like almost 50. It is 80% come back or what they invest as first year depreciation, but that’s all fine and dandy on the big deals, the syndication deals. But what we’re talking today is this cost effective.

Do it yourself. One that really makes it worthwhile to do on a smaller property. When I do it on my apartments, bill and I were looking at, This last deal and going to cost say get out. We don’t know the exact price yet, but it’s in the range of what, four to $6,000 typically on a large building and on a smaller building, it can be, you’ve got to send a guy out there and there’s a lot of modeling.

but there’s another way of doing it. And maybe bill, if you could go through that, what we’re talking about today, the paired down version. Yeah. so DIY cost sag is a platform we developed after being in the industry since 2002 and doing, well over 15,000 studies and we saw a need in the market for smaller properties under a million dollars.

And whether it’s a single family, residential, duplex, or triplex, we cover those, or it might also be a dentist office or any other kind of commercial property under a million, we actually go up to $3 million, but it’s a lower cost quicker alternative. So how that works is we’ve built a modeling system and we’ll model the property.

So it’s a non inspection product. It takes essentially. Five or 10 minutes to input the data you put in your credit card and you get your results instantly. So what happens with that is you’re done and you get your results. So it is going to air conservative and because we’re not inspecting it, there’s been a lot of talk like on bigger pockets.

Maybe you’re focusing on to BiggerPockets about these solutions. We have tremendous supporters and people that have questioned it, mostly competitors. But we provide audit protection. So in the event, you’re audited, which is very rare, but if you are audited, we are going to send an engineer out there and do a full engineering study, which we do.

again, we’ve done well over 15,000 a year, since 2002. So we will defend you fully. So you’re protected, but it’s a quick and easy solution, whether it’s a one to four family. With the discount code that you’ve got through here, with lane, it is a $640. That’s a one to four. It doesn’t matter.

What’s a single family or quad anything in between. And if it’s under a million dollars in five plus units, it’s 1200 and $1,390. That includes the auto protection is one 95 it’s insurance policy. So basically. It works great. It’s a good solution for the right situation. Certain, there are plenty of properties that are under a million or right in that borderline that justify the full asset detail that you’d get from a cost segregation study for.

A future of abandonment and disposition and things that depending on your purpose with the property and what your plans are with it, I talked to folks and say, this is your best option, or this is your best option. Are you looking to maximize your depreciation and do a lot of value add? Or are you just looking for quick deductions?

And an answer here, if you’re a real estate professional or not, sometimes that makes a difference. how valuable are these, tax deductions to you for an option? And it also takes into account like, how long are you going to put onto the property? It’s just like a turnkey rental that you’re going to dump in three years to go to syndication deals.

Maybe it doesn’t make sense. But if you’re costing out maybe a little bit. Larger property, especially in California, maybe that might be just enough to get some tax savings, to save up more money and eventually, go into deals and get cost segregations there and then sell the properties and not have to do a 10 31 exchange as I don’t like at all.

but you guys can go to against civil pass, a castle.com/costs say, and then there’s the link there with the discount code SPC, but I really wanted to dive into. there’s some controversy with this stuff when they go that’s so let’s speak to it. That’s how that mature conversation about the risks of what they are and some of the cons.

Okay. So you’re asking him what the cons are. The cons are, you have to have a habitats liability and you have to be able to use the benefits. I talk to people to say, okay, I want to get this. I heard about this depreciation. I want a bonus. I want everything.

It’s like Laurie real estate professional will know you got a deputy job. Yes, you’re good. They don’t have that much income where potentially straight line can almost neutralize their needs. they have to actually need it and have the doctors because there are passive, of course, if it’s a business property, and not residential, or it’s Airbnb, I talked to a guy the other day, he was calling about this and he’s doing Airbnb.

He was like, put this on my schedule C and I’m like, yeah, you could, because it’s a 39 year commercial property based on your tax situation. that’s a discussion with your CPA. So he was looking at getting these deductions on a schedule C, which actually did make some sense, but again, we’re not CPAs.

We don’t give that advice. So I talked to folks what makes sense for you? What’s your tax need and is this the right thing to do? And anything from, $58,000 single family, we did the other day with a guy in upstate New York. Too, we just did a $120 million, building in Atlanta, which obviously is a full cost.

Yeah. I’ll, I’m not a CPA, but I’ll walk people through the quick math in their heads. So basically we all know that on the residential rental property. You’re able to deduct one 27, the building value every year. So on a hundred thousand dollars property, let’s just assume that half of that property value is the building value, but in a lot of places that we like to invest in the Midwest and South with lower land values, that probably two thirds of it, but let’s just go at $50,000 and a hundred thousand dollars purchase price.

Now you divide that by 27. so 50,000 divided by 27. You’re roughly talking about a couple of grand a year of deductions, which is great. But. When you do a cost segregation, the general rule, as you’re looking to bottom third of the building value in the first year via cost segregation using utilizing bonus depreciation.

So one third of that building value 50,000. So you’re looking at 18 something like that. Yeah. So 18 grand compared to about two grand. So maybe a little bit less than 10 times, the amount of deductions you withdraw out in that first year.

That is right. But I think in the market, you’re talking about, you’re giving a lot of value to land because you live in Hawaii and usually in a CPA like Brandon Hall, he always wants to use the assessed value. And if the assessed value is below 20%, you go with the assess value. If it’s not, you look at the 20% is the rule.

A lot of people use. I’ve got people to use 10%. On pretty aggressive properties. We have to be able to support that. So we’re going to, it’s a problem. We’re going to say, wait, we can’t justify that land value for you, but usually 20%. So that a hundred thousand deal you’re looking at 80,000, let’s say it was 20% just at a conservative number for a house that’s a $20,000 deduction in year one with bonus depreciation.

And that goes to the end of 2022, unless the new administration happens to change that. we don’t know if they would or can and. And how quick that would actually happen, but it won’t happen on January 23rd. We know that, I’ve got a couple more years thinking and employ this strategy, but it’s ultimately, it sounds great, right?

You’re getting 10 to 15 times more deductions of first year, but there’s a cost to this. And when I do it for my large apartment buildings, I’m usually paying five grand or so on that thing to do this, to extract it out. but that requires sending, out a guy, unexpensive to travel out there, but that’s obviously not cost effective to spend $5,000 to get $20,000 of deductions at 25% tax bracket.

That’s a break even. So that’s where this do it. Yourself. Cost segregation product comes in. But bill, let me put you on the spot here. Why would lane spend $5,000? What else am I getting in my costs say that somebody’s spending 600 bucks and one of these things is getting. Just sitting no eyes wide open what they’re going into.

what does a huge difference? And I think on your bigger deals, if you’re spending 5,000, you’re not getting a very good study. You need to spend more than 5,000. They’re usually between five and 10. So on an apartment complex, it might be 7,500, six, six to eight, depending again, on the engineering that’s done.

So on a full study, we look at it and I think anybody else would look at. What are the engineering hours it’s going to take to do the work? Cause we send somebody on site. We count everything. We qualify everything and we do all the asset detail. So in a full study, you get complete pass at detail, meaning.

All your roof deal tale, all your HVAC detail, all your straight line detail, as well as all your short life detail, carpeting, flooring, cabinets, everything you’ve got. and we give a, a hundred page report back to you showing out all that detail. And we go into everything, electrical breakers, no one else gets the breakers.

We need things that people don’t do. So we wind in our deeper, but everybody goes in an engineer’s pretty deep and gets all the outlets and things. So that’s what a full study is. It’s a lot of pages. It’s a lot of research and a lot of documentation with the guy on site, too. Oh, yeah. You always see a guy inside.

Yeah. You always seen a guy inside an engineer. We send our own engineers. Some people would send picture takers and interviewers and stuff, but somebody all wasn’t goes on site. That’s pretty much what happens now with DIY it’s a non inspection product. So DIY means we’re modeling. So we are going to air conservative.

So if we would have gotten a 25% results by going on site, we might get 19% by the. DIY, because you’re not sending somebody on site. If in fact, you’re audited, though, again, as I mentioned, we will go send somebody on site and we will do that a hundred page report for you. But what you’re going to get with DIY is a model solution, which is what a lot of the people out there do models and residuals and sampling, and they add pictures and some engineering.

But what you get is a one-page report that gives you your five, seven, 15 and 27 and a half year. And then some categories of generally what it would be, and then a receipt. And then your data inputs, because some people input the date wrong. We fix it for them. We don’t charge. You’re afraid of that. you get a very streamlined report, but that’s all the CDA cares about CPR.

And 100 pages, they want five, seven, 15 and 27 and a half to put on your tax return and they’re done. So that’s what DIY does. So it gives you a lower number. It’s a lot less expensive. And so that’s why it’s good for the lower value properties where maybe you can’t justify a five or $10,000 study or for that, and then we also have a hybrid.

So one of the things to think about which I did, we did a million to house and sound like Hawaii, but that’d be a small house and wine LA this year we did a desktop. So a desktop takes our fully engineered study methodology. We use an engineer, but we don’t inspect. We ask the homeowner for answer a few questions.

Maybe get a few more pictures because the appraisals usually don’t have good property pictures. If they have a listing, like this was an Airbnb listing, then we had a lot of great pictures, had a swimming pool and tree. amazing grant, great landscape, good view. We got 52% of the property value for her.

She was blown away. She was like, wow, no, that’s not, doesn’t happen all the time. But that one, she’d been just a little bit under it, it might’ve got a DIY would not get near that because we just don’t know these specialty Palm trees and some nimble hot tub and the things that it says pool. So we’ll do the valuations, but it was, and that’s going to be a lower cost product about halfway between the DIY.

And the, full study, but so on a big house like that, they’re usually in the three to $4,000 range, but you’re going to get a full study, fully defendable, and you get a lot of detail. And that’s the thing, when you do one of these studies, if you were due to one, I would really suggest you guys get the audit protection.

So how does that kick in. I think there’s a pretty low chance of getting audited if you were. I dunno if like the percent chance, but I think it’s pretty dang low. It’s very low. of all the tax returns they get out at 4% of all returns get pulled for audit, which is a low number four or five.

and Cost segregation. Depreciation does not trigger on it. We’ve done over 15,000 studies. We’ve done plenty of audits, but relatively speaking, very few, but cost segregation has never been the trigger for the audit. People have got an audit for something else and when they get an audit. Of course, they look at everything.

They come in, they’re looking at everything. So now they’re going and depreciation schedules on the trip. So they say, okay, we need to check out why you did this or whatever. We send a report. If they asked a specific question, we answered their question. We showed the documentation to the report and the auditors happy.

Cause there’s somebody out of college, working for PWC or something and they go check and they’re off to the next thing. They got a list of 30 or 40 days or so. They’re happy. Our report is Bulletproof. And we’ve helped defend people that have been audited themselves. They got in trouble.

We’ve gone defended them. When guy was an honor, for two years, we did a quick study. We did a 27 page engineering letter, like a study summary. They send to the IRS in two days, the closest case. He had three more plants and was building a fifth plant. And so we, we got a client for life out of that.

Yeah, audits, but they’re rare. you want to anticipate the worst and expect the best. so walk me through this. Like I get the cost SEG, right? If I’m two bucks or so, you use my code to get a little off of that and maybe that helps pay for half of the audit protection and another a hundred bucks.

like a couple of years go by and the audit, maybe something else that gets flagged in my tax return. And he started digging into this. What do I do? so like, all right. I email bill and say, all right, man. the audit protection thing I bought, what’s the steps at that point?

You guys like, all right, man, we got it. We’re going to send the guy out and what’s the timeline and what are the steps? So what’s going to happen in the event. There’s an audit, your CPO, get involved, they’ll call us and say, Hey, we’ve got an audit and they’re looking at your depreciation schedule and say, yes, this one will not support an audit.

So we will then send somebody out onsite. Do the study, get it back and defend it. Usually have a specific question. So we might be able to defend it and just answer those specific questions. But if we need to go out and do a full study of it, and if we go to a full study, we’re going to find five, 10% plus more.

So you’re going to make sense. Oh, thanks for auditing because we actually have another $25,000 in appreciation. We didn’t claim. So we’re going to do a 31 15 change of accounting method. And where do you get this? And actually you owe us a refund. It may not go like that. that’d be a really happy ending, but we will find a lot more detail and we will get more benefit for you.

So there’s no chance there’s going to be any problems. Yeah. I think the do it yourself model is pretty dang close. Anyway. It might be so negligible. That it may not even matter, but I don’t know if that’s true if you do get audited and they do blow things up and you do find that your costs sake comes back even stronger, that you should go back and refile it seems like you should write, maybe just wait till the dust settles and refile next year.

So you don’t piss off that particular auditor. they forget that they’re not that’s that, but if you’ve done it in the year you purchased it. So you’ve already done component level depreciation. So actually you can’t go and do another 31 15 change of accounting method on the same thing you’ve already done.

I had someone ask me if they could reverse it because now they’re real estate professional. Two years later, go back to straight line for two years and then do it 31. I said, no, you can’t that’s well, there’s a lot of tax. I had to go to CPA on that one. And what if they didn’t pay for that insurance a hundred bucks.

Sharon’s how much legal fees or CPA fees does that take to defend something like that, just going out and doing a study or getting a study, you just have to go out and pay that $5,000 for a study, So you do have to defend that. So it’ll be certainly defendable. there’s no issue.

It’s not gonna be wrong. You just have to give them the detail. And that’s what the one big audit we did for that client. He did it. He was basically right. the CEO when they were doing, rubber for Nike and a whole bunch of stuff, he was basically right, but he didn’t have the backup details.

IRS wants you to detail out what you did. And that’s where our study with, our traditional study has straight-line components completely broken out. No one else does that. Unless you pay for an asset detail report. And they’ll charge again, another five or six grand on top of that original five or six brand they charged.

And so okay, now you’re looking at, 12 grand when we get an ELB for maybe seven for a thousand more that you’re looking at because we do the detail on everything. And what happens when you have that is you get dispositioned abandonment, which creates expense. So expense is great. So what you’re not going to get from, let’s say you’re doing roofs and things.

So you get a roof. We’ve put a value on it for if it’s about to be changed and we’re not going to high value with visit, it looks like it needs to be, it’s not a 30 year roof. We might have 20, $30,000 right on the roof, sat in an apartment complex. Like I’m one of the, one of your bigger projects or even a, on a house, houses that , we do with.

So what happens guys are during the shingles that rip off the shingles on the dumpster, they haul them away to landfill and then boom, throw them away and you put on a new $200,000 roof. On residential, you can’t expense it on commercial. You can expense it. Expenses are always better depreciation, but what happens?

You had $20,000 for the value on that roof. You just throw it away. And so at a, a 33% tax bracket that is $6,600, you just throw away. If you don’t have the asset detail and don’t know how to dispose of it or retire that asset that you’re replacing on a straight line. which is actually requirement from the IRS and their TPRS tangible property rates from 2014.

So that’s why asset detail’s important when you’re going to be doing a lot of repairs and maintenance, especially the straight line. It’s also important for the short life property. But now since a hundred percent bonus is in place, anything is five-year property carpeting things you’re replacing. Once you’ve done hardship bonus, it’s already written off.

You’ve disposed of it. It’s off your books. And so you just basically put in five years, so you spent 10,000 on flooring, you put 10,000 five-year life flooring, So when we help our clients identify, life components when they get replacements. Yeah. And the farm is pretty dummy-proof, it’s pretty easy.

Then you can do it in five minutes when I was looking at it. but yeah. So when people, they. Oh, you guys, this insurance, are you guys? Self-insuring it. It’s not through a third party. We’re self-insuring okay. Okay. So you guys, yeah. I’m sure you guys stand behind that percent chance of audit.

Cause your guys, the one, owning up if it’s the higher than that, right? that’s, that’s IO people always ask Oh, what do you think? The steel’s good look, man, I’m putting in my money. That’s what I think. And in this way, you guys are like, self-insuring these audits and not, you guys are going to do the work.

If we had charged with this kind of insurance policy that you guys have in place. so the odds are very low and we’re going to be Aaron conservative. So you’re not going to get maximum benefit. But you’re going to get good benefits and you’re going to get actually very similar to what some of our competitors do because they’re using modeling solution.

They’ve done a little bit engineering. We’ve actually done some tests and comparisons. We actually go up to 3 million now, on that net goes up, it’s not 640, that’s just for a house, but it goes up to close to 3000, I think for, a higher property. And we also, then we just, we do them on mobile home parks.

Those, we almost manually do our guide behind the curtain. He works on those, DIY is a great solution. It’s been really well adopted. A lot of folks in bigger pockets are big fans. A lot of folks are a lot of CPAs that use it for the smaller clients that have investors. I get a lot of calls and I get calls all the time.

They’ll go onto our website. Hey, I’ve got this house, let me know. And so we’ve got it. a number of big CPAs that also refer us when they have a smaller client. I talked to them and I set it up and they got 10 houses, or I get one, got a guy that had 10 houses. We’d get on Thursday. We connected and did 10 houses last Thursday.

All right. So yeah, to close things out, this, the why is this important guys, while you get the passive losses from these things, and you can offset your. Passive income. But if you’re super smart, like how we work our taxes, we played a real estate professional status. There’s a lot of nuances to that which we talk about every other week in the mastermind group, you guys can learn more about that.

It’s full passive cashflow.com/journey, but you can do tricks like this and. Now, I’m sure people who’ve listened to podcasts awhile. No, quite really don’t like 10 31 exchanges. I don’t know why anybody does them, who is a syndication investor, because, here’s my tax form that I have to display.

This is on the cost SEG website, simple passive cashflow.com/costs. So this year was I think, 2017 or 18 when I sold seven of my single valuable rentals. That previously done a 10 31 exchange. So I know all what they’re all about. I would never do one again and I don’t recommend it for most people, but I had a $200,000 capital gain see here on line 13, but because I was doing all these syndication deals doing cost segregations, like bill does, I was getting all these losses and they’re just piling up.

So when I had this big capital gain, I just brought it over here on line 17 to knock it right out and no gain. Without a 10 31 exchange. if you guys are thinking a 10 31 exchange, please don’t do it. Read this article, please don’t waste your money and don’t be a sucker or distressed. We call them the suckers, but they’re distressed buyers.

Whenever we want to sell an apartment, we jumped for joy when there’s a 10 31 buyer, because they are distressed buyers. But yeah. So coming to this page, that’s the main thing we’re talking about today is do it yourself cost SEG bill also does regular cost eggs. He’s looking at some of my apartments right now, to do it the, heavy duty way.

But this is the pair down for the show, slowly on 10 30 ones, because 10 30 ones. for some people generational wealth handing to the kids and what it was really designed for back in like the thirties or something like that. But people not using, Oh, I just want to get rid of taxes.

They use it for the wrong reason. And there’s so many, as you showed a great example, you don’t need a 10 31 necessarily to reduce your taxes. So I’m not a fan of 10 30 ones either. There’s a guy in those internet form that always gets into like an argument on the internet forums.

So to me and buck had 30 ones, he’s a 10 30 ones. He sells 10 31. So they always this is outrageous. You’re like 10 30 ones are like the best, no, man, like just looking at your small world, like this is the bigger picture. yeah, maybe in that world it is the best strategy that you know of, but I know something that’s a little bit better.

That’s right. And Joe Biden had said, he’s going to, the first thing he did was to go after his 10 30 ones is a low hanging fruit. And I don’t know if he’s at that’s just political talk or why, politicians say anything to get elected, but he said 10 30 ones showed more risks than bonus depreciation this point.

I will see what happens. I appreciate it. I don’t think people understand like that. You can depreciate an asset like with bonus depreciation. So therefore it’s out of the vernacular of the common American, like ABC can make an article on it basically. So yeah. let them have the tender one is what I say.

yeah. Yeah. Should we actually say, what bonus depreciation is done? And we define that. Did we. Yeah. Yeah, I think so. And, we also did mention a little bit that it is going to be going away in 2022, I think like stepping down 20% every year. So it’s not going away entirely, but.

Let’s cross our finger and it gets, renewed, right? Yeah, it will. What’s going to happen in 2022 and now it’s a hundred percent. And in 2023, it goes to 80% and then it goes to 60% and it goes to 40%. It’s been a hundred percent once before, and it’s been 50%, several times to infuse the economy, And so let’s say you bought a property in 2020. You didn’t realize cost you do it in 2021 and 2022. You will still, if we knew cross sag in the future and do what we call it, look back study. You still get bonus depreciation in the year that you paid for it. Bonus depreciation was in fact, or if you bought some in 2016, Wayne you’ve introduced me to a whole new world.

Oh my gosh. I bought this $5 million book apartment complex. And in 2016, we can do a site study on that. Now get that lost opportunity in 2016. 50% bonus depreciation. Of course the key thing is all a five-year we’re doing a catch-up you’re going to get it all in year one anyway. So what bonus appreciation is besides the word?

Everybody knows. Okay. We’ve heard about it. We’ve talked about 27 and a half year, 15 year, seven year. And five-year seven years. It’s your phone lines, but your short life, anything that has a shorter life than 20 years. You can depreciate in your one, it’s an election on your software, your CPA software, you still put in your five, seven and 15, but that bulk number, which might be 20 to 25 or 35 or 45%, I’ve seen some multi-families go to, you can take it all in year one doesn’t mean you get extra.

It just means you get it to take in year one. So you get that big deduction like you got in your properties. So you all set that big capital gain. So now you’re going to have to buy more properties next year to offset your other capital gains. So it just keeps going and you’re going to keep building your portfolio and your wealth.

So that’s how it keeps working. I call the, I call that the simple passive cashflow gravy train. Once you keep rolling and rolling. And people always ask don’t you sell your properties and you’ve got to pay back the depreciation and recapture and the capital gains, yeah.

But hopefully in the meantime, you went into dozens of deals and then you accumulated all these passive loss and then you take that money that you did make and put it into two or three new deals. Get the good towns rolling. That’s right. that’s the other thing that people that I don’t like as well as recapture all recapture and like 10 30 ones are also great recapture so bad.

Not necessarily because, one, we know tax rates are going up. And especially capital gains rates. So if capital gains rates go up to ordinary income, right then recapture, you can recapture anyway on your straight-line property. So do you want to, you’re going to pay taxes on that money either in the future or today just saw your tax rates are lower today.

So recapture is not such a bad thing. if you’re using the money, if you’re buying one house and you’re sitting on it for years and you might sell them, buy another house. Yeah. It’s probably makes sense. But if you’re investing. And turning your money. We have big clients. I won’t say the names, but they do it on everything.

They bought hotels in Hawaii, their bicep, all over the country building and buying they’re opportunistic. They might sell it, but they’re using that money. And the return they get on that money is greater than the tax rate they’re paying capita. So again, it could be bad. Again, it depends on your situation, but recapture and especially if.

Ordinary income tax rates or cap gains go to ordinary income tax rates. It makes it a moot point. You’re going to pay me now, pay me later. but the money in your pocket today, but yeah, there are, people are looking at this myopic thing. they’re looking at in one off deal one property and yeah, you do have to pay the depreciation recapture back, but I tell them like, Hey dude, look at the big picture.

You better be in like, 10 20 deals, right? Like in the next five, 10 years. Like they’re not only having one. you’re in multiple deals that are all kicking off these passive losses. So they all help, like in the big picture of things, right? Yeah. you’re going to pay tax on the recapture money anyway, so you can either pay him later in the future or pay them now.

And are not paying now and that’s what cost segregation as it differs, if it’s a tax deferral strategy. so anyway, what, what else? I love all your pictures there. All the parties you’ve had are all the groups, masterminds and networking groups. It’s fun out there in Hawaii.

Yeah. that’s where you get all these strategies, right? It’s not just like the neck when I read about this stuff in a book, because this stuff changes so quickly, right? Like bonus depreciation is a rather new thing, but that’s, I’m always preaching on develop your network.

Right? Most people, myself included when I started out, the best thing was like listening to the senior worker and to keep it going. That’s absolutely not the guy to listen to for financial advice. Yeah. Finding your peer group of pure passive upgraded investors doing this stuff. And that’s when you’re going to find these still chicks tips like this, just like the, do it yourself, cost sake, which, yeah, again, check it out.

As simple as a casper.com/cost say great for smaller property and mango airport folded on it. Cool bill. appreciate it. We’ll talk a little bit later about some loose. They, the larger ones, largest cost variations, but, yeah. Of you even want to get a hold of you? I’m gonna duct you’re contacting for, if not, they can reach out to me and I can do I’d have to you guys later on.

It’s pretty simple. It’s bill. At ELB cost seg.com. So ELB cost SEG is our firm cost segregation. It’s CLB consulting, but the website ELB costs. So just build an ELB cost side. And my phone number is four zero seven four seven five five four seven. It is my cell (480) 747-5547. Perfect. And, if you guys want to learn how to get these costs, surrogation bonus appreciation stuff.

That’s where the syndication deals come in, get yourself educated, pick up the new, go to simple paths to casel.com/syndication to check out the free guide there and see if the e-courses for you. But we’ll see everybody next time. Thanks very much.

The New Great Depression w/ James Rickards

https://youtu.be/4eVAskRng9Q

Today. We have James Rickards here, author of the new great depression. Check it out on Amazon. It should be out now, but let’s dig right into it because a lot of you guys know who James is and he writes a lot about, bat girl economies. And I thought bringing him on would be a great way to get a little bit of different contexts or different viewpoint on things too.

When you’re reading headlines, how do you take it in? But I guess James, let’s start off with you’re saying that we are in the new great depression. If you can explain that to us. Sure. It’s important to understand the distinction land between a recession and a depression.

A recession has a kind of a technical quantitative definition. It’s two consecutive quarters of declining GDP. There are a few other bells and whistles involving employment, so forth, but two consecutive quarters of declining GDP is a good rule of thumb. There’s actually a body that determines that it’s a national Bureau of economic research in Cambridge.

So the, they call the Boston strikes on recessions. They tell you when to start it when it ended, they said, pardon me? That this recession began in February, , 2020 . I think that’s correct. They haven’t said it’s over, but we can look at the data and. Pretty much see that it was over by probably July a third quarter growth was very strong, not strong enough to get us out of the hole we had fallen into, but but strong enough to end a recession.

Depression is different. Depressions are much more long lasting and people incorrectly assume that well, Jay, if a recession is two quarters of declining GDP depression is versus depression must be 10 quarters of declining GDP, like a really long recession. And that’s not the definition of depression.

Is you can have growth in a depression, but the point is it’s depressed growth. In other words, it’s growth below trend. For example, take the expansion from ten-year expansion from 2009 to 2019. The economy grew for 10 years. It was the longest expansion in us history, but it was also the weakest expansion in us history.

Average annual growth was about 2.2%. And all recessions are all recovery since 1980 average growth was 3.2%. So in other words, you were growing at a full percentage point less. Than the trend. And so it’s that below trend growth, depressed growth relative to trend. That’s what makes the depression.

That’s what we’re in now. So we had growth in the third quarter. That’s fine. We’ll probably have growth in the fourth quarter, although the data is that they keep revising the data downwards. So that target gets smaller for the full year to 2020. It’s going to be one of the Weakest year as largest negative growth, largest drop in GDP ever recorded.

The question is where are we now? My view is when a second technical recession in. The depression, by the way, this happened in the original great depression from 1929 to 1940, there were two technical recessions. There was a recession from 1929 to very severe. And then there was growth in 1933. It was one of the best years in the stock market.

34, 35, 36. We had growth. But the problem was we had dug such a deep hole. That even with growth, you weren’t back to where you were. So in 1934 or 35, unemployment fell from 25% to 14%. That’s sounds good. Except it’s still 14%. In other words, it’s still so extraordinarily high. And then 1937 38, we had a second recession and that’s what prolonged it and turned it into the great depression.

We’re going through something similar right now. I would we’re going to have a recession. In the first quarter of 2021, the quarter we’re in right now this will be what they call back-to-back recession. We had a recession and pretty much the first half of 2020 and a newest session beginning in the first quarter, at least of 2021.

All in the context of a great depression. So I focus on the depression aspect of it. You can have growth, you can have declining unemployment. There are certainly investment opportunities, but you’re looking at the press growth. You’re looking at prolonged period change behavior. We’re not going to get back to normal or there’s forget about normal.

We’ll live through it. We’ll cut out the other side, but things will be permanently different and that. Affects all kinds of expectations about growth asset allocation. And that’s really what I focus on in the book hit some of these COVID questions here at the end, cause that’s a little bit more of the micro cycle, right?

What we’re talking about today is more of a longer time horizon. So just to understand it correctly, from my perspective, you’re saying depression is you can still have growth. In a depression, but it’s just not at the pace of 3%, 4%, 5%. Correct is depressed growth in other words, right? One, 1%, 2% a year over five, 10 years, that can still be in the technical term, but depression is what I’m understanding.

That’s right. But again got to go back to the 2009, 2019 recovery ten-year recovery. And I said growth was 2.2% trend growth. Prior to that, going back to 1980, it was 3.2%. If you want to go back to the end of world war two, it was more like 4.2%. So that’s the kind of goes, so you say Jay, 2.2, 3.2 it’s only one percentage point.

What’s the big deal. No one percentage point apply to a $20 trillion economy. Compounded over 10 years, that has up to four to $5 trillion in lost wealth. In other words, yeah, we had an expansion, but it would have been $4 trillion greater. There would have been $4 trillion more wealth created. If we had been able to get back to 3.2% at which we did not The same thing is true today.

So yeah, you had growth. The numbers are in the first quarter, going back to 20, 21st, first quarter, GDP was down about 5%, second quarter down about 31%. And the third quarter, it was up about 33% and people go well, okay. We went down 31%. We went up 33%. Aren’t we back where we started? The answer is no, because the 33% was applied.

To a much lower base. In other words, if you start the year at a hundred, say 2019, is your baseline. Just call it a hundred percent of 2019. You go down 5%. And then you get down 32%. Now you’re around 67% of the old baseline. So even if you go up, let’s say 30% or a little higher at 32% that only gets you back to 87.

It gets you to 20 points. You get us back to 87. You’re still. 13 points below 13 percentage points below the old trend. And even if we have say 10% growth in the fourth quarter, which is some estimates show, okay, that gets you another eight points, but you’re still back to 95. In other words, you’re still.

Below 2019 baseline growth. We’re not going to get back to 2019 levels of growth until 2023 at the earliest. We’re not going to get back to 2019 employment levels in terms of total jobs until 2025 at the earliest that’s if nothing goes wrong in the meantime but I expect a number of things would go wrong, including a new recession right now.

Lot of people don’t know lane Yeah. They know that the stock market peaked in a night, October, 1929, and it crashed 89.2% by 1932. So almost 90%. That’s what a real market crash looks like. And then you ask people when did they get back to the 1929 level? When did it get back to the old high and people go, Oh, it must’ve been late thirties, early forties.

No, it was 1954 and it took 25 years. To get back to the old high, the Nikkei index in Japan hit 40,000 in 1989. It’s still not there. That’s, be able to talk about the last decade. We’ll try three last decades. Here we are 30, over 30 years later and it’s still nowhere near the old high.

And so that’s, I would say Japan has been in a depression the whole time. So that’s what depression is look like. They’re multi-year, they’re actually intergenerational You can have growth, but it’s not try and growth and it’s not enough to overcome the damage that was done. So we’re still way below, even with growth in the third and fourth quarters, we’re still well below the 2019 base.

And we’re not going to get to that level for several years, at least. So I think a lot of people understand this as, if you have your stocks drop a bunch where it’s going to almost have to come up twice as much to get to where you were, that phenomenon with numbers. And then you also mentioned something there too.

I think a lot of us, we understand what’s going on in Japan the last decades. Do they have negative GDP growth or is that kind of what you’re alluding towards that you. The U S is going towards, they have both I think the U S is going to resemble Japan. I think it has resembled Japan since 2007.

Going back before the global financial crisis, but I think that will continue. So just use Japan as example, I said during the 30 year depression, which they are, they’ve had a series of technical recessions. Now the recession might last. Six months, nine months a year, sometimes longer.

And then they have growth, but they never get back to trend growth. They never get back to the old level. That’s my point, not Japan’s nitrous in place. And I had a conversation with. He was known in 19 years and said, Mr. Yan, he was the assistant finance minister of Japan. But I was talking to him about this.

So we’re in Korea, about exactly what we’re discussing now, which is that Japan is growth has been very weak within and out of recession with a prolonged depression, but some growth along the way. And he said, yes, but you have to understand that the population is declining. So , if you calculate Japan on a per capita basis, They were actually doing better than on an absolute basis.

Absolute growth has been very weak, but if you spread that growth with a much smaller population, the per capita numbers, they’re actually significantly higher and which is true, just, fifth grade math

so where are you? Ended up as one person knows the whole country and he’s the richest guy in the world? That’s the deal ad absurdum of what he was describing. He was technically correct, but is that doesn’t work in the market? May our population is increasing we’re a country that likes growth.

We like both at the individual level and at the national level. So the idea that we could be satisfied with we growth in a declining population is just, it’s just not going to happen. Could be inappropriate long bout of weed growth. And then the policy question as well.

How do you change that? How do you get out of that? How do you deal with it? Yeah. So if you guys haven’t heard of this term of, changing worlds, demographics, aging, and birth I think that was in. Mr. Rickards last book. She just want to check that out, but definitely a big impact too.

So America’s population is growing. Barely, it’s funny looking at it as a great question. You look around the world. Japan’s population is declining. Russia is declining. Europe is declining. China is flat, but they’re approaching a level where they’re they’re not going to be at replacement levels.

Chris, this is the legacy of the one child policy, which is, we don’t have to do a deep dive on that, but that was one of the great plungers of history and aging rapidly. So Japan is flatline now until recently. United States population had been growing not at a high rate, but faster than all those other countries.

I mentioned mainly because of immigration , the natural birth rate of people in the country was not much better than Europe is at, or slightly below replacement level, but we had enough immigration to increase the population, but pardon me, partly because of policies during the Trump administration that immigration has been truncated.

So we may now be closer to a flat shall we say a population growth. And of course that, that affects output. There are lots of ways to think about GDP, the four part definition consumption investment government spending and net exports. But there’s an even simpler way to think about it.

It get to the same place, which is how many people were working and how productive are they? It’s working population times productivity. Productivity has been flattish, not very strong for reasons that are not entirely well understood, but it’s just the case. And population growth. Here, we’re talking about the labor force not the total number of people, from coast to coast, but how many people are in the labor force that labor force participation has been declining and fell very sharply during the technical recession that we had , in 2020.

If your population’s declining and your productivity is declining, your GDP is not growing very much at all. That is the situation we’re facing in the United States. And also like the way they keep those statistics on who unemployment has been changing to make it look rosier than it really is.

Yes. But I would say there’s another statistic, which is more important, which is labor force, the labor force participation rate, which is down around 61% now. But as recently as the 1990s, early two thousands, it was around 67%. So that’s a six and a half point decline or 10% decline if you think of it as a percentage of the whole that’s a big deal.

That number is the lowest. It has been since the 1970s, when women first started coming into the workforce in large numbers. Now, if you don’t have a job. But you’re not looking for a job. You’re actually not counted as unemployed. The unemployment number we saw and yeah, declined from it was hit about 13% last spring.

It came down to 10 . Now it’s around a seven or so, maybe slightly higher. That’s still high, but it’s a significant improvement over where it was last April, let’s say, but that’s not the number that matters. The number that matters is labor force participation. So what’s happened is.

Tens of millions of Americans have, I’ve left the workforce there and I’m talking to ages 25 to 54. I’m not talking about, a 68 year old who wants to keep working or a teenager, or we’re not talking about disabled. There are perfectly good reasons for people not to be in the workforce.

There are always some, but. We’re talking about able-bodied individuals between the ages of 25 and 54 prime working ages who have left the workforce. If you’re not, banging on the door of the unemployment office is looking for a job. They don’t count, it was unemployed but you’re not working and you’re not producing.

And so I look at that number because to me it’s a better gauge of economic growth

displayed right here. So that’s just simply Google and the labor force participation rate. Kept up by the U S Bureau of labor statistics. And is this pretty much it, this is what makes it hard, right? Cause everybody hears the news headlines and we know they’re always just trying to sell news headline, just like other talking about how collections are horrible, but I don’t see any of that issue happening.

In other words saying that unemployment’s down, but is this really the way they cut through that noise? Yeah. This is a more manual chart than the unemployment rate. Again this is the labor force participation rate. Now you notice you’re heard a lot of talk and last March, April may, about the V-shaped recovery and pent up demand and all that.

And you look at that chart and look at labor force participation while you see the steep decline at the time of the pandemic. Okay. Got it. It came back, but that’s not a B that’s like a half a B in other words, the bounce now it’s flat and going down again. So yeah, you had a little bit of a bounce back.

That was to be expected after the, we got through the original round of lockdowns in in may, in June, she had that bounce back. But then it flat lines and now it’s going down again. And that’s consistent with what I said earlier, which is we’re heading back into another recession right now. Because there’s a new round of lockdowns.

You don’t need a PhD to figure this out. You locked down half the economy, you’re going to get a reception. It’s as simple as that. And the other thing lane is that People go, Oh, the stock market’s at all time highs, my 401k is back where it was or even better, et cetera. There is a major disjoint, if you will, between the stock market indices and the health of the economy, you have stock markets who are back to all time highs, but I look at the S and P 500 and I call it the S and P six, or maybe S and P seven, if you want to count Tesla now.

And that was the S and P 500 is the cap weighted index. That means if you have a larger market capitalization, you count for more, in the index itself? 40% of the index is a Dell seven stocks and you know what they are, it’s, Amazon, Microsoft, Google, Facebook, Netflix, Apple, and now you can throw in Tesla and maybe one or two others, and they’re the ones going up.

They’re the ones that least affected by the pandemic. They’re overwhelmingly digital. Okay. Amazon owns whole foods and Apple has some showroom type stores. But not much, mostly they’re online and they’re selling digital products and advertising and data mining, et cetera. So they were not only unaffected by the pandemic, but did better because that was the only place people could shop or communicate.

But what about the S and P 490? What about the other stocks in the S and P 500? Have a look. They’re all the kind of flat to down there. Yeah. There’s some individual cases that have gone up, but on average they’re flat to down. So we’ve bet our whole economy on so there’s six or seven stocks.

So there’s no. Relationship between how the stock market and the seas are doing and how the economy is doing. When we get back to the economy who suffered the most and who continues to suffer the most small and medium size enterprises. So restaurants, bars, nail salons, dry cleaners Boutique shopping on and on.

There’s a long list and people look down their nose at that and they go, Oh, you’re a small business who cares? You’re not Apple, computer, whatever, sorry. Those small businesses are 45% of GDP and 50% of all jobs. That’s half the economy right there. If you crush it, you’re going to crush the economy.

I don’t care where Apple stock goes. It’ll, I’m not going to short it’ll probably go up more, but you’ve crushed and destroyed half the economy. And we’re doing it again with the new outbreak in COVID cases and fatalities, which are actually higher. Then they were less March and April when everyone thought the world was coming to an end, it’s worse right now with this second wave and it may get even worse because some of the new variants or strange, or whatever you want to call it, it’s not clear that they will be controlled by the vaccine, even if they are.

It’s not clear that the virus won’t mutate further. To escape the vaccine, they call it mutation as escape or the immunity escape. In other words, the idea is that the virus first of all, the scientists and I’m a sheriff is alive or not. I talked about that in the book.

It’s a it’s something, it’s got some RNA in it. It’s got a shell and it exists. We can see it under electron microscope. It’s not clear that it’s alive, but it’s really good. At replicating a cell by taking over cells and cell infection spread. Now, if you create antibodies to the virus, so you can get antibodies through a vaccine and you get hit with a virus, your body can fight back.

That’s what vaccines do. But so the virus think of the virus is trying to survive, right? It, all of a sudden more and more people have the vaccine more and more people have immunity get close to her, to immunity. The virus has nowhere to go. Every time it jumps from one body to the next, it runs into the antibodies.

Or as I say, the vaccine or whatever what does it do? It mutates in ways that do an Enron around those particular antibodies, you need new vaccines, new antibodies to stop it. This is just how viruses behave. It’s been true throughout history. It’s why you get these second waves or in our case remain.

B heading for third wave. So this pandemic is far from over, right? The vaccines. Great. That nice job. The pharmaceutical companies, the Trump administration did a great job of funding it and getting bureaucratic roadblocks out of the way. And it was in redundant record time for something of this magnitude.

That’s all to the good, but it doesn’t mean it’s over because we actually already, with this new UK, South African. Strain or variant could be saying the virus like Houdini escaping from the existing antibodies and finding new ways to infect people. So I want to go back to wrapping up the depression discussion.

So you, you mentioned productivity and the percent of. Labor force participation rate. What is the cause of that? I don’t know if you can speculate. Maybe it doesn’t matter, but what do you think is the general cause of that? Is this people lazier these days or, no, there are a couple of causes.

One is demographics, as I said, the populations aging and not expanding as fast as it used to so that some of it’s demographic people get to retirement as, no reason you can’t work it. 68 years old. Bernie Sanders has gone strong and he’s just getting close to 80. But the point being that is a time when people retire and check out, then the workforce has to decline and you don’t have as many younger people entering the workforce.

You have millennials now gen Z is coming along, but I’m not quite at that replacement level, but that’s not the only factor. The other factor is Because so many jobs have been moved to China and elsewhere, it’s not just China, but China’s probably the biggest culprit. Where are the the mining jobs, the steel jobs, the assembly line jobs, the skilled craftspeople, et cetera.

You don’t need a nothing wrong with college, but you don’t need a college degree to. To work on assembly line. You need some training and some smarts but yeah, jobs are largely gone. And what have we done replacing them with? We’re replacing them with, the gig economy, barista, Sarah, and by the way, there’s dignity in all work.

There’s not nothing, wrong with being a barista, good for you or an Uber driver, but those jobs don’t have the benefits and the pay scales and the security that we’re talking about. So a lot of people just drop out of the workforce. Drug use is going up. Obesity is a problem.

Diabetes is a problem. A lot of areas are just totally depressed. There aren’t any jobs around people don’t have the resources to necessarily pick up and move. I remember the 1980s, there was a migration from Detroit to Dallas. People just got to you all and moved to Texas and got another job. That’s harder to do now.

Not just the question, having the resources, there are plenty of jobs in Austin, but they’re the high-tech jobs. You do need an engineering degree or something like that to jump on board there. The quality of the jobs the lost opportunities, the depressed area, drug addiction, demographics, all these things come together and people just say, you know what?

I’ll sit on the couch in front of my wide screen TV and watch a football game and maybe. A relative as a job or someone else is paying the rent or you got some a government check or something, but it sounded long-term solution. And that’s part of what we’re going through.

I’ve heard that there is immigration still coming into America and that’s a lot of the blue collar workforce coming in. And a lot of markets there are new. Assembly, plants opening up, Mazda and Huntsville, stuff like that. But , you think it’s more of a paradigm between the coastal markets and more Southern Southeastern States, Florida?

Is there a different between, people moving out of California or no jobs in California. I know homelessness is really bad out there in Washington and a lot of other cities. Yeah. When you talk about immigration, that mean there are two completely different kinds of immigration going on.

There’s legal immigration with, an H1B visa or some other visas. And yeah, if you’re an engineer from India, come on and you’ll get hired, before you’re off the plane. But that’s okay. A limited number. And those aren’t really creating jobs for Americans or creating jobs for Indians who got an engineering degree, but that’s relatively small compared to the whole, most of the immigration is the opposite.

They’re, coming through the Mexican border. They’re pretty much impoverished. And then they’re not all Mexicans, by the way, they’re from Guatemala and El Salvador and Nicaragua, and actually all over the world. If you can get to Mexico, you can probably get into the United States.

Those people are not getting jobs in Huntsville. They’re they’re either dependent on the state or, yeah. Okay. Landscaping jobs waitress jobs maybe babysitters, et cetera. And again, let me be clear. There’s dignity in all work. So I’m not sure. Disparaging prefer illegal immigration.

I’m not disparaging people who do what they have to do for themselves or their families. And I’m not disparaging that type of work. What I’m saying is that those jobs do not have high salaries. They do not have benefits. They’re not going to lead to a particularly a high growth or higher consumption. Maybe in the next generation, that’s fine but not now.

So moving on to the COVID 19, which we know we’re moving into 2021. Where were we? About half time, first quarter. How do you see this playing out this year? The pandemic is getting worse and it may get worse than that depending on how the mutations go, which are unpredictable while lot mutations mean nothing.

They’re like right. A couple sequences change, but it didn’t really change the behavior of the virus and the vaccines still works, et cetera. Some mutations are favorable in the sense that the virus gets less contagious and eventually it can fail entirely. Those are possibilities. The history of pandemics is that in most cases, not all, but the most that the mutations actually get worse.

And then the classic example of that was the Spanish grow which by the way, lasted for three years and especially in 1918. Okay. But it was very bad, 19, 19 and continued into 1920. So that was really spread over three years. And the first way it was kind of March April 1918, which was horrific, but then it seemed to go away in the summer.

July, August, September were much better. It came back with a vengeance in October, 1918, and most of the fatalities were in that October, November, December. 1918 period, and then it faded again. They came back for third way of 19, 19, not as bad. So the, and that’s true of the Hong Kong flu in 1958. And the several other flu epidemics we’ve had recently.

And I COVID is not the flu. It’s a coronavirus, but some of the mutation dynamics are the same. So the point is the place you don’t know, nobody can sit here today and predict. What will happen exactly, but history and biology and virology suggest that, mutations that, as I say, do this immunity, escape that I talked about earlier can make it a lot worse and we seem to be seeing something like that right now.

But even if we don’t, even if. The vaccines where the mutations don’t get worse in this phase, over the course of 2021, it’s going to take a year by the way at best. It doesn’t mean the economy comes roaring back this whole notion. You’re Larry Kudlow and everyone else talking to me. And last April may is I guess, bad right now we’re locked down.

But we’re at least there’s pent up demand. Where the economy is going to come roaring back. As soon as we get through this and a lot of the policy decisions in March and April were based on the fact that we’d be able to remove the lockdowns by July and August. And they were expecting as they say, pent up demand, but that’s not true.

For example My wife and I, we were locked down kinda quarantined like everybody else in March, April and may. And usually we go out to dinner on a Friday night, but we didn’t because we were locked down. Eventually in June, the restaurants opened up and my wife and I went out to dinner.

We didn’t order 10 dinners. We ordered one. And as if we had skipped nine weeks of dinners and then went out, we ordered one dinner. Those other nine were permanently lost. That was not a temporary loss. That was not a timing difference. That was a permanently lost income permanently lost revenue, besides which when a restaurant let’s say had 20, the waiters and cooks and maitre D whatever, and you shut down.

And then you reopened in the summer. You didn’t hire back 20 hard back 10 maybe because capacity was reduced. People still weren’t going out, et cetera. That’s if you even reopened at all, a lot of small businesses did not reopen those. Those losses are permanent. Again, I’m not talking about Apple computer, I’m talking about.

The other half of the economy, which is small and medium size enterprises. And there’s data on all this. I’m not just speculating, and this is all in my book. By the way, in the book it’s got 200 end notes. So you might want to buy it just for the endnotes alone, because I I researched everything.

I read over a hundred peer reviewed papers, and I should more than that. And and all the citations are there. So if I’m saying something, I tell the reader, don’t argue with me, argue with scientists. Cause they’re all footnoted and you can look at the source papers, but we have data on all this.

Now we didn’t have as much data. In may and June when I was writing a lot of the book, but then the publication date got pushed back a little bit because of supply chain problems actually in the printing industry. But that gave me an opportunity to freshen it up in September, even as late as October.

So we have the most recent data and it shows what I’m describing. This is a mess migration. Out of New York, Los Angeles, San Francisco, Seattle, Chicago, Philadelphia, and Baltimore, and a few other cities. And the people are going to, Phoenix, Scottsdale, Miami, Nashville, Portsmouth, New Hampshire Boulder, Colorado, Denver, and a few other places.

And part of the reason is climate’s nice, but there are jobs there, but the taxes and the crime, you didn’t have the kind of rioting and destruction that you saw in New York and Seattle and Portland you don’t see that in Phoenix and some of the other cities I mentioned or Miami for that matter.

So whether it’s high crime, high taxes, density, functions, lost jobs or whatever, there is this massive migration, which is interesting because. In certain sectors, residential real estate is doing extremely well. Usually residential and commercial kind of move together based on interest rates and economic cycles.

They can go up together or down together in a recession. But right now there’s is a bifurcation residential real estate in the destination, cities and suburbs is going up very strongly. Commercial real estate is nowhere near the bottom. It’s just going to get worse. At least through 2021, probably even longer.

veteran, you mentioned in your past book the move towards the urban Exodus. I like that idea. That’s why we try and stay out of the city core out to the more suburbs investing in those multi-families out there. And I think, with the pandemic, I don’t know if you want to expand anymore, the big cities are mostly blue.

Mostly bird moving up to the red States any other kind of newer developments on that? That’s, I don’t really I don’t really get into politics. I say in the book, the virus is not a Republican or a Democrat. The virus just wants to kill you. So the virus, you need to understand epidemiology and virology and what’s going on, but yeah.

It by itself. It’s not political. Now you can politicize it if you want to. And a lot of people have but I would simply make the point that the reason commercial real estate is down. Across the board, even in stronger cities like Miami and Phoenix, that’s suffering. And clearly the exit of cities as I call them New York and Seattle and others is suffering even more.

A lot of that has to do some of it has to do with crime in the streets and the mayors and all that. Yes. But a lot of it has to do with the work from home environment, which very few large companies would have said. No two years ago, Hey, I think everybody can work from home. We’ll figure it out. We’ll get some software or whatever nobody was saying that but in the pandemic and the shutdown last March, they had no choice.

You had to work from home, because of the lockdown, it turns out it worked pretty well. There are pros and cons. We all get a little tired of living on zoom, a little bit. Personal contact is socializing is a good thing for your mental health, but that aside from a purely business point of view, the work from home model still works.

So if you had 10 floors of a, Midtown office building prime location in New York, And they’re vacant because everyone’s working from home. You’re not going to go back to 10 floors. You might go back to two floors. You might have a locker room. Not like we had in high school, but yeah, a nice facility with a lot of attractive office space where people can basically reserve the office.

So you’re working for him. You call up say, Hey, I need an office and a conference room two days next week. And you book it as yours. You come in, you open your locker, there’s a laptop and a sport coat and a tie or whatever you need. Nice scarf. And you go sit in the office and you do your business, and then you go back and work from home.

If that’s the environment where everyone, it’s not quite like a, it’s a kind of office Sharon, but it’s not, we works in the sense that everyone’s crammed in together. You could have a nice facility, but if it’s always temporary and always rolling over. You only need two floors instead of 10 floors.

So first of all, that’s slams the landlord, but the ripple effects are huge because it’s not just that it’s okay, what about commutation? What about public transportation, food trucks, restaurants, cleaning staff, maintenance, staff shopping is so all the things that surround people coming to cities and working in fairly dense environments, that’s down 80%.

And it’s not coming back because the model’s not coming back. We’re a long way from the bottom. I understand what the stock market’s doing. I would say again, B seven, not the S and P 500 and query whether that’s a bubble, I don’t want to go short Tesla right now. You probably get the getting run over by an 18 Wheeler, but I don’t want to buy it either because I do see it as a bubble, something that’s going to reverse fairly.

Severely wants this new stage, two of the recession sinks in, but again, commercial real estate and small and medium sized enterprises, including a lot of retail, which has half the economy have been slammed and are not coming back quickly. So our listener base is pretty smart.

They don’t just read general headlines on, people are moving out of the cities. They understand somewhere in the pilot, there is an emerging market out there that is doing better than the rest. Any particular emerging markets in America that you like or. Yeah. As I said, we already talked about residential real estate and the target cities, I would say again, Nashville, Miami, Phoenix, and others as attractive 10-year treasury notes are set to rally and we’re probably going to get to a negative yield to maturity and yield matured in a 10 year note is set by secondary market trading.

So that has nothing to do directly with the fed funds policy rate, which is Yeah, with basically an overnight rate. The fed can stay at zero, not go negative in terms of the policy rate, but there’s nothing stopping 10-year treasury notes from having a negative yield of maturity. All it takes is, secondary market trading.

I’m a seller, you’re a buyer. There’s this triple coupons associated with. The tenure note, the minute you pay me a price, that’s greater than the present value of the coupons and the principal. You’re going to have a negative yield to maturity. Now that’s okay. There might be a lot of reasons to do it. One might be that you think rates are going to go even lower so you can sell to somebody else at the higher price.

The other thing is, if you’re a foreign investor, you can lose on the dollar denominated, yield maturity, but make money on the currency. If the dollar gets stronger against the Euro. Based investor can make profits in Euro, even though the cashflow in dollars was negative because you have higher exchange rate.

So there’ll plenty of reasons for it. And we see this all over the world. Buns are a negative buns, Japanese government bonds, awesome. Bond markets have negative deals to mature. There’s no reason to doubt the treasury, no market can’t do the same thing. If it does, you’ll be looking at huge capital gains because right now the.

Yield to maturity is about 95 basis points. So if you go up from 95 basis points to, let’s say negative 50 basis points, that’s a huge capital gain because the interest rates go down prices go up. And so that’s how you You capture your profits. So that can be large. I like gold. For about 10% of your portfolio, there are opportunities and alternatives.

Again, we talked about residential real estate funds, but I think natural resources, water, agriculture, some other sectors will define this also room for a big allocation to cash. And people go, wait a second though. Why would I want cash? It has no yield a couple of things. Number one if you had deflation.

And I think right now, deflation is a greater danger than inflation. If you have deflation, even with zero return, your real return could be. 2%. It could be your best performing asset because in deflation prices are dropping. So you’re not getting returned a nominal return on your cash, that the cash is worth more because the price has dropped.

So there’s a real gain there. But number two and probably more importantly, cash has huge optionality. If you have cash. That’s the functional equivalent of not the money call option on every asset class in the world. And we’re going to need greater visibility and you need to be nimble to decide what to do.

So you can have some investments today, but if you go all in. You say why? No. I want to be all in residential real estate or all in some alternative funding, whatever it may be. And you find out six or eight months from now that OJ to places worse than I thought, maybe inflation’s worse. And I thought maybe this particular sector is not so hot.

It can be very expensive. If not impossible to get out of. Those asset classes. Try getting your money back from Henry Kravis ahead of schedule. It’s you know, good luck. So the point is the person with cash can be more nimble because as we get greater visibility, you have no impediments to the pivot.

You can pivot here or there, depending on where the opportunity lies. And that’s valuable. The most people, a lot of experts will say, you know what? The fed printing all this money. It’ll be leading towards inflation, right? $3 trillion, $4 trillion in the last few months. Pop the stock market. And that’s one of the ways it’s shown its ugly head, but you’re saying the complete opposite it’s deflation that’s coming.

Maybe why is the whole inflation story? Not true, first of all, it hasn’t been true for 13 years. Go back to 2009, between late 2008 and 2009, the federal reserve expanded its balance sheet from about $800 billion. Two something just under $4 trillion. So they increased it by the 300% and it was like, Oh my goodness, they’re printing all this money.

We’re going to get inflation. We never got inflation. We didn’t have inflation for 10 years. We still don’t. The money supply has nothing to do with inflation. Milton Friedman was wrong about that. The Austrian school was wrong about that. The Neo Keynesians are wrong about that. Inflation is not caused by money printing.

Inflation is caused by velocity of money and it was this, the turnover of money. So you can take the fed balance sheet to 7 trillion. My friend, Stephanie Kelton, she’s the big brand of modern monetary theory. They say, why can’t it be 10 trillion? The answer is, it could be 10 trillion, but it’s not necessarily inflationary unless you get the turnover.

So I’ll give you a simple example. Let’s say I go out to dinner and I tip the waiter and the waiter takes the tip money and takes a taxi or an Uber home, tips the driver. And then the driver takes the tip money and puts gas in his car. My $1 had velocity of three. It supported $3 of goods and services that, the restaurant tip the taxi tip and the guests.

But what if I stayed home? And watch TV. Then my money has philosophy of zero. I didn’t spend my money. There was no turnover and I remind people $7 trillion times zero. Is zero in others. If you don’t have velocity, I don’t care how much money you print. If you don’t have velocity, you don’t have an economy.

Velocity has been dropping for 22 years. It started to drop in 1998. It’s been coming down ever since our head larger spikes down and the 2008 global financial crisis and the 2020 pandemic collapse. the clear line has been going steeply down and it’s still going down.

So my point is, And we need inflation. Inflation is not good in some ways, but you can’t print your way out of a liquidity chap. You can’t borrow your way out of a debt trap. The only way to get out of it is with inflation.

And the only way to get inflation is to change the psychology because it’s not controlled by my supplies control by how people feel. And right now they’re. They’re savings. Savings rates are sky high is precautionary savings. People feel it, prices are going to get lower, so they defer consumption.

Now I’m talking about consumer price inflation, which is what the fed looks at and what’s policymakers. I got a few, if you think the stock market is a place, I can call it an asset bubble. Yeah. Stock prices are going up. That’s not inflation as. Economists and policymakers understand it.

Those are just asset bubbles and they are happening. So the money has to go somewhere. I’ve heard of people got these $1,200 checks last. Think around last June, may and June, they’re probably going to get another $600, in the next month or so. What are they doing with the money?

Some people were paying the bills, but a lot of people are investing in stocks. You’ve got all these newbies, they’re on Robin hood, their first time investors. They don’t really know what they’re doing, but they know that stocks only go up. They’re not spending the money they’re investing in the stock market.

They’re just in plating the bubble, not doing anything for the real economy, which would come from spending. And there’s something to be said for savings. But that’s what people are doing, the saving the money and investing the money. They’re not spending it. So the money printing doesn’t work.

Yeah, no, that makes total sense. The money’s out there, it’s just, the government needs have to try and find a way to incentivize throwing it into the real economy. Getting abundance mindset for consumers. That’s right. And there is a way to do it, which I talked about in the conclusion of the book.

Not to tease it, but yeah, it’s out there. What I tell people is that policymakers don’t. I understand that. So I explain it clearly. I give two historical examples, two different presidents, one Democrat, one Republican of the 20th century who pulled this off successfully. So it does work.

There is historical precedent for it. Central bankers have forgotten it if they ever knew, so they should read my book. If they want to know how to get in place and get out of the debt trap. But the point I make for the reader is even if the central banks don’t do it, even if the government doesn’t do it, you can’t, you can personally go on a gold standard one, a hard assets standard and and benefit personally, preserve wealth and make money.

Even if the government doesn’t find a right. So I guess the, I was going to ask you about the Biden camp or anything coming down the pipeline, but it may not matter, if they have another couple of rounds of stimulus checks, this money is just being diverted to the stock market. It’s just not getting to where it needs to go.

That’s exactly why I’m proud to say, I barely talk about politics at all in the book, but partly for the reason you mentioned, which is it doesn’t matter. Monetary policy doesn’t work because of declining velocity, fiscal policy deficit spending doesn’t work it because the debt to GDP ratio is so high that we’re through the looking glass that what people are doing now is they’re saying, look, I don’t know how it ends.

It could be inflation. It could be higher taxes. It could be a debt default. There could be a number of different scenarios, but they’re all bad. And so I’m just going to save more, spend less on a precautionary basis to get ready for that day. When other, inflation kicks in or I have to pay higher taxes or whatever.

, and that pressure by the way, is 90% debt to GDP. Right now, the debt to GDP has gone up from a hundred, 6% pre COVID to around a hundred. 30% today. So this is for the United States. The U S is now in the same league as a, Lebanon Greece, Italy there’s your club. So my point being we will have large deficits.

We will have more deficit spending. We will have more debit. It doesn’t work because we’re through the looking glass. We’re through that 9% critical threshold where now behavior changes and people don’t spend the money. So monetary policy doesn’t work because of philosophy and psychology fiscal policy doesn’t work.

Because debt to GDP ratio is too high and people are getting ready for bed ending. So it, Trump Biden administration, they’re going to pursue the same policies. You can print money, but that’s not stimulus. You can run deficits, but that’s not stainless. I always tell people stop calling it stimulus.

You can call it deficit spending. If you want, you can call it money printing if you want, but it’s not stimulus. It doesn’t stimulate anything. Yeah, no. Very interesting. For the guy under a few million dollars net worth, what would you be suggesting at this point for their portfolio?

Yeah I think I have about 30% cash, but sounds high to most people, but we already explained that I’d have 10% gold or gold mining shares. There’s room for a residential real estate. We talked about that you need the right fund manager but there’s a way to do that. Some for alternative investments, I’ve some money in some venture capital and startup type companies they’re risky, but they can be.

Very attractive, depending on the management again, and the business plan this one for listed equities, but pardon me, and have more than about, Oh, 20% or so in the stock market, people say to me, Jim, yeah, you’ve got 10% in gold. How can you sleep at night? And I go, you’re 90% in equities.

How can you use sleep at night? Because that’s really the risky asset class. Yeah. That’s something, I don’t have any paper assets personally, we’re always trying to move people to alternative assets. It’s either, do they take the money in their home equity or they take their money in their stock holdings or mutual funds?

And I’m like, I don’t know if it were me, I’d take it out of the stocks, but look, that’s just, who knows. but thanks James. For coming on. Folks get his book, the new great depression, winners and losers in a post pandemic world found on Amazon and yeah. Thanks for coming on.

Appreciate it. Thank you.

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What is an Institutional Asset and Operator?

What is an Institutional Asset?

What is an Institutional Operator?

I am going to be doing a shorter podcast this week because I’ll be honest. I’m a little poop from this weekend. About eight hours a day of pure passive investor networking at the bubble. Thank you all for coming. We almost had a hundred folks join us in the plethora of breakout rooms. I think a lot of people made lifelong connections., this week cast, we’re going to be briefly going over. What is it? Institutional grade, they did investment and operator. Before we do that, I want just wanted to catch up people where we are in the economy.

And what are some of my opinions of things four. the fed almost $4 trillion Into the economy in the past six or seven months, you can bet that this is likely the reason why stocks are now at an all time high. Yeah. I don’t know if this is going to continue, but I do know that true wealth comes to those who create value.

And for those of you guys jumping into opportunities that do value, add. AKA rehab the property to create better living conditions for people who in turn pay more money for that product are the ones who are going to have sustainable longterm wealth. Those people who trade money, like you’ve got our Amazon business or eBay business where you just buy things low, sell high.

It’s just easy come easy go. And the same. About, buying crypto Bitcoin or just trading stocks. What value are you adding there? What value are you adding to society? But anyway, all this money is going into the system prop and stocks up. But what about inflation? Shouldn’t inflation come well, I was just watching some of Richard Duncan’s videos , who is an economist that I follow.

And if you guys want to get more information about Richard Dunkin and see the. Past podcasts. He was on go to simple, passive cashflow.com/dunkin. Check out his newsletter there too. I subscribed to it and while you’re there checking on all the other things on civil pass, a castle.com, but you can never checked it out and join our investor club@simplepassivecashflow.com slash investor.

Now what’s going on here? Why is the money supply growing by leaps and bounds yet? Inflation. It’s not happening. Part of this has to do with, we are not backed by gold anymore, and it is decoupled the correlation with modern money that’s out there and inflation.

It’s just another form of credit. And that is being created by the federal

and that’s why money’s still apply, but it doesn’t really matter. Although a lot of people say when is this going to end? This is all going to come down. People say that all the time, but a lot of these people are, what are they selling to you guys? What’s their product of the week.

There’s trying to sell to you gold, which is why they’re trying to claim the doom and gloom thing. Whereas I don’t know if the doom and gloom is going to happen, but I do know people need a place to live at the end of the day, especially. Good value rents between 700 and $1,200 a month.

What we call workforce housing? Richard Dunkin says that the credit supply is not what counts and he outlines four scenarios here. First snares were inflation. Interest rates remain low. This would probably be the best possible scenario for asset prices. And I think we know one thing. In all these scenarios that the government is going to be spending more money.

I mean Biden’s in there and he’s going to be putting more money into the system, which I ultimately think helps investors. Yeah.

Now the fed is likely to be putting more money into the system. This is going to keep things going, Richard Dunkin actually. He made a comment where he thinks that we are nowhere near the end of seeing the last, the stimulus. He says that you might even go two times. So what we see now from about 4 trillion to atrial and dollars.

So there are two that you talked about as higher inflation with higher interest rates. This would be the worst snare for asset prices. The economy would obviously get a boost from the increased government spending. But significantly higher interest rates would probably come. So those of you guys are watching interest rates on your primary residence should probably be wary of this possible scenario.

Gold is seen as a hedge against inflation, but significantly higher interest rates could actually cause the price of gold to fall. Scenario three. Is higher inflation without higher interest rates. I actually think this is where we are heading normally when inflation increases in interest rates move higher to however, as we sit before the fed is adopting a new thing called yield curve control, which is like quantitative easing where holds the interest rates at this unnatural level.

But it is the new natural. It’s whatever the fed desires, for instance, if they want it at 3%, they keep it at 3%, even though the inflation was at five or 6%.

So this new government spending would boost the economy and it would be combined with lots of quantitative easing or your curve control. And this would likely push asset prices up in this case. Sabers are the losers. If you got money in your cash, bonds, savings accounts, or maybe an equity that lazy equity in your homes or your rentals, you won’t be the loser.

And the last scenario is a short-term rise in inflation and interest rates followed by a subsequent client and vote.

either way. I think we’ve had several guests on even Jim Rickard, who you’re going to hear coming up in the coming weeks, but Richard Duncan, John Burns, they’re all pointing towards this bullish sign and we’ll see what happens if it comes great. Cap rates will fall. And our properties will increase in value, but if it doesn’t, Hey, we still cash all heads.

I’m going to be explaining what an institutional asset is. Now. Institutional asset is a little bit different than what we normally go after. When we’re looking for a 50 to 300 unit apartment complex and institutional asset is the higher grade than that. And certainly it’s bigger than your your single family, home, duplex, triplex, or quad.

The institutional asset normally is around, higher than five to $20 million in purchase price. And in these properties,

usually the largest buildings in the skyline, lower cap rates, somewhere in the two to under five cap rate land. And these are usually what the assets that large family offices, hedge funds. Insurance companies or any other institutional operator that is just trying to invest large sums of money. They’re not quite in it to make the best return, but they more want the reliability.

This is usually what is invested in large clumpy REITs. They’ll go after these markets, situational assets, because it’s a lot easier for them to manage them. Also. Outside of that, these things spike, you get the reliability. It is lower returns.

What is an institutional operator and institutional operator is an operator that manages apartments, mobile home parks, or office space or commercial veto ins is the operator. We’re talking about. , I consider myself more of a middle-market operator. Where we’ve been around, we’ve done deals. We went full cycle on some properties, but we haven’t been around for decades.

a lot of investors always ask I want to work with the operator that has been around since 2008, And I’ll be honest. especially in the apartment investing world, You’re not going to find them. I’ve tried to look for them. They’re not out there. Because they have been around since 2008, what they’ve been doing slowly is swimming upstream.

So they don’t work with small private equity guys. guys that are million dollars, a few million dollars net worth putting in 50 to $200,000 chunks there we’re swimming upstream. So they can eventually grow into large REITs so that they can extract more fees and better profits split for themselves.

So going back to ourselves. I’m the principal of the company, typically the one making management decisions, interacting with third party property managers, or maybe we have them in house. I don’t have, maybe, luckily one day we’ll have an investor relations staff, but we don’t have all these operational staff.

like a manager of operations, Texas director operations, Alabama, for example, I’m the guy. And I think that’s why a lot of people like investing, cause we’re not small, we’re not new, but we’re not also large. And, big and comfy, the reason why people like to work with middle-market operators and why I as LP, like to invest with middle-market operators, because when you start to go to the institutional operators, they charge very heavy fees, acquisition fees, and typically over.

Three to 4%, which is crazy to me. Remember, you have to add up all loan fees, guarantor fees, all these other fees, they’re all acquisition fees. They’re all just tricky ways to make you think that the acquisition fee is lower than it is. so in addition to the fees you also have where splits for passive investors and not necessarily saying that an 80 20 split is good or bad.

the operator’s going to take more as they become more online institutional and as their cost of capital gets cheaper from their perspective. So as an investor, you want to get a good blend of both, and especially when your network is lower than a few million dollars, you’ve got to grow your money.

You can’t just invest with institutional operators in my again, but. Institutional operators have been around the block, possibly five, 10, 15, 20 years in some cases. And they have large bloated staff, a lot of times, a lot of operators. And you’ll see a lot of these companies where they have to continually do deals just to get acquisition fees, just to get that three, 4% of big money to come into the office so they can pay their office staff and keep the lights on.

I don’t want to run a business like that, where I need to do deals just to do deals, just to pay my staff. But a lot of these companies have created this type of infrastructure where that’s, how they need to do it.

So some of my higher end clients, the guys that are over a few million dollars net worths, I may suggest to go into and work with self institutional operators in certain asset classes. But for, a lot of us that are under that, it may not make sense from a rewards perspective, which you definitely don’t want to be doing is working with a newbie operator.

And you guys know who I’m talking about. We talk about a lot of times, these are the guys who just created a podcast out of the blue cause everybody can name podcasts. He speaks, he just read a little script and in front of the microphone right here, And you got yourself a podcast and not, everybody’s like a syndication expert these days.

I’ll tell you creating a podcast. If you don’t do it efficiently, there’s no way in heck you can be the primary operator. It’s typically the guy on the blank is really the marketing side of the company. But what you’re trying to do is you’re trying to cut through the noise where the people who are actually doing the work and is this operator or that interacting with.

Are they truly more of an institutional operator or have they been around the block or are they complete newbie? tell, tells are guys still working their it job and they do this apartment investing on the side, but they have a great understanding of Upwork and Fiverr.

And how do you get a VA to do a nice little PDF pitch paycheck? And they have great presentation skills and they can put together a very, concise webinar. So don’t be fooled by all this. they could very well be very new just because they can put together a shiny presentation it doesn’t mean that they can operate or they have a track record.

I’m all for people going after their genes, but I don’t want to be putting in my 50 grand to be powering that I want to see people have to be at least in a few deals. Getting their track record going. And that’s why I prefer to work with more middle of the range operators. I’ve said that a lot of times before, the same reason why I don’t work with certain CPAs that charge our clients 10, 20, $30,000, even though they might be fine and they do a really good job.

I just don’t think it’s worth it at the same time. I won’t go to the low end and I won’t work with like H and R block or do triple tax. It’s just not good quality and you’re not getting all the deductions. I work with value operators and value vendors, and that’s just my brand. Is it a little bit more risky?

Yeah, but I think the risks outweigh the reward and you get the better returns in the middle, it’s very hard for passive investors to distinguish between complete newbies who are pretty nifty with making PDFs and presentations. From those operators who have been around the block a little bit.

that’s why I stopped going to real estate meetups and different conferences these days, because I’m in this business, honestly, Gator, I know all the little tricks and games they play. I know when they say something and it’s complete nonsense when they say it during a presentation, I make a list of these things and still I have a really hard time too.

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January 2021 Monthly Market Update

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All right. Hello everybody. This is January, 2021. We made it yay. 35 monthly market update. We’ll be talking about the 2020 statistics, how it was for 2020 real estate versus the stock market and that rehab trends. Introducing Dean here. There’s this contact information you went to buy or sell your house.

Great time to sell. Does that sound happy? New year, buddy? Glad everyone made it through. Pretty exciting new years. I don’t know how the festivities were for you lean, but we saw quite a few areas as usual. Thankfully you weren’t in a beach or Waipahu, right? I think they, Oh yeah. So was like, It’s always a great shortage.

If you see those videos of people driving through, like on the freeway passing, when is the next Paki off like, Oh, I don’t keep up. Take your kids? Go on there for the next firework workshop. Why the ones here blew it away. Eight away starting off 2021. , as we always do talking about, August statistics for December, 2020, it was the same trend as we’ve had for the last, maybe nine months since the April, March of 2020, where we’ve seen Prices go up.

We’ve seen volume go up and we’ve seen days on market go down or signs of a strong, healthy market favorable for the sellers for the most part. So on the single family on the left, median single family prices at 870,000 increase of 6.1% from prior year. Or Same time in December, 2019 closed sales at 420.

It’s like almost a 36% increase from same time last year. And these are market in staying at 10 days for single family, which is as discussed before very low. And that’s from the point that the property is listed from the point it gets into contract. So on the condo townhouse side, we have 455,000 as a meeting conduct price increase of 7%, close sales 20% increase at 514 closed sales.

And these are markets still really low 19 days. That number is a little bit deceiving though, because I think overall yes, it is still a strong seller’s market, but it seems to be a way stronger on the single-family side. And part of it due to COVID. So now we look at closed sales, we see.

, I want to talk about just taking a look at the trends, right? So we talked about the five 14 and the four 24 single family. But if you see that trend going upwards, so we’re seeing, volume tending to go up and on the next slide side, we’ll see that the new listings are going down.

What’s that a S R E S next year name. What does that stand? Oh, yeah, that sounds for senior real estate specialist. Thank you for noticing that lane. Wow. You’re pretty. I so that’s why I don’t like that. Instead on the next slide The numbers we’ve talked about before is again, when you’re looking at the median sales price for single family, we’re looking at, it’s 70 years, the end of this year versus eight 20, was it in the last year? So that’s a 6% increase.

And for, condos, we see about a 7% increase, which is, really healthy considering all this current situation. So , when we look at that lane, What made me think, we talked about all the year and things and comparison. So , we talk about. Real estate versus other investment opportunities.

So I wanted to see how the stock markets did and how stocks did. So I pulled this off of a site and if you can see for the year 2020, SMP was up 16% and that’s pretty darn awesome. And it makes me think, Then, we’ve been proponents for real estate for a while.

And, we have our opinions about investing in real estate versus the stock. So I made me. Look into things a little more and just do a quick, not a really a case study, but I just wanted to put something up. So last night I pulled this stock market information and then the next slide you can see, I did it really quick just for SNG.

Just to take a look at, try to compare that to you. So I went onto the MLS and I looked at single family homes that closed on December 30, first, 2020. Just for fun. Again, just bear with me. So that’s 38 homes. I found right. So then what I did was I scrolled through the transactions and I tried to find one that was few years ago, not a flip.

So I came on as I was going through the details. I came up with this home. So on the next slide, and you’ll see this home hopefully none of our viewers homes, but this is public information. So anyway, at number 15 of 38, I stopped. So this is a single family home, a little more than 1500 square feet, three bedroom, two and a half bath sold for $800,000.

And was it days on market. Okay. Then I looked at its history. So if you’re going to next slide, we see. So yeah, again sold for 808 days on market listed for $50,000 less. So it was closed at $50,000 over asking price. That same property sold in about four years prior on February, 2017 for $690,000 even almost two months on market.

And it was listed, at a higher per click. It closed at a less than the listed price. Yeah. Slightly. So definitely a different market if three, four years ago. And simple math, you say, okay, that’s a 16% appreciation over four years. I’m like, Holy that’s. Still sound too good. We’re trying to pitch this and again, not as a replacement, as a way to, compliment your portfolio and then, but we’re saying, okay, on the slide few slides ago, I said, okay, but this P had a 16%, return right in 2020.

So they ha but then, I was thinking, Hey, , we forgot to consider leverage. So I then looked further to get more information on this property and as okay, let’s see if it was a leverage. So come to find out, this property was bought in 2017, it was purchased a hundred percent finance VA loan so that the buyer didn’t even pay any closing costs, anything, and all got rolled up, as you can see in that amount.

And that $110,000 of appreciation. , in theory that. Owner purchased with no money down $110,000 in appreciation, but no initial investments or nothing down. And he made a hundred, $10,000 in theory. So that to me, then validates. In my mind, why I’m also investing in real estate.

As well as in the stock market, because, when you take into the con the other benefits of real estate investing it does have its positives that you can’t just look at the 16% for S and P for one year versus the 16% in this appreciation for this home for four years.

So there’s a lot of things to take into account and also keep in mind that on the other end is, whenever you take into account, leverage it. Could be the dangerous you need to be leveraging. Smart. Yeah, because I think literally the first, I think this property might’ve actually went through a foreclosure process, but anyway, that’s beside the point, but, yeah, it’s a classic case of people just comparing rates or return.

But you got to leverage, so yeah. We didn’t even lever that appreciation of three, four X. We didn’t take into account the tax potential tax benefits. All that kind of stuff. Because when they sold that 110 K was P could potentially have been tax free for them as well difference.

Like the stocks is ordinary income and for people making over three, $400,000, you don’t want any of that. You want passive income. So again, yeah, I just did that for us in G last night as I was going to this. And yeah, one thing I wanted to talk through to end my section was my other day, I put the house bathroom trend studies for 2020.

And so how was, is a resource for homeowners to, that they provide information to . Help us know what the current trends are in terms of the home improvement activities going on throughout the States. So I pulled that and in doing so put some interesting data, if you want the report, just shoot me an email and I can send it to you.

But some interesting information we found for 2020, so average remodels Then on the next slide, you’ll see that the average remodels are in the realm of 8,000. So for the major remodels and upwards of, close to 20,000 and for the minor remodels where, below 5,000, but some interesting information, again, this is just trends.

So everyone has their. See, this is a way to see how you add up. But one thing was , 23% of renovations included bathtub removals. So I thought that was kinda interesting. And another, yeah that’s what we noticed on the apartments. People are optic for the really nice showers.

Getting rid of the Tufts or the other thing I was thinking of is , aging populations needing to age in place, or so they’re getting walk-in showers with, less chance of slipping as they step over the threshold. Yeah. Yeah. Yeah. Both. All right. And then, yeah, so I thought that was interesting.

And then another statistic per this study was that of everyone doing their innovations. They said that 41% use the bathroom to relax and rests or, ticket what it is. I don’t know if you count, like sitting on the throne and going number two or Sandy crutch. But I was thinking more along the lines of they’re having their tubs with their.

Either a jacuzzi tub or a soaking tub, which what’s the best time for that anymore. You got to get your shower, get the heck out this morning. Yeah. So the funny thing that you mentioned that too is because I’m working with buyers and sellers. And so , when I’m talking to every different buyer has their opinion.

So the I’m working with the , families , with young children and I’m like, Oh yeah, we need a tub because the child is going to love to play in it. Or the way they beat them. So the younger families need them. And then as we mentioned earlier the order.

Generations tend to not want one as much. Yeah. And it’s not as much of a necessary cause what else are you going to do besides that? Because it’s hard to soak in for, adults. Yeah. And then the other thing that came up was. This is on another deal in Texas. Like my partners are now in our Indian, so I was asking it’s a cultural thing.

Cause a lot of tenants are Indian. Okay. And they’re like, what do you guys do with your kids? Do you guys, do you bathe their kids and the sink or I don’t want me, yeah. What do you guys use? When my kids are young, Yeah. Yeah. When you’re a super small we bought like a little plastic support thing.

I was actually the designated beta. So we bought this plastic tub that they would sit in nicely with a nice padding and it would sit within the tub and it would hold them up. But I’ve seen people beat them in the sink too. Yeah. Yeah. My partner said, yeah, we just bathed them at the sink.

We don’t care. I guess no need for a tub, that’s true. Once they can stand up and say, okay, just take the shower head that comes off and you just. Should we shut them down time efficiencies. So a few other statistics guests I thought were very interesting vinyl flooring, although not very big had an increase.

So as you can see, on the left side, ceramic and porcelain still. Took the cake with 59% for, the flooring outside the showers, but the vinyl jumped up apparently 4% to 11, which is still relatively low for the flooring. With the luxury playing vinyl coming out with, so it’s waterproof.

It has, they have so much new styles coming out and so strong and reasonable. I thought that would have been up higher over the ceramic important, especially for the floor, and then little self selecting, people that are getting bathroom remodels or your affluent people. So that they’re getting that stuff.

LVT is more for like rental grade. That’s true. That’s a very good point. That’s a very good point. And then on the right side, we see four sinks. Whenever they’re upgrading sinks. Of course, the undermount sinks took the cake at 65% and then, the drop-in sinks were second and I was surprised vessel sinks.

We even made third place. Cause I thought those are a dated, but I think again, I’m not keeping up with the trends. So I know, what do you think about those vessels sinks that you see in the fancy bathrooms? So like the one where it’s like a bonsai pick a ball, it looks like a giant salad bowl.

Yeah. I’ll be honest, man. I don’t know what the weather undermount Drophead vessel. I don’t know until you said vessel and that I didn’t have call it. Who wants to get there for that one? Yeah. I just don’t care about that stuff. No you’re the pragmatic guy though.

So if we asked your wife, it might be different, right? Yeah. Yeah. She doesn’t know. But the last, just a slide I was going to talk to is I’m talking about premium features for toilets, showers and tub. So one thing I agreed with in this was the one-piece toilets. You can see, , 20%. Of renovations had one piece Torres.

I really liked those one piece toilets. It’s the one that the tank on top is, it’s one piece with the base so that it’s not screwed in. You don’t have to worry about any leaks in between. Sometimes if you lean back on the tank or you push it, that’s it creates a crack or the seal breaks and it starts leaking so simple easier to clean.

There’s no. Crevices and let at times the base of the one-piece toilets drop straight down. So there’s less dust to collect around the the edges. Something I didn’t care for so much that I not to say I disagreed, but the premium features for the shower, they talked about those rainfall shower heads, where it feels like it’s, it’s a big square and it’s like raining on you.

That was a 58%. Of installs had those as well as the dual showers, which are, I believe where the jets are right in front of you. And they’re shooting horizontally for me. I’ve used those at the hotels and I don’t really care for it. I’m old school. I like the high pressure to shoot the soap off of my hair and kind of feels weird when.

Something’s coming at me horizontally, but that’s just me. So give me one of those high efficiency things that you need to stay in the shower for 20 minutes you do something like, Oh yeah, those are super bad. Yeah. Then those, yeah. It’s like really mini sprees. We install them and all the apartments.

Oh yeah. Talk about money savers. That’s a great money saver from that standpoint. Yeah. It’d be being green, then that’s a different story though. Yeah. So , if you want a copy of the 20, 20 years how’s bathroom trends study, just shoot me an email and I can send it your way. So about 33 pages and I just tried to pull out what I thought was interesting.

So yeah, if you guys haven’t checked out my podcasts, we’ll pass the cashflow all about investing on the mainland for cashflow. But the free giveaway this month is a free buy and hold analyzer. And this thing called the bird calculator. I’m not a big fan of this burst stuff, which stands for buy rent, rehab, you finance.

But if you want to do it, I used to go in knowing your numbers. You can go download it simple past the castle.com/returns and download it there. But yeah, little teaching point. Paying off debt. I pulled up this check from 2011. We didn’t know each other back then. Did we? I don’t think so. Yeah, that was before BiggerPockets was around, right?

Yeah. So this is one of the checks where I would pay down my mortgage and then I realized what a mistake that was, and she saw. And I knew it didn’t make sense, but everything gets you taught right. Pay down debt, pay down that. But I will be one to tell you, that’s a tool use tools for the right job.

This might be the reason why I’ll ever be stocks is of 16% this year. If you look on the right side, that’s the amount of money that got pumped into the system the last five months. And. This is what’s surprising. Like you look at 2008, 2009, there was a lot of stimulus, but nothing compared to what it is in the last five months.

Yeah. That’s true. It’s being supported. Yep. So John Burns puts together these reports, different markets that he likes. And I think the real story is, yeah, I heard about it is the max Exodus out of San Francisco, New York. Expensive parts of California and going to more than the Midwest, South, Texas, and uncle bill Gates had a little predictor.

Some people don’t like them, but he had a phase, one health crisis. He got that one, we had 10 weeks of lockdown. He thought it was going to take 18 months to get a vaccine, took us what nine, nine or 10. Rented as it is it’s a fake vaccine, right? It’s an NRA or whatever they call it.

Wasn’t like the normal vaccines that we get. That’s cool. That’s pretty quick, right? It’s like super fast. Yeah. And then he also, I don’t know why the heck they’re asking bill Gates this stuff, but he also predicted that home buying. The market would take a very long time to recovery.

So he was completely wrong on that. We had just a nice bull run with prices going up and pretty much every single market due to low supply, billionaires got rich through COVID because they pivoted their business. Yeah, there’s always opportunity out there, people to capitalize on it. Jim Rickards.

Have you heard of that guy, but he’s a per repair. So I interviewed him last week or it might’ve been Monday. They just go by, but he’s right. He’s got this new book out, the new great depression. And I was expecting him again to let off a scuffle with him. Cause he’s like economists, I’m not to each big fan of economists because.

They’re like the weather man. They just make a bunch of predictions and change it when it doesn’t happen. And they’re never in the game, they never have money. They never have any investments. So they’re out of touch with reality, in my opinion, their academics. Yeah. Other academics that Howard Drake gets guys, right?

Like he’s the Hawaii guy, right? I’m like, I want to know what’s in his portfolio. I don’t want to hear his predictions. I want to know what he’s doing. Maybe he’s not doing it. I want to know his network. I want to know what’s under the hood, but yeah, Mr. Rickards said here that basically do not expect two, three, 5% GDP growth every year.

Like how we’ve been saying the last generations instead to expect maybe a zero to 2% increase every year. And I was like I’m cool with that. That’s fine with me. My expectations aren’t that high, and that he says, that’s the new great depression like a Japan in a way

pulled this one out. And if you heard about this project, a cool renovation of an older apartment, hi at the address and it’s somewhere downtown. But yeah, it’s cool to see these types of properties get rehabilitated,

but going back to the mainland stuff, if you are checking this out on the YouTube channel, we have a map of the United States. You see where a lot of the red is getting out of Seattle port plan Bay area, Los Angeles. And moving forward to places that are a lot less budget friendly and less crowded.

And one of the big headlines is of course, everybody is getting the heck out of California. If you watch any bit of YouTube, every single influencers, making a YouTube video on getting out of California, it’s such a big trend that just by having that in your video, it pulls a lot of things. Readers and viewers, because it is so popular.

Good to know. So if HP, they were the startups in the Bay area, and now they’re fleeing to Texas just like Tesla, just like many other companies out there because of put taxes out there. Effective rate for growth for multi-family. It was flat line this year, but that’s to be expected, right?

It’s a pandemic, have new single-family rental tenants coming from urban areas. And so 59% removing from urban locations, 41% moving from suburban locations. So this is a general trend of people getting out of the business court district. Going to a little bit more suburb type areas. Yeah. This is why ever beach in maca.

Kilo is single families are off the hook when you know that wasn’t the case before. Yeah. I don’t know. Th I think Hawaii is weird though. Like it’s, Hawaii is like the Island on that night. It’s just a long piece on the cause he gobbled up mountains, but like in a normal. It States ever say it grows outward like a web.

But I guess, yeah. People want to get away from the Seattle or maybe it’s just, they can’t afford it too. Yeah it’s the way they develop too. Because like you said, typically they talk about the urban sprawl where if it starts in Honolulu and starts to go out. But I think when they tried to do, a couple, a, the second city and Colina was that 20 years ago, it, they just said, okay, we’ll go all the way out there and just build, so that kind of.

Threw everything off and not in hindsight being 2020 the urban planners look at it and say, that may not have been the way to go, it is what it is, right? Yeah. People want to work, not really in the city unless they have to for connection, or, but I think people would rather just take a little shorter drive to the, the middle market.

Five story, high rise, like Milani has some of those, I think a small office building. I think so. Hopefully it has that. Yeah. So three big trends for multi-family and you could probably make the case for single families in 2021, a banner year for the transactions, because things are going to somewhat normalcy by mid to late 20, 21.

And just a lot of heads up transactional demand. People were frozen with the whole COVID-19 and also the election too, which came and went. The second thing was the crowding of the South East capital markets. So the, like it’s at the general trend to get out of those high price areas to more places that make more sense financially, economically.

And. A temporary boost for the suburbs that you just talking about on the last page with the remote worker cultural sort of sticking around and coupled with the desire to live in less than populated areas. Yeah. Should be interesting. And like you said, temporary, it should be interesting when people are starting to have to go back to work and now have to start fighting that traffic again.

And I call how We used to see, then that side we might, out in the suburbs might not be as appealing as it was earlier this year. Yeah. Yeah. But COVID accelerated a lot of trends, right? A lot of employers got confident. That’s true. Yeah. That is a very good point. My ordering from California pizza kitchen and some other restaurants.

It’s pretty sleek using those apps or stuff now. Oh yeah. Yeah. So $900 billion relief package. Got signed very recently. This is the latest round of stimulus. Everybody should have got their checks. You didn’t make too much, you got your checks. And a lot of this is somehow probably flows down to investors and the general public.

But I think that generally a lot of people are boarding this cash. They’re just paying down debt, keeping into savings accounts, very logical, but that’s not what the government wants. The government kind of needs it to get into the system spent yeah. Need to spend it. Yeah. Yeah. So we talked about stocks.

This is something I’m interested in investing in, like investing in websites and stuff like that because no. So like Blackstone, the big hedge fund, they’re buying ancestry.com, buying a website that has existing cashflow that they could do value add, or can improve the business. It’s like a digital asset that you can buy.

But I think , what I don’t like about stocks is like, you can appreciate the value that you can’t increase value just in Bibles. So high. I don’t think that builds like a C well, you can get lucky here and there and you can buy an option, but , real wealth comes to those who create value.

And you can do a plug for the mastermind this year. We’re not going to be able to do it in Hawaii. But we’re going to do it for Chile. We’re going to have almost a hundred people come into this. Wow. It might, you might help out. Yeah. Yeah. I had fun last year. That was the one we did last year.

They have to do it. Hi, I’m super bummed that we’re not having additional. Nope, no pick-up ball, no pickle. No. Knockout room. What does that room? Yeah. Yeah. They escape from escape rooms. They’re out of business now. I think that was a bummer, but that’s okay. How many days are this one for two days.

And I think it’s cool because look at then like already a, how many people registered, like so many other people are going to see the kind of people that we have in this school. So people want to register. You got another week simple, passive cashflow.com/bubble. And but yeah, if nobody has anything else to get any parting words, 13, what are you up to this month? This month? I am doing some refinances. I. Didn’t realize call me foolish, but I’m only doing my refinances now and that, in terms of some of my investment properties on the mainland, so China hit up a bunch of them all at one time.

And hopefully, bring down my debt servicing by a lot. I got a letter from my lender. It was a portfolio loan and they were calling my note due here in the next few months. And I was like, what did I do? But then it was a five-year note and they get you to five years already is a commercial.

And then, yeah. So you just got to refund it. It’s a little single family home, but Oh, that thing. So I don’t have to go through the trouble of refinancing then one of the last few ones you have. Yeah. Yeah. I should just fire. So bad thing. If somebody wants to buy up turnkey rental in Birmingham, No, but yeah, it’s been five years since I got that.

That one there. Oh yeah. I’ll hit you on. Maybe I’ll throw it into my solo 401k or something. I dunno. Cheap.

Yeah. I have something here, but all right guys, we’ll turn the recording off here and we’ll see you guys next week. Bye. See ya, Mike.

Essential Virtual Networking Etiquette w/ Deborah King

https://youtu.be/zmBt2VCsF5E

Hey, simple, passive cashflow listeners. As you guys know, we are not doing the retreat this year in Hawaii. Unfortunately, a lot of you guys had a lot of fun office, back in the beginning of the year, but we’re taking it virtual this year and NBA style. We’re calling it the bubble.

We, if you guys want to learn more about this, go to simplepassive cashflow.com/bubble, but I wanted to, have a guest today, Deborah, who is basically, runs a charm school for professionals and she was going to help me out, and give everybody some tips on in this world of digital networking.

And we’ll also get into some professional networking etiquette, too. how do we extract the most value of, people are going to be coming into this bubble and it’s not cheap. And the people coming here and we’ll see, going to be accredited investors that A-list, that I’m going to curate and not everybody’s going to be allowed to attend this meeting.

A lot of you guys have said, I don’t have anybody in my network that invest in real estate or invest the people on the internet. I need to build a network. this is the time to do it. So how do you make the best use of the time? this event is going to be a lot of networking and in small intimate groups or even one-to-one with a guided topics.

So we’re not just staring out into the camera, , , , you got Debra on, she runs a charm school for professionals. I got connected with her. She’s not some just random guests. It’s someone I’ve actually worked with. I think a few years now when I was up in Seattle, she does these cool, in-person trainings that, yeah, it seems so long ago and you’d be able to do things in person, but she runs some in Texas and Seattle.

And, we’ll get into that a little bit, , but yeah. Thanks for jumping on. Appreciate having you. Oh, my pleasure. It’s so good to be with you and excited to learn more about your group and, what you’re doing it. you’re doing some incredible work and building a network of people, which is the whole key.

Isn’t it building networks of people that we can collaborate with and, do business with. I think I told you this earlier, like most of the people in my group are introverts myself included. that’s why I tried, I’m always like cognizant of connecting other people. Cause I don’t like talking, I’d rather just connect to people.

So I can just into that vanish and go away and have them talk. So I don’t have to talk. I’ll do it. I’ll get it in front of the stage if I have to. But that’s what I prefer. And I think that’s what the bubble mastermind is going to be all about. But, yeah, let’s start off with some general things.

the world is changing. What are some key things that you’ve been teaching your students, this past year that can help out the listening. we can dive into specific scenarios. 2020 has been a year. Hasn’t it? I think we’ve all been stretched to do things outside of our bubble and whatever we had done previously.

Maybe some of those things weren’t working quite the same way, or we needed to adapt some new skills in order to successfully move into the world we’re living in right now. as you noted all of my classes, everything I had done pre COVID. Was all in person we met together. It was face-to-face, I’m pretty strong believer that the best way we learn social skills is in a social environment.

And so we had to move that physical environment here into a virtual platform. And we’ve done that this year. but I am looking forward to the day where. We will resume, to face-to-face because I do think that’s most important. I think one of the things I saw this year unfold was, not only the heightened.

Realization for the need of social skills. Reality is that, the talent professionals today are saying that it takes, soft skills are really the reason why most people fail in their job, whether it’s their own business or they work in a business. And there was a LinkedIn survey just recently conducted that said, okay, That 92% of businesses and companies believe that it’s more important to hire for soft skills than it is for hard technical skills.

And I find that’s really interesting because in the 32 years I’ve been doing the work I do. I have worked with every type of individual and. We tend to think soft skills, social skills, or are common sense and people should just know this. It should just be intuitive and it truly isn’t. And so where do we invest our time and our money and our effort.

it’s in developing those technical skills and we do need them. I’m not minimizing those at all, but what really sets us apart and allows us to reach those highest levels of success. Are going to be social skills and the ability to create human connection. this year lane, we’ve heard a lot about what’s essential.

I’m sure you probably have there in Hawaii as well. this is an essential business. This is an essential fill in the blank. I firmly believe that the most important and most essential tool that any of us have is human connection. And it’s really backed up by science because human connection allows us to, be healthier physically, emotionally.

mentally and look at some of what, at least I know some people in this past year and clients that have contacted us that have really struggled with dealing with mental challenges and physical health issues. Because they are isolated. And we’ve seen an increase in alcohol abuse and drug abuse, and people either are really exercising a lot, or they have set exercising apart and you might’ve heard of the COVID 15 or 20 for some people, not the 15 and 20 we want, and sleep quality is impacted.

So not connecting socially. Really has, an impact on us and interestingly pre COVID. Do you know what the cost to us companies was for disconnection in the business world? Talk to tell, right? Yeah, it was over $500 billion pre COVID. I would love to see new research on that number. Now where we’re at today, because the more we have isolated and pulled apart from one another, it’s impacted how productive we are in business and in what you’re doing.

and that is critical. Human connection is absolutely critical and it’s key to networking. Isn’t it? Yeah. and that’s what we want, but a little bit off the wires, like I tell a lot of investors, right? When you’re investing in private placements and syndication deals, or you’re trying to find that lawyer or tax accountant, different service provider, it’s all referrals.

This is a referral based business. And how do you find those referrals? But you have to find a pure passive investors. And build relationships with them or jump into my master bag. But that’s a paid thing, right? It’s a, it’s a bat cave for that. So there’s two ways about doing it. The cheap ways just put on a smile and get along with people which doesn’t come naturally to most of my folks, right?

Most of us are technical type of sighted people. I think when we step back, one of the taglines for final touches, how do you want to be remembered? And that’s not just thinking about some people take it to the morbid side of when I’m dead. certainly there will all be remembered at that point in some manner, but how do you want to be remembered when you walk out of the room?

When you click in the meeting on your zoom call, when you got off the telephone or you just finished that email, how do you want to be remembered? That’s really quite powerful. That takes, a big picture approach to every single interaction that I have with one. Whether it’s going to be brief in passing, maybe at a networking event or on a zoom call where I just see a little face on a tile or it’s long and lasting, maybe it’s somebody that I really do work at setting up engagements and having other points of contact.

how do I want to be remembered? And it doesn’t matter if you’re an introvert or not. Actually, I used to be much more of an introvert than I am today. I would stand back and observe and watch people and, it took practice. All I had to do was learn some skills, practice those skills. And it became much easier.

And once I understood the why does it really matter? Why does it really matter? What’s hate to all of us say what’s in it for me, but what’s in it for us in creating those connections. And, for me, when I go into a networking event, I’m always looking lane for, do I really see others?

Because I think it’s easy for our brain to get focused on everything else that’s going on around us. all the distractions, is my phone beeping at me or vibrating or is it not? And I’m concerned about that. who’s in the room. Do I have the skill? I’m a little bit nervous stepping up and speaking up, but do I come fully prepared, fully present, fully ready to engage with the people that are there.

That’s important. And if I really do see others. And then I look for ways to connect with them virtually or in person. Then I’m beginning to create those relationships that are going to enable me to find the clients that I’m looking for and find the people that I need to connect with because in business, everything is about those relationships.

And some of the basics there is, show up, . Turn on the camera, turn off all of these. I have the four screens here. Turn them off. Stop typing stuff. Face the damn camera and playful out and interact. This is not, at least my meetings. Is this not like the workplace where if you say something stupid will not be considered for a promotion for five or 10 years, I guess people don’t even stay at a company for more than a couple of years, these days anyway.

But yeah, this setting is at least my bubble mastermind and all my other events that I do. It’s a place where it’s time to be vulnerable, which gets very out of your social norms for your professional work setting. Because. People come in and they have to protect their reputation.

Yeah. Yeah. And I think. I, we all do business with those that we know we like, and we trust that’s just the bottom line. , if you’re a fan of Starbucks and you buy your coffee at Starbucks or your local coffee place, and you are loyal to that location, you’ll drive further, you’ll spend more and you will be more consistent, then to accompany that you don’t really know where you don’t have that commitment to.

So to your point, do I know you. So you have to show up and went in this format, you have to show up on video. so often I see people turn off their videos and there are some companies that do require that just because of the technical load in that. So I get that, but when you can’t see a person.

It’s very difficult. You’ve hindered the amount of connection you’re going to be able to make. we make fast impressions about people in a blink of an eye, and it’s primarily based on how they dress, how they show up. what am I reading when I look at you and research shows that we gather over a dozen.

Really core values about an individual within a blink of an eye. So if my visual picture is missing or I haven’t put effort into showing up with some thought in how I wanted to show up, I’m missing a really important moment and I’m going to be invisible to that group, even though I might add value vocally or in the chat box or in another manner.

I’m sure it is. People make snap judgements. They do. And so I do I show up and then, so do you know me? And then I do I have likability. Is there something about that individual that is likable and, that comes across in some pretty easy ways? we are always looking to have those, have the hormone oxytocin fire off in our brain, and oxytocin is known as the connection hormone.

So when I see you, I immediately have some type of a response. And the response I want to have with another individual is a positive response, because I want to be able to create that oxytocin, which is a bonding hormone. It’s going to make us feel more connected. It’s going to create, like ability between the two of you and easy ways to do that is, smile.

A smile is so powerful, make eye contact and you can’t be looking down. And then this kind of a platform, a lot of times you’ll see people looking down or looking all around in, they’re not focused on what’s taking place. And it does take a little more effort. I do think in this format than it does face to face, frankly, but, do I really, show up?

so do I smile? Do I make eye contact? Am I fully present? Do I do something as simple as say hello? amazing. How many people don’t say hello or goodbye. Those are the two things I’m really always amazed by. Some of the research says that just as simple greeting of hello, how are you is really powerful and memorable.

Oh, and wear a decent shirt, right? Like you wear whatever you want underneath. Cause they don’t see it, but it’s fun. A decent shirt. That’s all I ask guys. But on a decent shirt, comb your hair, make sure that you look at least somewhat presentable given your audience, given your brand and how you want to be remembered.

Because you only have this little moment to do that. . So do you, do you know me, do you, is there like ability there, something that makes you want a trigger that says, I want to get to know you a bit more or I want to be able to connect with you again and then last, do I trust you?

And again, oxytocin is that hormone that feel good hormone that does start to establish trust between two people really powerful and it helps to deepen our relationships and the connection and that bond so that you do think of that individual moving forward and a little bit of a tech tip here.

There’s a setting and Zune where , it can scrub your faces gives you makeup. Wow. So you guys are tech people, you guys can figure it out or Google letter. I’m sure there’s a YouTube video out there, but that can help, like you’ve got boogers under your eyes in the morning. I need to go find that it’s in there.

It’s in there. So let’s move on to some more tactical tips once they get in the set, They’ve shown up, they’ve got their stuffs set. They’re smiling. And they got their cameras on. so one thing I got for a lot of people is the nice thing about this online settings, is like you get forced into the interaction.

It’s not like you’re him and hauling. I’m going to we’ll talk to him or her over there after walk over. It’s this is the beauty of virtual networking is I can force people into breakout rooms. And you’re stuck. You’ve got to do it, So there’s not that awkward feeling the fear of approaching and starting that conversation.

But once you’re in the set, one tip I always have is yeah, you introduced yourselves, but it’s always about the other person help them out. Like one tip I’ve always followed for myself personally, is help out the other person first, which is why I do all these free onboarding calls to new investors is I’m just trying to add value to them.

In 15, 20 minutes. It’s a test, whoever reciprocates or stays around. That’s what food typically stays at my network for my circle. And so I would push that out there is like, when you get into a set with somebody or a few people learn what the other people are doing and see how you can add value means, add encouragement.

If you don’t know anything. give them a referral and articles, something you’ve heard, or maybe there’s somebody else in the group that you met five minutes ago, the day before that you can connect them with a way to add value. So you’re not just standing there spying, right? Yeah. you’re not a model or a statue.

and that’s, part of connection because if I’m going to connect with you that it can’t just be this. Stoic stable face staring back at me. I have to give something to receive something. and we do, it’s the old analogy of the farmer. You’ve got to go out and plant something before you can go out into the field and look for anything to harvest.

And so showing up smiling, engaging, asking about the other person. Get to know something about the other person. I have a friend a few years back and she used to say, if I ask somebody three questions about themselves or what they do, or the type of work they’re involved with, , and they never asked anything of me about me.

I write them off. Now that’s pretty harsh. I’m not personally going to take that stand, but it does make sense because it’s really a one-way street. And sometimes we do that because we’re nervous. We know all the answers to our own story. I don’t necessarily know your story, but get good at having at least three good questions in your back pocket that you’ve thought about ahead of time.

So when you go into these types of settings, that you can start the dialogue and not feel uncomfortable. Now I can think of conversation. Lane is like playing tennis. if I hit a ball to you and you let it drop, I’m thinking you missed it. So I’ll serve you another ball. If you let it drop again, I might serve you another ball, but then I’m going to start saying you’re not a lot of fun to play tennis with.

And that’s frustrating, right? All right, you’re listening to LAN and Deborah talk about these tips or asking questions, but it’s hard to do anything unless the other person is playing tennis, but you and being vulnerable, right?

Show your insecurities, tell people what you’re working on, what you don’t know. Maybe you haven’t heard about real estate professional assessment asks the freaking question because that’s how you hit the ball back over the net. And this is how it works. but it can be frustrating, right?

Debra, if you’re not in a place where people know how to swing the racket and get the ball over the net, right? and this is why I say it’s a waste of time to go to most. Local real estate club events or free online forums because you’re in a room with people who are all about themselves are selfish mindset and it’s all about what’s in it for them.

I’ve curated my group and people who come to my events. It’s a different type of crowd. mostly because I’ve gotten to help that people out of here. The people that don’t fit that aren’t this abundance mindset or not just in it for them, they’re gone. So I’ve set the culture in a way and curated the list to be decent tennis players here to spar with.

but that’s hard, right? It’s hard to practice with people who don’t know how to swing. It is. And then there’s the other side of playing tennis. So then you, I say to you Lang let’s go to the court again tomorrow. Let’s try again and you’re ready. So you’re there with your racket. And I stand on the other side of the net and just bounce the ball on my own racket.

And you’re saying, Debra, I thought we were going to play tennis and it’s we are. And you’re thinking if you were just going to bounce the ball in your own racket, you could have done that at home. And I didn’t need to even get dressed to show up. And that’s what I call a monologue. Not a dialogue.

When you ask somebody, how are you today? And they never stopped talking. It’s all about them, as you just mentioned. And, Oh goodness. I’ve been to so many networking events where I’ve had people come up and shove their business cards on me and their books on me and their things and talk about what they’re doing.

And I walked away going, that’d be the last person in that field I’d ever hired. And those people typically never get anywhere. So there really isn’t much. Motivation to follow up there, being there. this is why my wife is like, why do you spend $25,000 to go to this? Like mastermind four times a year?

yeah, you don’t deal with people like that. There’s a reason why they’re in the wrong and they can afford that to it. The stuff, Yeah. Going to a dinner party to lane, you go to a dinner party. And if you sit down with a whole table of people that have nothing to share, it’s a really quiet, boring meal.

And you hope the food is really good. but if you come to the table and the food could be okay, maybe the environment’s okay. But. You’re sitting next to people on your right and your left, maybe across the table, depending on the size of it that are engaging and interesting and, sharing that’s a meal you leave not just fed physically, but you’re inspired mentally.

You’re encouraged and you walk away from that going. Wow. That was really an amazing night. And you said it before, you said the word practice before, and it’s not like people , if they don’t do this, it’s not like they’re jerks or they’re horrible people. It may just be, they just don’t know how to do it.

Know all the time. I hear that all the time lane, that it’s all a matter of, gosh, I should know how to do this. I’m, 30 years old, 40 years, 50, 60 years old, I’m at this place in my career. Financially and I’m successful. And I can’t show up to this kind of a class because it’s been, make me look like I’m an idiot.

I should know this. Why would you know this over? I don’t know the real estate information, it’s not what I’ve studied. It’s not my area of expertise. So I don’t have any expectations on myself to know that same. Thing’s true about social skills. We only know what we know and we’ve only made it to the point we’ve made it because we have the skill level.

We have to go to that next level. You join mastermind groups, you go into other environments and you learn new skills so that you can boost every area of your life. And the exciting thing to me with social skills, it influences absolutely every part of our life. Yeah. . So let’s, kind of transition here to some mistakes you’ve seen people make.

I’ll start off with one, give you time to think politics just don’t go there. I think I can agree with this, but here’s the funny thing. I think the majority. Of people who are normally not the talkers, they’re the listeners to the minority of people who go talk about left stuff, talk about rights stuff.

And the majority of people get this. So we’re talking to the minority of people who talk about this stuff and you guys know who they are. I’m so glad when, I saw this at another very high level mastermind I’m in. we were finishing up the main talk and it was just Oh, this is a break time.

So a few people at the nominee chit-chat and I’m just sitting here doing my own thing, working on the computer and just listening and waiting for this next session to start. And there were like three very high level entrepreneurs. these are guys making over a million dollars a year and they got into this thing about some political discussion and I saw.

Three, very intelligent high-performing people and it just got derailed and they were never going to do business with each other ever, never, it wasn’t going to be a shot. And my takeaway from that was what is the purpose of having that conversation? Is it worth the risk for never working with each other in the future ever again?

And and that’s how do you want to be remembered? Correct. They will remember each other forever based on that political conversation they had, and it will frame up or destroy or undermine any potential business in the future. And we do that in so many ways. So politics definitely. And certainly in the last, I would say probably 10, 15 years.

Getting into politics is just bad news. It used to be in when I was younger, that we could have political conversations and we could agree disagree. We’d walk away and still be friends. And sadly, that’s just not what’s happening in this day and age, it seems like so many of these social issues right now are just.

Highly charged. and I often encourage people to stay away from conversations that are emotionally charged or could potentially be emotionally charged because it does trigger. It’s not going to trigger oxytocin. I promise you, it’s going to create that divide. So you’re not going to create like ability you’re going to do exactly the office that I’ll know you, but I won’t like you.

And I certainly won’t do business with you. those emotionally charged, even talking about COVID right now for a lot of people. you bring up something about that and aspect of that, and that creates an emotional charge for people. Politics does it. so many issues that we’ve seen in the last couple of years have created really emotionally charged moments.

And so I always say, stay out of that. Territory find other conversations, starters that are going to be more engaging. one thing that I hear people say a lot when they first meet somebody is, where are you from? Have you ever heard that? And I used to say that all the time, Oh, where are you from?

And then I interacted with somebody that was, Not from, here they were from another country. And I sense that because they had an accent and so forth. but they said, Deborah, that makes me feel really uncomfortable. And I said, tell me about that. And they said, when you asked me where I am, from what you’re saying without realizing it is, you’re saying I’m not from here.

So I’m not one of you. that wasn’t at all. What I was meaning, what I meant was I’m really interested in your, place of origin, your birthplace, or where your family grew up or where you may have grown up. And that was what was intriguing to me. Never entered my mind that maybe there was a seven message being sent to that individual that they’re not from here.

When I moved to Texas from Seattle, I would be in a store and people would say, where are you from? And I went, Oh, that’s what they mean because it was a very strong message. I wasn’t one of them, which is fine for me. I didn’t mind it, but that’s something to be mindful. So I’ve switched that language.

And now what I’ll say is where is home for you or have you always lived in Dallas? Is Dallas always been your home? Because everybody has a home. And everybody generally likes to talk about home. what kind of food did you grow up eating or that, and that has always, I found that it’s been received far more positively than where are you from?

Yeah. Yeah. it’s just part of this, it’s just the self-awareness right. And empathy. How does it come across? I know some people , it wouldn’t matter. But just spell it out, right? If you ask somebody like that,

what do you think I’m from? Like some jungles of Asia or something like that? Where are you from? Like it’s some people that’s just how they are and you just never know. So Y chip yourself off the starting line, but I say, I like, wow, I’ll look for those points of connection, Lane. I want to find, how can I connect with you?

Not how can I create a, something abrasive and it’s going to happen. This human connection is not about perfection. I’ve never met anybody. That’s perfect. I’ve just met some people that are really good, but I’ve never met anybody. That’s perfect. And so I always encourage people, take the press off of yourself to be perfect.

This isn’t about perfection. It’s about purpose. And so my purpose is I want to connect and I have to be able to read those non-verbals and say, you know what, maybe I missed it there. Maybe I missed it. And then step back and ask a question or find out a different approach. And that’s why having more than just one or two questions to dive into, but you’ve got to be using empathy.

it’s you can’t go overboard. You can’t be too subtle. if you’re trying to build connection, you’re going to have to take a little bit of risks with that kind of opener. you don’t want to be just, I’ve been vanilla, right? Unless you love vanilla ice cream, but you want something with some complexity and somebody that has a backbone and has an opinion.

But stay away from those emotionally charged topics. I know something that I’ll personally do. I don’t get along with most people. I’ll be honest. , I don’t really like my job. I never really liked it. so I can’t really get into rapport with somebody who just loves their w two job.

So that’s always been a hard thing for me, but what I used to do or. What I do now is I just put it out there. Yeah. I stopped in my engineering dinner and they liked that. And then I just see how they respond. that’s a good icebreaker though lane, because that opens up where somebody else might say, you know what?

I don’t really either. And if somebody is like, they think the complete opposite they’re totally company person. that’s cool. find some, move on, right? What’s the next like point of connection we can make and the goal is to get into connection and to get into rapport and then figure out how we can help each other, what are the needs of the other person, And learn about them. You brought this up earlier is. I want to learn about what they’re doing, who they are, maybe a little bit about their family. why is that important? Because later on, when I connect with them again, then I’m gonna have a little bit of insight into who they are, what they do, and you start building, it’s a process.

It’s not one and done. That’s not our goal. Our goal is for ongoing long-term relationships that we can go to at different points and we may not see somebody for five years and then you see them again and you’re able to pick up and move right on. Yeah. and this segment will probably be like required viewing prior to entering the bubble.

And for those of you guys in the bubble, if you guys get stuck, To say, Hey, I was listening to Lane’s podcasts on networking in the bubble, and I’m just trying my best. I’m very awkward. Tell me about yourself and what is it that you’re struggling with? So maybe I could help, just use that light.

if you get stuck, just use that like ice, but, any other mistakes, people making it’s very common. Yeah, I think just being distracted, I think distraction. one is emotionally charged questions, conversations or topics, but the other is just distraction. Looking over your shoulder for somebody better to come down

the hallway or, into the room. Of course, virtually we don’t have that, but we do it virtually in other ways, by looking at our computer, by picking up our phone by looking at something else. And what’s interesting in this format because we only have this little tile that we see this small amount of space.

We can very easily misread those. Micro-expressions. When I’m with you face to face and a live networking event lane, I get to see your entire being and place you in context of what’s going on, not the case in this setting. So we have to be careful that we’re not just picking up certain, non-verbals and reading more into it than what it is.

But that also means I have to be responsible when I show up to really show up and be there be a hundred percent present. And, They’re simple things, eye contact focused, ask clarifying questions, make sure you come in with some good questions. be honest, be humble. You don’t know everything.

You might know a lot of things and you’d probably know way more than I’ll ever know. But you all, there’s always room to be gracious and people remember that. And when you’re remembered like that, you’re remembered for the right reasons and people are more likely to reach out to you when your services one that they might need in the future.

Yeah. And it’s also, I can think of one particular, he’s a pretty high , profile person in our real estate world. I remember having interaction with him and he was doing the show over the shoulder, looking at who else is coming down. I will never forget that. And you guys come in the above, I’ll tell you who it is.

I’m not too big fan of them. for sure, but I will always remember that. And same thing when you’re in this virtual setting, people remember that type of stuff, and you’re not going to be able to pick up on those social cues that you go down the wrong path on something to pull yourself back.

If you don’t have your camera’s on coming back to that again. And, I realized that there are times that if you’re called into a last minute meeting, maybe you’re not ready to be on camera, but. you just need to hustle, you need to make it a priority and then schedule those meetings so that you can be fully present.

it’s critical right now because we don’t have the opportunity to connect face to face like we were doing. hopefully we’ll be doing that again soon. When this is our primary format for connecting, we have to utilize every little inch micro inch of this screen space we have and make sure that we’re really showing up and putting the effort in.

and I recognize zoom fatigue is a real issue. It’s a real issue this year. I hear it a lot from people. I don’t know if you’re hearing people talk about zoom, fatigue. Yeah. Yeah, another thing, this is more of a technical thing, and I’d like to get your opinion on it. It might just be me being nitpicky, as more of a person born with this technology.

people jumping on these in calls on the call-in number, which is like the worst, because you’d never see who they are. Everyone’s a little wary of who that magical person is. and then even just using an iPad or their phone, right? , especially in the bubble format, I want everybody to be on their computers because you’re not able to navigate and jump into your breakout rooms unless you have the desktop software.

Correct me if I’m wrong, but I see it as like a subtle thing of no, this is that important. I’m just going to do my own thing. Maybe be at the at the mall waiting for my spouse while I’m jumping on this thing and just hop it on. As opposed to I’m in my dedicated place of work, I’m going to dedicate all my attention to this person on the other end, but that might just be me nitpicky, but I think there’s a subtle message there line. , it’d be like going into a live meeting across the desk from you. And I didn’t bring what I was supposed to bring to my meeting and I was half dressed. for that meeting and was totally distracted.

You would say, why did you even bother showing up? , I think what’s happened this year. What I’ve observed is this feels so casual to people. And because we’ve dressed down more this year, people aren’t getting dressed up, people aren’t putting in a hundred percent and some people are working many more hours.

But are they being effective in those hours? and I think the whole experience has just taken steps down and then every once in a while we show up, we really need to shift that and think about, no, this is a time. I have an opportunity. This is the format right now. And how I show up now is going to be how others are going to see me when we are back out face to face.

Interesting about first impression, some studies say it can take up to five years to change a first impression. That’s quite. Staggering. And I think a lot of it has to do with so much of how we interact with one another, even pre COVID. and the lockdowns is because we had to, we spoke on the phone or we sent emails or we, occasionally may have jumped on these platforms.

And then that was my memory of that person. And then when I saw them in person, it took several of those interactions over maybe years before I finally started to see them slightly differently. Just like the man that you just talked about, what you remember is him looking over your shoulder. It would take a long time, a lot of interactions before that would shift and a willingness on both of you, to shift that, first impression and how you would interact with each other.

Cool. Of people want to , work with Debra. She’s taking her classes soon. I actually might jump on this. It’s every, in starting in January on the Saturdays, she giving a live presentation and, tell us more about that event. And, you guys are doing some networking, so that’s what I’m particularly , excited about kind of meeting some other people have that growth mindset too.

And you never know who you’re going to meet on the other end. And we never know who signs up for our programs because unlike you, we just, whoever signs up, as long as they have a room, they enter into the room with us. but it’s called confident connections and we hit over those five weeks. the key areas that we’ve been brought into companies to do training for, I did the training for Boeing for about eight years prior to COVID, worked with many fortune 500 companies, as well as.

Small startup companies, everything across the board, as well as individuals and some public programs. And we’ve taken many of those key elements and brought that into this five week. confident connections masterclass that we conduct. We will have some breakout rooms and interesting. we’ve had some people that have turned off their cameras and we use that as a teaching opportunity.

Everything’s a teaching opportunity. And so I say, all right, how did you feel connected to this person? When their camera is not on. And of course, everybody says, no, not the purpose to embarrass anyone ever, but it is important that we step back and vocalize and really think about how we show up really does matter because I think it’s easy to get fall into the pit of it’s just my technical expertise.

As long as I’m good at that, the rest doesn’t matter. And that’s the cool thing about these online settings and being connected with this random people is , you likely will never meet these people again. And if you’re trying to work on these skills, what better place to work on the stuff that messed it up royally, then people not at your workplace, right?

Like just random strangers on the internet. I think it’s a great opportunity to nudge at your self-aware and just practice. and it’s a safe place. these are live training programs. These are not recorded that you’re going to watch later. These are live interactive. We tried to make it as close to being in a real class.

Face-to-face as we possibly could. the interactions, the conversations, it’s right now in present. And it’s always interesting that people that show up around the table and the questions that they have, and it takes on a lot of the life of the participants. it’s always fun for me to see who’s going to be around the table.

And what will this particular program look like? as we walk through content, but people don’t leave jobs usually because of the technical issues, they typically leave jobs because there was something in that work environment that. was abrasive for them. most of us get a job and we’re excited about it.

And we tell everybody, and then we start hitting the snooze button saying, is it Friday yet? Or whatever your work week looks like. And it’s usually that sandpaper individual or that person I have to work with that is just very difficult. Because it’s relationships. and so the better I become at communication, creating connections at delivering a better service.

The more effective I am professionally. And so these classes are really fun. We have that one coming up and we do have some live programs that we’ll be re-engaging with this next year as well. But our is final touch school.com. And if anybody has any questions that you’ve been just totally off of topic of that, and they want to shoot me an email, I was open to reply to them.

Yeah, and you’re based out of Dallas. So we do have a lot of Dallas and Texas folks that are listeners. nothing earlier places, the in-person stuff. but, yeah, we’ll put that in the show notes for everybody and, yeah, appreciate you jumping on. thank you lane. If I were in your world, I would be at your masterclasses

it sounds fantastic. And what a great, great, opportunity for those individuals that can participate and grow individually, grow professionally and grow collaboratively. , it’s what business is about. Yeah. And so if you guys want to jump in the bubble of go to simple passive cashflow.com/bubble, that’s going to be January 16th, the 17th Martin Luther King weekend.

or if not, she may email lane and simple passive cashflow.com. If you’ve got any questions, but, thanks for listening guys. And we’ll see you guys next week.

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