Control What You Can, and Plan For What You Can’t

Control What You Can, and Plan For What You Can’t

controlling the real estate markets

Life can throw some wrenches your way, especially when you live in a post-pandemic world with financial uncertainty on the horizon. When it comes to your financial game plan, it’s always a good idea to focus on areas where you can direct the course of events. When you are unable to control a situation or outcome (like most things in life), it is best to have a plan to deal with it.

Here are three myths and ideas to have a strong plan for the uncontrollable:

Myth 1: Controlling People

I have learned from operating companies as large as 50 employees, that you must focus on people’s strengths, and accept them for who they are and how they operate. This applies not only to work, but to every single relationship in your life. Fortunately, I was raised in a high acuity personality environment. My mother analyzed personalities for a living. Barbara is an expert consultant helping large companies to analyze personality profiles which help them understand why people behave in certain ways, utilizing the DISC system. Additionally, we have been using the Culture Index extensively through our business partner, Don Dalrymple in very effective ways.

You cannot change people, nor should you try. Understand how they operate and bring out the best in them.

 

Myth 2: Controlling the Markets

S&P:Case-Shiller US National Home Price Index

If you decided to sell your real estate back in November 2016 because the S&P/Case-Shiller National Home Price Index pointed to the top of the market, you would have missed out on the largest real estate bull run in the history of real estate. The Index climbed from 184 to 284 in four years. When planning for real estate, you must consider liquidity needs, demographic growth projections, and tenant rental income.

Devising a plan to continue to cash flow your property over 10 years or more is the best way to accumulate massive amounts of equity without worrying about how to time the markets.

Myth 3: Controlling the Government

As discussed in my previous blog dated April 21, 2021, Uncle Sam’s Deadliest Tax, Inflation, we are currently witnessing unprecedented inflation as a result of relentless deficit spending and irresponsible fiscal and monetary policies coming out of Washington DC.

You can hedge against the government’s predictable tax, print, and spend policies by investing in real estate, commodities, and non-US denominated foreign stocks and currencies.

We all want more control, but at the end of the day, what matters most is that you have a plan to manage the challenges in life that you cannot control. This will help you to enjoy your life in a way that is much more stress free and informed. And when you have your plans in place, I recommend the following book by Dale Carnegie, How to Stop Worrying and Start Living. One of my favorites.

US Dollar Demise – Is the Perfect Storm Brewing?

US Dollar Demise – Is the Perfect Storm Brewing?

demise of the u.s. dollar

Predicting the financial future of the world is impossible but paying attention to certain historical trends which are repeating themselves right now can indicate where the future is heading. And then throw in the likes of digital currencies such as Bitcoin, that have no allegiance to any sovereign nation, and you get the feeling that all currency hell is about to break loose. Paying attention to the following indicators can help you start to make moves to protect your portfolio.

Keep your friends close and trading partners closer

The US trade deficit measures the net balance of imports vs. exports with a particular country. The following chart shows the extreme imbalance the US currently trades with China, which makes us vulnerable to trade wars and supply chain disruptions. On top of this, we are exporting our US dollar for goods that are imported. Should China decide to no longer to accept the US dollar as payment for goods, we could find ourselves in an unwinnable trade war.

a longterm view on u.s. trade with china

Dollar Warfare

As US fiscal and monetary policy of massive dollar printing continues with the Biden administration, the inequities between the rich and the poor have accelerated. This social instability is seen as a weakness by our global adversaries. In fact, according to CurrencyTrading.net, there are seven nations planning a dollar coup against the United States which should raise alarm bells for our citizens: China, Saudi Arabia, South Korea, Venezuela, Sudan, Iran and Russia. Should China alone call in its approximately $1 trillion in US debt, the demand for the dollar could plummet, disrupting markets worse than the 2008 financial crisis.

The Black Swan – Cryptocurrency

According to author and hedge fund manager Ray Dalio, in his book, The Changing World Order, the last three major powers who held global reserve currency status were the Dutch Empire in the 1600’s, the British Empire in the 1800’s and now the United States Empire which has held reserve currency status since the 1930’s. Many are predicting that the Chinese Yuan is the next currency to be held as a global medium of exchange. However, it may not be a sovereign nations’ currency which holds that next top spot. It may be cryptocurrencies because of their decentralized nature, transportability across national borders, and the fact that they are impervious to government corruption.

There are some strong warning signs that the 200-year run as the preferred global medium of exchange for the US dollar may be coming to an end. I would strongly encourage you to watch this video, from Ray Dalio to understand historical trends and how it relates to the rise and fall of global powers. History has a way of repeating and recognizing the patterns in modern day life could be the best way to predict your financial future. However, this historical shift may have a crypto twist!

How “Alternative” Can You Get?

How “Alternative” Can You Get?

Blockchain Technology

Have you ever reached into a coat packet to find that a $20 bill you lost a few years ago had turned into a $50 bill? Or, you hadn’t driven your car for a few months and the gas tank went from half full to completely full while just sitting in your driveway? It happens to me all the time . . . in my “alternative” world. When it comes to investments, wouldn’t it be nice just to write a check, and let those dollars grow without doing anything? The world of alternative investments can do just that and may be something you’re missing out on!

The one thing I have learned in my 30 years of investing is that if I want exposure to alternative assets, I leave it to the professionals who make it their business to master the art of these asset domains every day. Here are some examples of investments to help you get “Alternative”!

Secondary Investments

Secondary investment funds such as Akkadian, High Gear and Ion Pacific offer the accredited investor the ability to invest in late stage, pre-IPO companies such as Uber, DocuSign and Boom Supersonic. Essentially, these companies approach founders and early employees with the opportunity to sell some of their shares at a discount to realize a liquidity event. This allows them to enjoy some cash now for all their hard work, while the remainder of their shares await a major liquidation event such as a SPAC buyout or an initial public offering. The multiples on these investments can be tremendous with very controlled and mitigated risk.

Private Equity Investments

Private equity real estate firms such as our company, Recentric, offers accredited investors the opportunity to invest directly into medical office buildings in the Western region of the United States. We offer units of investment directly into the Limited Liability Company that acquires such medical office buildings. This investment vehicle offers exposure to one of the safest sectors of commercial real estate, with a 7–10 year horizon. This provides plenty of time to create equity for our investors that can hedge inflation and generate exceptional returns.

Blockchain Technology

Now, you may have read my newsletter Today’s Peacock is Tomorrow’s Feather Duster from July 2021. While cryptocurrency is still relatively new and no one knows its future as an accepted currency in the global economy, an indisputable fact is that Blockchain technology will transform the world in ways we never imagined with technology such as Web 3.0, MachineFI, GameFI, and DeFI. Since I started Winebid.com back in 1997, I have not had this overwhelming feeling of intrigue, excitement, and fascination with a disruption in our economy and literally the way we all function in a society. Fortunes will be made, and sovereign countries will be forever changed, and may even dissolve as a result. While the alternative investment options in this space are limited, I am committed to sourcing a reliable expert in the space to invest. Stay tuned on this topic in future newsletters.

Alternative investments can be very risky. I encourage everyone to consult with experts, do your own homework, and trust your instinct. If it’s too good to be true, it probably is. Having part of your portfolio exposed to unique investment offerings with competent and trusted sponsors may find you waking up one day, living out your dreams because you made the right choices earlier, than later. And if you ever want to grab a cup of coffee and talk alternative investments, I am always ready for that conversation!

Equity Happens!

Equity Happens!

medical-office-building-design-01
Image Credit: bisnow.com

I have long been a fan of the wealth accumulating effects of investing in real estate. If you have the patience and the wherewithal to invest dollars in commercial real estate, only to let it grow and compound, you will likely wake up one day with the pleasant surprise of having amassed large amounts of equity. When you compare real estate as an asset class in the capital markets world (stocks and bonds), commercial real estate has certain advantages over its competition for investment dollars. Here are a few simple reasons why we love investing in real estate and the incredible wealth effects they can have:

Inflation + Real Estate Debt = Your Best Friend

If you have turned on the news lately, or purchased food, gas, or building products, you are aware that inflation has become a reality for Americans, and is looking more to be secular than transitory (meaning it’s here to stay). The recent CPI numbers came out this week and on average, through August 2021, we have hit 5.3% inflation for the past 12 months. How is inflation good for your commercial real estate debt? Let me explain: Most interest payments are fixed in nominal or unadjusted terms. Inflation makes this kind of debt less important in real terms. Raising the inflation target to 6% would substantially increase the rate at which the debt effectively vanishes over time. History has shown US central banks have used inflation to reduce its national debt. Therefore, holding on to cash is a losing proposition in an inflationary environment.

Tax Advantages Are Unmatched

We all know the largest expense we have is taxes. No other investment vehicle offers as many tax benefits as real estate, period. First, you can deduct expenses before you pay yourself a dividend. Secondly, you can depreciate your building in many ways, which is in effect an interest free loan from the federal government. Thirdly, you can utilize the 1031 exchange to trade up to a bigger and better property, while deferring those taxes down the road.

No Such Thing As Impulse Decisions

Your average human being cannot control themselves when it comes to the stock market. According to this CNBC report, “Investing based on emotion has consequences: Over the last three decades, U.S. stock investors have lagged the S&P 500 by more than 7 percentage points annually. Instead of holding on to earn market returns, investors shortchange themselves by trading in and out — at exactly the wrong times.”

Commercial real estate has its challenges; however, if you are invested with an expert in the market, and specific real estate product type, chances are you are going to win more than you lose. The long game of real estate provides security for you and your family. Schedule an initial call with us today to ask any questions learn more about what we do.

Maintaining the Value of Commercial Real Estate: The Vital Role of a Property Manager

Maintaining the Value of Commercial Real Estate: The Vital Role of a Property Manager

eric rehm

Delivering excellent service happens when you put yourself in someone else’s shoes. That’s what our property manager, Eric Rehm does for all our tenants and vendors at each Recentric property. He ultimately considers what experience each practitioner is trying to offer their own patients and seeks to help them deliver that level of service. 

Meet Recentric Property Manager, Eric Rehm

With over 15 years in property management in Aspen/Snowmass, Summit County and the Denver Metro area, Eric knows the value and importance of vendor relationships. He is proactive in seeking out the best vendors to care for our Recentric properties and builds trustworthy relationships with each of them. He magically nails that balance of quality and cost. He finds the best resources at the best price point, in order to keep our own operating costs low for our investors. He gets to know the contractors of each vendor, so that he has a direct line to the resources he needs. He respects the relationship and puts himself in their shoes, never calling out favors unless it is important.

No two days ever look the same for Eric. Between all our properties, he could be managing landscaping updates, checking pressure systems, talking to insurance companies, or getting to know a new tenant. While Recentric makes great efforts to be proactive with preventative maintenance, some issues are just unpredictable – like four feet of snow in one morning in Denver which caused snow plow delays, freezes, and leaks. Eric Rehm went above and beyond that day, after just flying in from LA and independently purchased a shovel from Home Depot to clear the walkways and parking lots himself! 

Keeping High Standards For Vendors and Quality Service

Eric knows that the experience at each property represents the Recentric brand, which is high quality, professional, and authentic. Everything from the curb appeal of the exterior building to the cleanliness of the bathrooms need to show class and thoughtfulness for the tenant and their patients. Because Eric is naturally able to put himself in someone else’s shoes, he delivers the type of experience that he would prefer, while making others feel appreciated and cared for.