Equity Happens!

Equity Happens!

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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

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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.

 

What’s Your Life Genome?

What’s Your Life Genome?

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With all the serious and perplexing issues going on this world today, I feel compelled to share a positive and constructive message to help you live your best life, physically, emotionally, and financially.   After all, our company’s slogan is “Investing in America’s Health”. Without going into too much detail on the scientific definition of the word “genome” and, for purposes of this article, your life genome can be described as an organisms’ complete set of genetic instructions.  Here are a few ideas to create your own set of life instructions:

Put Yourself First

To stay healthy and fit, your first instruction is to make “you” first. Schedule your week in advance and block out enough times to stay active, biking, hiking, walking, yoga!  Anything to keep moving.

Be a Digitally Engaged Patient

Your second instruction is to be a digitally engaged patient. 

There is a digital health revolution in progress across the globe.  

I recently starting using Welltory, both with my iPhone 12 and my Garmin Fenix watch to record my HRV (heart rate variable) and activities. Welltory uses an AI data approach to help you with your sleep, stress and even help you drink less alcohol. 

These daily instructions and feedback can provide a wealth of health information.

Tune Out the Noise

Here are ten reasons to ditch your social networking.  

Even some younger people are starting to feel the pressure. In March 2018, it was reported that more than a third of Generation Z from a survey of 1,000 individuals stated that they were quitting social media for good as 41 percent stated that social media platforms make them feel anxious, sad or depressed.  

What are my new instructions?  Since quitting Facebook last year, I now have time to visit my bike therapist for a few more hours a week. 

Surround Yourself With Successful People

Did you know that you are the average of the 5 people you hang out with most? According to Jim Rohn, this is true. 

As you start to gravitate towards positive and successful people, your life will in turn become more positive in all areas. While this instruction may be intimidating, you will be forced to step up your game. Plus, I find that successful people drink better wine!

Your life genome is yours and only yours to create, nurture and evolve over time.  Our human body is made up of millions of cells, each with their own set of instructions. It’s your recipe for life. If you apply this concept to important parts of your life, you can define your own set of instructions to a path for an enriched and fulfilled life.   

Today’s Peacock Is Tomorrow’s Feather Duster

Today’s Peacock Is Tomorrow’s Feather Duster

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Have you ever watched a peacock strut around on full display? From a human’s perspective, we believe a peacock is a beautiful, proud and slightly arrogant animal.In reality, they are just trying to court another peacock.

Certain global capital markets have an amazing way of emulating a glorious peacock, but the reality of those markets might just be a feather duster.

Back in 2001, during my internet wine auction house days at Winebid.com, there were many peacocks running around on full display, with dot.com business models that were pumped up with hype and meteoric pro-forma projections such as Pets.com, Drugstore.com and online grocer Webvan. All these businesses are now feather dusters. 

To protect your portfolio, and provide you with insight, here are a few feather dusters you should avoid:

Bitcoin as store of value

Bitcoin has often been touted as a store of value, similar to gold and the US Dollar.  However, the value of Bitcoin dropped 54% in one month on May, 19th 2021 from its all time high in April 2021.  Furthermore, Bitcoin has no underlying intrinsic value, which is a large reason for the extreme volatility.  Bitcoin is not used to facilitate daily transactions, nor is it adopted as a reserve currency by any country in the world. At this moment, Bitcoin is purely speculative, and is at risk of being viewed as an outcast by major economic world powers.

Chasing IPO’s

Unless you are lucky enough to invest in the top 10% of Initial Public Offerings, you run the risk of negative returns.  In a recent Nasdaq study looking at companies three years after their IPO, the study calculated that almost two-thirds of all IPO’s are now underperforming the market with 10% lagging behind overall market returns. Holding onto those investments which seemed exciting at the time, cost investors money.  Lately, we have been investing in late stage, pre-IPO companies through several secondary investment funds with strong track records, a.k.a., buying from the inside. Once a company executes an initial public offering, you are buying stock from the outside and much of the value has already been squeezed out. The key to assuring solid returns is to buy the stock from the inside.

Investments that are too good to be true

If it’s too good to be true, it likely is. There is a reason that Bernie Madoff was the most successful Ponzi scam artist ever, stealing over $18 billion from investors.  He promised higher than average returns without fail while seducing and abusing his personal network. 

However, it takes two to tango. Investors were naïve enough to not perform their own due diligence. “The financial mechanisms behind the con man’s moneymaking scheme are always secret or hard to verify,” Tamar Frankel, a Boston University professor said. “There is always a smell of illegality, persistent but subtle enough that people are willing to overlook it in order to get at the financial returns.”

Investing can be a risky business. 

We all make mistakes along the way; however, you can learn from others to prevent the same mistakes. Peacock investments sometimes show up in beautiful and alluring packaging, but without doing your due diligence, you may end up with a feather duster. As always, consult your financial advisor and trusted sources before you invest in any opportunities.

Please reach out any time if you’d like to discuss why we believe investing in commercial medical real estate is not a peacock or a feather duster.

Be Careful! US Financial History Is Repeating!

Be Careful! US Financial History Is Repeating!

History Repeats Itself

British statesman, Winston Churchill once wrote, “Those that fail to learn from history are doomed to repeat it.” Hats off, Prime Minister Churchill.If only you were alive today to see how our leaders are setting the stage for another global financial meltdown.

The keys to learning from mistakes made in the past are to study history, uncover the clues and constantly compare to today’s realities.

Here are a few clues that I have unearthed for you to ponder as the history books are written:

Raiding the public treasury

Lord Tytler describes the “Eight Stages of Democracy” as the life cycle of a democracy to be around 200 years in length and exhibits the eight stages of its life cycle as follows: bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to complacency; from complacency to apathy; from apathy to dependence, and finally from dependence back to bondage.

Many would argue that we are retreating from apathy to dependence as the current socialist movement may not be stopped. With the staggering amount of public financial dependence via transfer payments, we are surely heading, if not already there. Government transfer payments now account for 34% of all personal total income!

Lord Tytler said it perfectly: “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse (generous gifts) from the public treasury.”

Dollar printing press in overdrive

In 2012, Obama and the Democrats lost control of the House and the Senate at the mid-term elections, which then forced Obama to sequester the annual budget by $109 billion, sparing the likes of Social Security, Medicaid, Medicare and Pell Grants.

This time around for the mid-term elections in 2022, the Democrats are going to try and not make the same mistake and keep the printing presses in overdrive to maintain control of the House and the Senate in 2022. This might explain why even in the face of mounting inflation numbers, the Federal government is pushing even more stimulus than ever before.

Energy Dependence

Under the Biden administration, we have quickly gone from independence to dependence on foreign sovereign nations for our own energy needs, through executive orders such as the terminating the Keystone Oil Pipeline Permit and banning drilling in ANWR, the Arctic National Wildlife Refuge.

When Jimmy Carter was President, the 1970’s oil crisis proved disastrous for our national security and the middle class with soaring gasoline prices. Are we destined to repeat a similar energy crisis in the United States?

All of these actions add up to a weaker US dollar, higher cost of goods for our country, and more dependence on the Federal government. So how do you take action?

Please read my previous blog titled Uncle Sam’s Deadliest Tax: The Inflation Tax.  Since this article was written, the cost of Bloomberg Commodities Index has increased by 15.5%.  Reach out today to discuss further.