The U.S. Economy Is Sick. Problem, Or Opportunity?

apartment investing opportunityA couple of weeks ago President Obama was on one of the last Jon Stewart shows. John Stewart gave him a bit of stick about inadequate VA services, but he let the POTUS get away with saying, “… the Economy, by every metric is better than when I came into Office, and so, the reason I can sleep at night is I say to myself, ‘you know what, it’s better.’”

Most people hate statistics, which is why comments like this can be let slip by.

There is a “metric” though the President either missed, wasn’t made available to him, or if it was he chose not to look at.

That is, the labor participation rate.

According to the US Bureau of Labor Statistics labor participation has been in decline since February of 2000, when it reached a high of 67.3%. Today labor participation is at a new low, not seen since the 1970’s, of 62.6%.

Of the 250 million people of working age in the U.S., 149 million of that total number have a job. 8 million people want a job, but don’t have one. However, there are 93 million people who don’t work, and don’t want to work.

That last figure should cause an Apartment entrepreneur pause.

Despite all the Federal Reserve huffing and puffing about its dual mandate and 5% unemployment, about 30% of the entire U.S. population, who are of working age, do not consider themselves part of the work force.

This is a staggering number.

Read more…

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Posted by Ben - August 24, 2015 at 12:42 pm

Categories: Markets   Tags: , , , ,

Buying Opportunity Ahead

stock market crash aheadThere is a saying on Wall Street, “Bulls make money, Bears make money, Pigs get slaughtered.” Right now, we are in ‘pigs get slaughtered’ territory. The only people buying now are Greater Fools blindly buying because prices have always gone up.

Housing markets, whether they be single family, multi-family, high end, low, end, Class A, Class C, have been distorted beyond all functional recognition, and are decoupling from the natural forces of supply and demand thanks to intervention of monetary stimulus by the Federal Reserve.

High end single family sales are growing, while mid to low end single family sales are cratering. Roughly 30% of US single family sales are cash sales, with increasingly foreign buyers now that the Chinese credit bubble is going ”pop”, and the Greek exit of the EU unfolds.

Multifamily, be they Class A, B, or C are at peak valuations thanks to land value adjusting to years of Fed driven monetary stimulus. In the case of Class C apartments, occupancy rates are at all time highs thanks to falling real incomes and increasingly fewer people able to afford a home.

After six years of Federal Reserve money printing, the result is a Frankensteinian economic monster, riddled with unintended consequences and serving no-one, except those at the very top.

To get an idea of how absurd things have become, have a look at the price chart for the Standard and Poors 500 Index, which serves as a rough barometer of US economic health. Read more…

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Posted by Ben - June 26, 2015 at 12:46 pm

Categories: Markets   Tags:

4 Ways To Wholesale An Apartment Building

wholesale transactionWholesaling an apartment building is usually only thought of in terms of an all cash transaction, where the seller agrees to a low price in order to get a cash sale and the end buyer comes in with cash plus bridge financing to fund the transaction.

This is indeed a tried and true model, but they are only available in any kind of abundance at a certain stage of the real estate market cycle. Once a market heats up, the deep discounts are harder to find.

If you broaden the transaction types you can do, you are able to wholesale more deals in a single market over a longer period of time.

Below are four transaction types that will expand your opportunities as an apartment wholesaler.

1. All Cash For Double Discount Price: This is the classic scenario for wholesaling an apartment building (or any other piece of commercial real estate). The property is usually distressed and attempts to market it have been unsuccessful. To price your offer as a wholesaler you first look at what would make sense for property as a value-add. You then discount price again to take into account what you need to make for an assignment fee. Persistent follow-up and negotiation by the wholesaler gets the deal under contract at a double discounted price, and the end buyer comes to closing with cash paying the single discounted price, cashing out the seller and paying the apartment wholesaler their assignment fee. As long as market conditions allow for extremely low prices, end buyers are able to easily mobilize capital for your asking price and deals go through easily. Read more…

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Posted by Ben - December 19, 2014 at 2:28 pm

Categories: Apartment Investing   Tags:

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