All Forum Posts by: Nicholas Varner

@Bob Pattersonly I enjoyed your response. You bring up some good points about market players and data applications. Industry players are extremely vulnerable with high P/E ratios and growth projections that are optimistic. The industry is still a fledging industry. All you have to do is look at a stock chart of Tableau and that tells you the story. My winners in this space for the future are Microsoft, Amazon, SalesForce, and Google. Facebook could do some interesting things as well. I am not a big fan of Oracle shops. 

Returning to RE applications. I just read an article the other day that described what the biggest indicator of price appreciation is in real estate. Out of the 5 variables tested, they determined that shadow inventory is the greatest single indicator of whether a market's prices will appreciate or depreciate. To me, how they came to that conclusion and whether or not it can be tested and proven are the types of ways that big data could have applications in real estate. However, whether or not spending the time to acquire, store, structure, and analyze massive amounts of data to determine actionable insights....the jury is still out on that one to me. 

Hi @Tarun Bhalla it's still available. Send me an email [email protected] and I will send you the pro forma. 

I still have 5 of the 6. I have a realtor helping me out with the sales. Let me know if you are interested in more details. 

New Listing 2808-12 Snow Road Parma. New side by side duplex in Parma, Ohio (B area), 3bed/1bath in both. Rent is currently 750/unit, should be 850/unit. List price $134,900, Cap rate 8% Cash on Cash 10%. 

The TED Spread measures credit risk to the general economy. TED is an acronym that stands for T-Bills and Euro-Dollar. The TED Spread is calculated by a simple formula:

TED Spread = 3-month Libor Rate - 3-month T-Bill Interest Rate.

Some very basic principles are as follows:

• 3-month LIBOR rate measures the rate at which banks will lend each other money. This week it's .62%, but a year ago it was .26%
• 3-month T-Bill Interest Rate currently sits at .26%, but last year was at .03%. This really measures how much confidence investors have in the economy as a whole as T-Bills are backed by U.S. Treasury.
• TED Spreads in a healthy market are going to be 30-50 basis points. In the 2008, they went up past 400 basis points.

Here is a chart that describes the last 10 years of TED Spreads courtesy of the St. Louis Federal Reserve.

Much like the VIX, it measures short term temperament in the market and shows the credit risk premium for inter-bank lending by describing the willingness of lenders to deploy credit to other banks. The higher it goes, the less that banks are going to feel comfortable lending to one another. We've gone through several years where both variables (T-Bills and LIBOR) have been artificially driven lower by never before seen Quantitative Easing and bank-friendly Federal Reserve policy.

So why does any of this matter to the market or to Real Estate Investors?

As a variable, the TED Spread has a correlation to Home Price Appreciation. When Home Price Appreciation goes down, TED Spreads go up. Historically, TED Spreads lag by two quarters HPA. With high TED Spreads, rent prices will drop as well home prices. TED spreads are not the "be all, end all" in Real Estate investing, however, it's another variable that we as investors would do well to monitor in the background for any unforeseen movements. 

Thanks @Account Closed

@Account Closed I think apartment complexes will continue to grow in value here. It's a great way for investors to play defense. The returns aren't going to cash flow as high as duplexes, however, there are a few reasons I believe they will hold their value nicely and even go up in value. 

• A lot of folks out there on disability, unemployment, low paying jobs, living at home with their parents, and so on, they all need to live somewhere and it's not going to be a Single Family House. 
• Real Estate Investing is maturing in ways we have not seen before in the past. Buyers are more willing to invest in areas not remotely close to where they live. In fact, I have clients who have specifically ask me, "I want to invest in Cleveland, I just don't want to ever have to go there." 
• Service Providers have increased. Twenty years ago there were not as many service providers or the sophistication associated with being able to scale property management, development, and sales. Tools have evolved and the business is reaching a more mature place in its development. 

Buying apartment buildings is a great way to play defense and are great long-term plays. As far as, population decreases and vacancy rates here in Cleveland. When you live here, it sure does not feel like everyone is leaving. It actually feels like folks are moving here. I've noticed folks moving to Cleveland from Puerto Rico, New York, and Chicago. A nice combination of lower property prices and job creation here is driving the influx. For white collar workers, Cleveland Clinic brings in medical students, doctors, and administrators. 

As far as vacancy rate is concerned, there are two factors to consider. Functional vs. non-functional housing. If you take a building without heat and electric and you count that as part of the vacancy rate, thats technically true. However, if you have a building that is functional and it's still not renting that is far more disconcerting. We don't see that here. If the building is livable, we can rent it. 

Thanks a lot @Tyisha G.! My 2016 goal is to post one article a week at least. Hope you are able to read some future articles. Best of luck out on The Island!

@Ryan Schechtman  my personal feeling is that banks, financial advisors, and hedge funds are egregious offenders of their fiduciary responsibilities. It's never an "everyone" or "all" is guilty of these charges, but the industry makes it extremely difficult to trust them when they make jokes like the joke that goes more/less like "take a look at all our yachts in the harbor and then someone asks where are the clients' yachts (ensue uncontrollable laughter)". The industry really could use a little more appreciation towards clients that have stuck with them through all the bailouts and bs that they put the country through. I have a very minority position that we should have allowed the banks that made careless bets fail and other companies that were irresponsible to fail. It would have been much worse in the short term, but we could have used the crisis for some good by showing banks to take care of their own risk-managemnent, and cleaning out the bad assets through bankruptcy and starting over. I fear that with the federal reserve's interest rate policy, Quantitive easing, and bailouts that we've really backed ourselves into a corner and we're set up for a much bigger crisis. I hope I am very wrong on that belief. Debt is really strangling our federal budget, some states, and some municipalities. I thoroughly enjoyed the film, Christian Bale and Steve Carrell stole the show! 

Thanks @Ryan Schechtman! Did you see the movie "The Big Short"?