All Forum Posts by: Paul Azad

Here’s the Shocking Truth About the DOGE Dividend

A Mr. Gammon gives a good whiteboard YouTube breakdown of what I posted a few days ago, that any $5000 dividend rebate would be better spent in decreasing our yearly deficit or national debt than given back to the taxpayers or average Americans. I would love to get back some of the vast amount of money I've paid to the IRS over the years as well, but with how precarious our financial situation is, being on the brink of a debt spiral that could trigger another depression and at the least far higher interest rates and cripple CRE. I think it's best to find every dollar we can of waste and fraud and pay down our debt as much as possible because our grandchildren will have to deal with it if we don't.

SUPPLY 

"About 2.6 million Baby Boomers die each year, but that number is expected to increase to nearly 4 million by 2037." And a total of about 3.3 million Americans in total die each year. Likely most are over 40 and more likely to be homeowners than younger people percentage wise. Boomers are largest demographic co-hort in US history. Also a buddy of mine lives in a mythical city called Austin, where he swears while sober, said he saw guys 3-D printing houses, well foundation/walls etc. I have not looked into this but, if process ramps up, could cut construction costs, time to market and massively increase supply, too. 

DEMAND

America is decreasing it's previously Laissez-faire approach to immigration.  

So population decline either with Celestial deportation or with a more southerly route may not be good long term for housing market?

I thought it was an "Onion" headline, but it turns out that our Cheeto-in-Chief wants to send $5000 dollar Stimi-checks again, ie direct M2 inflation like he did in 2020, this time to every American "household", about 130 million of those. But now under the guise of "returning the waste and fraud to the American people." This would be about 650 Billion dollars one time so far.

This could certainly potentially worsen inflation again, remember he caused the recent 2021-22 inflation by printing 3.4 Trillion no one needed, followed by grandpa Biden adding his own 2.3 Trillion or so, though he may not remember doing it. If we get a second inflation bump now with a weakening Europe and Asia, he may just bring on the next recession, and that won't be good for CRE at all.

Last week's CPI print was awesome. It showed a headline core CPI of just 3.3%, but as we all know it's housing component is 36% of the number and it uses an antiquated sampling system of owner equivalent rents O.E.R., that is 1 year old data and bad data due to methodology. If you instead put in actual current Rent data, which is much lower, the core CPI is currently 2%, which is the putative FED ie New Zealand target. As future monthly CPI reports print, wall-street and the US treasury market will then trade on this, thus continuing the fall of the 10 year yield, likely to upper to mid 3s, lowering mortgage rates/cap rates. Now the guy who "knows the best words and went to the best schools" is threatening all the pain that we have endured from the FEDs Rate-pocalypse in 2022.

I'm still hoping mainstream media picked up the story from the "Onion" and it's not true. Didn't he and Herr Musk tell us we needed to decrease the debt and deficit? Maybe use that 650 Billion to pay down our credit card balance which is rising at 1 Trillion every 95 days and perhaps then the Bond market would take our own country seriously. 

Maybe Trump and Biden and their rich friends actually want to subject our middle class to a permanent state of Penury, by engineering inflation at every chance?

As a first time investor in syndications, very sorry to hear about this situation with Ashcroft. Obviously many young and inexperienced or too aggressive syndicators got caught up in a very hot multi-family market a few years ago fueled by historically low mortgage rates allowing for extremely low market cap rates where everyone was committing the cardinal sin of investing, which is "paying too much", but they were continuously bailed out by a greater fool every 18 to 24 months. It was the CRE equivalent of 1999 and multifamily was the JDS Uniphase and pets.com. Unfortunately, now they are likely underwater 30 or 40% due to the return of interest rates to a more normalized level but I fear still historically lower than where they will be in the next two to 5 years. With massive inventory which came online last year and this year as an echo from those boom years and more likely rising interest rates it may be best for you to stay out of multifamily syndication for another one to two years when the ground should improve, as now permits to start to do multifamily are near all-time lows which should create a lack of supply two to three years from now. Thus, forcing up rents and net operating incomes and even with rising cap rates the space should become profitable again. Also, you should be able to buy multifamily units at possibly much lower prices one to two years from now as it takes time for any "market to clear", meaning sellers have to come to terms with a permanence of their loss or the banks get scared and call in the loans. Don't be afraid of investing in syndications in the future, they can be extremely lucrative. Spend this time learning more and studying the different CRE sectors. Consider reading the book "Investing in real estate private equity" by Sean Cook. As well as "The Hands off investor" by Brian Burke. Invest the minimal amount into multiple syndications in different geographies once you feel educated on a particular sector, to both diversify risk but to also study different syndicators on how they acquire/manage/dispose of properties, then back the best jockeys over time as you learn more. good luck :)

 Hi Teresa, tariffs will certainly impact the US as well as our trading partners. But as we are a massive net importer the tariffs, we put into place will affect our trading partners far more negatively than they will affect us if they remain small and targeted tariffs. 

For example, take our annoyingly polite, plaid wearing, maple syrup drinking cousins to the North, Canada exports nearly 20% of its total yearly exports to us. However, we export only 1% of our exports to Canada, so any reciprocal tariffs placed by Canada will assuredly have an impact but a proportionately muted one. I have cousins in B.C. "British Canada" they hate when I say that and not British Columbia. Their economy is actually today in a more fragile position currently than ours, partly due to relative Dollar strength. The US Dollar is very strong around the world and in Canada is at a 14 year high, so their dollar is at a 14 year relative low which further exacerbates the pain of Tariffs on Canadian goods. (great time to vacation in Canada though) Now, President Trump aka. Cheeto Jesus, "just kiddin" can safely bully them a bit over the next few years as he can with most other countries, too, due to this similar dilemma with nearly all trading partners. 

The other thing, and far more important thing, is not what can we get away with at present due to our relative economic strength and strong Dollar, but what should we be doing with one of our oldest and dearest Allies who has fought and bled with us for 2 centuries. President Trump complains ceaselessly but also quite Accurately about how NATO and all our allies like Canada have been getting a "free ride" and not paying "their fair share" of Defense costs and foreign aid etc.  To a large extent this may be true, but we have to look at what the World Order we crafted with all our allies after WW2 has given not just to them but to us as well. As America (one nation under Canada, invisible with Justice and Malls) we represent only 4% of the global population, but we produce 26% of global GDP or economic output, and of all global financial transactions 87% are done in US Dollars. English has become the "Lingua Franca" of this century. Yes, we pay to have the strongest Navy ever to patrol the oceans and the shipping lanes, Yes, we pay to have the best Army/Air Force/Marines to prevent aggressors from even contemplating invading their neighbors and disrupting regional and world trade. Yes, we disproportionately fund the United Nations where our world class diplomats prevent a hundred little disruptions we seldom hear about to the global machine we have so carefully crafted. But so far, it's been working pretty well for all of our benefit. Escalating tariffs which could possibly turn into a trade war could severely weaken global trade, and consequently our GDP as well, and also hurt our Allies from Europe to Japan which could unravel what it took 80 years to assiduously build. I think we should continue to lead, out-front as a monopolar Hedgemon. When asked what are we, Thomas Jefferson said, " An Empire of Liberty." He wasn't ashamed of an imperial America if for the right reason. (Then again he did double the country at 5 cents an acre and tried to populate it with Sally Hemmings help)

As our Chinese friends say, "May you live in interesting times." we should charge 'em 10% for that too. :)

 Agree with all of your points short term, next 6-12 months, but not longer term. Trump will do what he did his first term, which is to pressure Jerome Powell to increase quantitative Easing and to lower the Overnight lending rate, and he will massively increase the money printing and treasury issuance as he did before. (Hopefully, he won't send people 3.4 Trillion again directly with his name on the treasury checks :) With the deficit running at >7% to GDP, a height usually only seen during wartime, further money printing and tax cuts, as he did before, will worsen this deficit, then total debt, and this more massive US treasury issuance (more supply) will cause long term Rates to continue the climb they started 5 years ago when 10 yr yield at 0.31% intraday in 3/2020.  This is basically the same set-up we had in 1945, coming out of WWII with massive debt/deficit. This caused a 36 year "Inflationary Deleveraging" , and yields gradually rose to US 10yr @15%, mortgage rates @19%. The current situation is similar with no out, except radical cost cutting, however if you back out the 2 trillion a year deficit then over last 2 years our GDP has actually been negative 1.6% or we would have been in recession. So that's politically not an option ie to cause a necessary recession and unemployment.

So, I suspect Trump will Trump and we will see gradual rise in all long yields from current levels to 14-16% over next 30-40 years. Real Estate Cap Rates will of course follow. Prolonged "Stagflation" will cause rise in rents, but with much higher vacancies and rising interest rates and falling property values, like the 1960s1970s into early 1980s.  A very bad portent of this is the 40% rise in GOLD the last 12 months on top of strong run in 2023, this is how things started in past cycle as well, with stocks flat for 20 years and volatile commodities. 

Tariffs won't have much initial impact as 83% of US economy is Services and unimpacted, and of the goods part of economy, we Import far more than we Export so tariffs on either side will hurt foreigners far more than USA, but trade war will degrade GDP, so 10yr yield will fall more from that lower expected GDP than from mild inflation causing it to rise, but this is all irrelevant short term "re-arranging deck chairs on the Titanic", so to speak

Highly selective Real Estate picking/management or very selective Value based stock picking or precious metals will be the probable course to Navigate the next 30+ years. 

Unmasking the Real Estate Wealth Myth | Nasdaq

a short article from Nasdaq debunking this social media myth, at least in the US. However, there's an obvious loophole to the claim because if you buy a house for 999K and then the value goes over 1 million then technically you're one of the 90% that just became a millionaire through real estate :)

REIT investing is a much less active way of investing into the 11 major real estate sub-sectors, in the US we have 274 listed REITs on the major exchanges of NYSE and NASDAQ, and about 75-80 of them are not equity REITs but rather mortgage REITs, which I like to park cash in when 10yr yields are trending down to give me capital appreciation plus 14-15% dividend yields. check out

alreits | Global REIT Research

to do more thorough individual research. Historically REITs in US have outperformed the sp500 for last 50/40/30 years by 3-4% a year, but they have underperformed sp500 in the last 20 years due to Quantitative Easing induced liquidity stock inflation. This means it's likely a good time historically to buy REITs as they are relatively cheap. 

VNQ or IRET are passive and actively managed ETFs in US that hold hundreds of REITs if you don't want to choose individual ones.   

private real estate syndications are another option to passive RE investing, but IMO require a lot more research before buying than REITs where you have a professional team managing under SEC regulations, with public accounting and filings. REITs can also get capital cheaper than you/me/syndications. In fact, most just print new shares to get billions to invest when stock price is high and buy the shares back when price is low. I wish I could do that. :)     good luck :)

Hi Brian, are you concerned about the new deportation policies by the new administration? Here in Texas, thousands of people have been deported in the last 2 weeks and many who have not committed any crimes per our local news agencies. President Trump said during campaign to plan on 14 million to be deported out of 32-35 million illegal immigrants in US out of 335 mil population base. This would amount to about 4-5% of US residents and of a demographic which disproportionately rents multi-family and also SFRs not owns. This could depress rental rates which have fallen y/y by 9% in Austin and other formerly Hot Cities already. Combined with increasing supply, what could this reasonably do to MF market and syndications near term, ie next 1-2 years?  thankyou

separate question on Tariffs possibly causing trade war and inflation and higher 10yr yield and cap rates?

     I think the 1% rules best value may be to protect less experienced investors from overpaying for a rental Income producing property. As we all know, the only Cardinal Sin of investing in any asset class is "overpaying".

There are often long stretches of flat SFR markets in US. like '79-'83, '89-'94, or even down markets like '06-'13 where single family home values dropped 36% on average across country, so 1% rule may help keep some investors out of trouble by at least having some cash flow to safely carry the mortgage during those times.

Perhaps the SFR market is overvalued now and 1% rule is just a simple valuation tool like a P/E multiple in equities telling people to stay clear.

      My parents bought many SFRs in 70s and 80s and with mortgage rates at 18-19% but always made money as rents greatly exceeded mortgage payments, because home prices matched incomes for 200 years prior to 1994, then FED started money printing x 30 years until now. (systolic pressure rising so won't get into that)

And many less experienced individual investors in SFRs don't do as well as others and "well" means what could you have done otherwise. Chart below shows last 45 years, about 14% in sp500 and 8.7% in rental income producing real estate, nominal not real.

so maybe if the 1% rule is telling you that single family rentals are too expensive? Then perhaps you could invest in something else until the single-family rental market is back to an affordable range, and in the meantime, you could also make a lot more money.

Quote from @Greg Scott:

Quote from @Henry Clark:

Quote from @Greg Scott:

I have invested in over 50 syndications, of which about 45 are still active.  I have also done four syndications myself.  Of course, on the syndications we put together, we get some compensation for our efforts, so I'll ignore those when discussing my returns below.

Of the 11 deals we've had that have gone full cycle, we are averaging about a 40% annualized rate of return.  Of those 11, only one had net loss, and clearly the others did very well with outsized returns.

Of the 45 that are still active, the returns have been a little softer the past two years, and we had two small capital calls.  On the other hand, we also had three provide cash-out refinances.  My quarterly cash distributions hit bottom about a year ago and have been on the rise since then.  About 1/3 are still not providing distributions but their cash position is strong and I'm not concerned about them potentially selling at a loss.  Six of them just launched this year, so I wasn't expecting distributions anyways.

These syndications have change life.  I am truly blessed.

However, you should know that these syndications are not available to everyone.  I am a member of a private group that puts these syndications together ONLY with members of the group.  They have rules and best practices about how we put these deals together which has collectively saved us from much of the pain being experienced right now in the multifamily space.

 Thanks for insight.  When you say 40% annualized is that per year or over the entire life cycle.  Example if 3 years then say 13% return each year?  Or 40% each year for 3 years?  

Great job on the due diligence or Operational process you have going.  

This image summarizes my syndication returns on deals that have gone full cycle.  I haven't added the 11th, the one that lost about 60% of value.  They haven't fully closed out the deal yet, so I don't know exactly where it will end up.

 Congratulations Greg, Those are amazing returns from. 2014 to 2023 over a 10 year span to average 40 per cent is phenomenal. What are some of the guidelines you and your group have used to keep you out of trouble? And get those incredibly good returns? Were all these deals multifamily value add or any core deals? Thank you.