RECESSI ECESSION PR ON PROOF OOF REAL EAL EST ESTAT ATE J Sc - - PowerPoint PPT Presentation

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RECESSI ECESSION PR ON PROOF OOF REAL EAL EST ESTAT ATE J Sc - - PowerPoint PPT Presentation

Jan 12, 2023 156 likes •484 views

RECESSI ECESSION PR ON PROOF OOF REAL EAL EST ESTAT ATE J Sc J Scott ott Who Am I? Tech/Corporate/Business Background Entrepreneur, Investor, Advisor Started in Real Estate in 2008 Over $60M in Transactions Flipping / Rentals / Notes

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SLIDE 1

RECESSI ECESSION PR ON PROOF OOF REAL EAL EST ESTAT ATE J Sc J Scott

  • tt
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SLIDE 2

Who Am I?

Tech/Corporate/Business Background Entrepreneur, Investor, Advisor Started in Real Estate in 2008 Over $60M in Transactions Flipping / Rentals / Notes / Lending / Development / Multi-Family

123FLIP.COM JSCOTT.COM

INSTAGRAM: JSCOTT_123FLIP FACEBOOK: JSCOTTINVESTOR

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SLIDE 3

Disclaimers

1. 1. I can an’t t tel tell y you u when hen the n the nex ext recessi ssion w n will ll hit. 2.

  • 2. I can’

n’t tell yo ll you how b bad d the ne next xt recessi ssion w n will ll be. 3.

  • 3. Thi

his ti time mi me might b ht be d e differen erent (b (but probably ly no not). ).

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SLIDE 4

Agenda

1. 1. Why y is s this s topic important nt? 2.

  • 2. What is

s an n econo nomic cyc ycle le? 3.

  • 3. Where are w

Where are we e in the c the cycle? e? 4.

  • 4. What sh

should yo ld you be do doing ng no now?

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SLIDE 5

WHY I HY IS S UNDER UNDERST STANDI ANDING NG ECONOMI ECONOMIC CYCL C CYCLES ES IMPOR MPORTANT ANT?

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SLIDE 6

Why This Is Important

  • 2. Real

eal E Estate i tate is a a lag agging indicato ator 1. 1. The ec he economy my af affec ects ts real real es estate, tate, ev even en if real real es estate i tate isn’t d t dri riving the the econo nomy 3.

  • 3. Unde

nderst standi nding ng cyc ycle les s will ll allo llow us to maximize profi fits s and nd mini nimize head headac aches hes

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SLIDE 7

WHAT HAT IS AN S AN ECONOMI ECONOMIC CYCL C CYCLE

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SLIDE 8

What is an Economic Cycle?

EX EXPAN ANSION EX EXPAN ANSION CONTRA RACTI TION

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SLIDE 9

What is an Economic Cycle?

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SLIDE 10

What is an Economic Cycle?

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SLIDE 11

What is an Economic Cycle?

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SLIDE 12

WHER HERE AR E ARE W E WE E IN T N THE HE CYCL CYCLE? E?

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SLIDE 13

TIMING OBSERVATION ECONOMIC DATA

Where Are We In The Cycle?

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SLIDE 14

TIMING

Where Are We In The Cycle?

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SLIDE 15

Where Are We in the Cycle?

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SLIDE 16

Where Are We in the Cycle?

70 Years 11 Recessions

Aver Average C e Cycle le: ~ 6.5 Y Year ears

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SLIDE 17

Where Are We in the Cycle?

20 40 60 80 100 120 140 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Cycle Duration (Months)

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SLIDE 18

OBSERVATION

Where Are We In The Cycle?

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SLIDE 19

OBSERVATION

Where Are We In The Cycle?

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SLIDE 20

ECONOMIC DATA

Where Are We In The Cycle?

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SLIDE 21

Where Are We in the Cycle?

  • Yield C

Cur urve

  • Buffett I

t Indicato tor

  • Gross D

ss Domest stic P Produc uct

  • Busine

iness I Investm tment nt

  • Un

Unemp employment

  • Housing S

ng Starts ts

  • Forec

eclosure Ra Rate

  • Stock M

Market t

  • Consum

sumer S Sentiment

Econ conom

  • mic da

c data i ta is th the be best w t way to to for

  • recast a

t a dow downtu turn:

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SLIDE 22

Government bonds pay interest The longer the maturity, the higher the interest

THE HE YIELD LD CURV RVE

Where Are We in the Cycle?

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SLIDE 23

0% 1% 2% 3% 4% 5% 6% 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

Ja January 2004 004 THE HE YIELD LD CURV RVE

DEMAND RATES DEMAND RATES

Whe When Inves esto tors Get et Scared

Where Are We in the Cycle?

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SLIDE 24

0% 1% 2% 3% 4% 5% 6% 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

Ja January 2004 004

4 4.2 4.4 4.6 4.8 5 5.2 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

March ch 2 2006 06

THE HE YIELD LD CURV RVE

Where Are We in the Cycle?

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SLIDE 25

4.4 4.6 4.8 5 5.2 5.4 5.6 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

August ust 2006 THE HE YIELD LD CURV RVE

Where Are We in the Cycle?

Yie ield ld Cur urve ve Inversio sion

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SLIDE 26

Where Are We Headed?

0.8 1 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

Yield Curve - December 2017

1.8% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 3.2% 3.4% 3.6% 3.8% 3 Month 2 Year 5 Year 7 Year 10 Year 20 Year

Yield Curve - March 15, 2019

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SLIDE 27

Where Are We in the Cycle?

  • Yield C

Cur urve

  • Buffett I

t Indicato tor

  • Gross D

ss Domest stic P Produc uct

  • Busine

iness I Investm tment nt

  • Un

Unemp employment

  • Housing S

ng Starts ts

  • Forec

eclosure Ra Rate

  • Sto

tock Ma Market

  • Consum

sumer S Sentiment

Econ conom

  • mic da

c data i ta is th the be best w t way to to for

  • recast a

t a dow downtu turn:

  • Inverte

ted

  • 144

144%

  • .
  • Down

wn

  • 3.7

.7%

  • .
  • Sligh

ghtly ly U Up

  • Up

Up

  • Down

wn

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SLIDE 28

Where Are We in the Cycle?

We Are About Here

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SLIDE 29

Where Are We in the Cycle?

THE WILDCARDS:

INTEREST RATES PRINTING MONEY TRADE WAR

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SLIDE 30

HOW HOW DO W DO WE MAK E MAKE MONEY T MONEY TODAY? ODAY?

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SLIDE 31

What You Should Be Doing Today

BU BUY & HOL HOLD

  • Yes,

, buy uy-an and-hold ld still w ll works!

  • Ye

Yes, apartm tment nt investi ting ng (cas ash flow

  • w or
  • r val

alue add) still ll works!

  • Under

erwrit itin ing: B Be co e conser ervativ ive e on ren ents

  • Under

erwrit itin ing: B Be co e conser ervativ ive e on va vacan ancies

  • Asset

et T Types es: Focus cus on

  • n “B

“B Class” & ” & “C Cl Class” proper erties ies

  • Va

Value-Add A Apartmen ments: Under erwrit ite t e to longer er h hold per eriods

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SLIDE 32

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