Fiji Edition 2022 - View From The Fort

I hope you had a relaxing, unwinding Thanksgiving holiday. Besides hanging out, eating, drinking, and watching football (or the World Cup), it is a time to reflect and be grateful. I enjoy real estate, but I appreciate more what real estate affords me. I often talk about time freedom and the ability to travel during a shoulder season that comes with that. Traveling away from the herd creates a more tranquil experience.?

This past October was a significant birthday for my wife. She wanted to travel somewhere exotic and tropical. Something more unique to Americans than Hawaii. We developed a short list, and we settled on Fiji. I had to be transparent with her. She had to be completely aware that Fiji is one of the most incredible surf destinations in the world, so we weren’t going to be lying around a pool sipping Mai Tais. She was on board, and it paid off for both of us.

No trip to the third world would be complete without some adversity. In this case, the domestic airline told me my surfboards would not be joining us until later. When you have only a few weeks of surfing, time is money. How long would I be without my surfboards? Would I ever see my surfboards again? I said, look lady my boards have to make this flight, even if you have to remove the women and children. I had already prepaid for the oversized baggage charge, but my pleas went on deaf ears. My boards arrived a day and a half later.

They tried to pull the same stunt on the way back while on our way to another surf destination. I went out on the tarmac to ensure my boards got on. I agreed to let them remove one of my boards to "make" it fit. My newish board probably suffered a?few pressure dings because of it.

While Fiji is home to "Cloud Break" and numerous other legendary surf breaks in the west, we decided to go off the beaten path and fly east. The east is home to breaks on par with the west, but most don’t want to buck up for the additional domestic flight required. We surfed nine days over two different areas, with a travel day, bad weather day, and rest day mixed in. We never saw another boat or surfer the entire time. Sitting out in the break and looking back on the landscapes, you only saw a few structures. It was as remote as one could hope. I didn’t realize that this still existed.

I want to tell you that I am Kelly Slater-like; I am not. I learned later in life, and I am no spring chicken - I know my limitations. Your heart starts pumping when you hear the heavy break cracking against the coral reef as it barrels its way toward you. Even if you make the take-off (steep and fast at most spots), you need the speed to make the section out in front of you, and if you don’t, you risk getting pounded against the sharp coral beneath. I came home with a few "souvenirs."?

The swell did subside on several days, and these were more playful sessions with less adrenalin pumping through your veins. We were up at first light daily and in the boats by 5:30 AM to take advantage of our days.

The incredible staff would whip you up a coffee on the ride back, and we’d talk about our sessions and soak in the fantastic scenery. We’d be back at our remote resort having a full breakfast by 9 AM with a full day ahead to snorkel, kayak, inner-tube down a river, travel down a natural water slide under a waterfall, or just kick back.

I can’t say enough positive things about Fiji. The people are warm and welcoming, and the beauty is unparalleled.

I love the real estate game, but I appreciate what it affords me the most.

On to other news...

A LOT OF MOVEMENT ON PRICING FROM GETTING IT UNDER CONTRACT TO CLOSE

I can't reveal much about our latest deal as it is a 506b offering that cannot be advertised. Still, I would like to share a few items that might be useful to the reader. As has been a common theme this year, the deal improved from the time it went under contract until close.

Three factors contributed to?increasing our average cash flow from 6.1% to 7.6%.

(1)?Our final insurance premium increased by $200/dr.?(2)?While this doesn't sound positive, it allowed us to renegotiate our price to $59.5M, resulting in a $2.7M additional discount (the original asking price was $72M).

(3)?We also implemented a process known as bifurcation, which allows us to split the transaction into a real estate sale and an intangible business asset sale. The benefits of this are that our property taxes will be based only on the real estate portion of the sale. This lowers our annual tax bill, increases our NOI and increases our cash flow to investors.

SPECIAL REPORT

White House aims for greater housing affordability.?Incentivizing the construction of lower-income housing in various forms is the primary goal of the Housing Supply Action Plan, updated this October. In particular, a proposed income averaging provision for the Low-Income Housing Tax Credit would make development more feasible in sparsely-populated areas, by no longer requiring all tenants to meet the same income threshold.?

This change joins a series of other alterations and additions, designed to ease the regulatory and financial hurdles of building income-restricted dwellings. Addressing housing affordability is becoming a priority for the Biden administration, after steep home price run-ups directed excess demand to apartments and drove up rental costs.

FROM THE BLOG

Try your best not to be a victim of clickbait. Whatever web news source you use is no doubt packed with ominous headlines. For the sake of this article, I clicked over to Google in real-time. These are the first few real estate-related articles I found:?

New Data Suggests 'Serious" Market Correction?

Challenging Real Estate Market Forced Layoffs of 18%?

Major Commercial Real Estate Firm Looks to Cut Costs as Capital Markets Slow?

Scary words – all of them, but one thing they don't consider is time.?

Time is Money

How long does a typical recession last? You'll find that over the last 70 years, recessions have lasted anywhere from 2 to 18 months for an average of only ten months. To make you feel even a bit better is that recessions intentionally induced by the FED – which this next potential one will be – are the shortest. We might be looking only at a few quarters. Does the pain of a recession only last during the cycle - no, the residual effects drag out beyond its life, which may be impactful if you are holding a stock. However, it is a different story if you have real Estate, as long as you follow the non-negotiable rules. The asset?produces cash flow. You bought it with the proper debt structure that allows you to continue to hold, whether fixed or floating. You went into the deal with plenty of capital reserves and contingencies.

Thank you for making it this far. If you have interest in any current or future opportunities set up a time to talk using the calendar link below:

Enjoy cash flow, appreciation, and tax write-offs without the hassles of being a landlord.

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