Thirty percent, maybe even more forty percent of all homes might be owned by
hedge funds, a large hedge funds. So the American dream is definitely getting
tougher to do, especially in this climate with increased interest rates. We're predominant
a multi family space and we are pretty bullish there. There has its own
set of issues, of course, with all the debt out there rising pretty
hard and the floating rates coming do with that, So we really do see
opportunities to be purchasers in that space as well. As you are listening to
Carrie Let's's Financial Survival Network, where you get valuable information you just can't find
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newsletter and gift. Financial Survival Network now more than ever, And welcome you
are in listening to watching the Financial Survival Network. I'm your host, Carrie
Luntz. Hey. Real estate, real estate, real estate. You know,
in tough times, you know, if you invest smartly in real estate,
especially after it's come down a little bit, that could be the key
to generational wealth. Some of my best deals I've ever made in my life
have been a real estate because when you do it right, you'll get a
windfall. But the key is you got to do it right. And with
us now is Craig Sicilio, founder of Diversity Fund, a fund out of
Chicago. A. You've been a guest on the show before, Craig.
We're really happy to have you back. Yeah, thanks, Kerry, thanks
for having me on the show today. So you believe that the American dreams
should be available to everyone regardless, and I totally agree with you. And
that doesn't always seem to be the case today, does it now? Especially
today today, we're any definitely a different time period. The markets have been
frothy for so long or at least a whole decade in rendering a downturn here,
and those downturns really present a lot of opportunity for people. I know
there's a lot of fear out there. However, this is where the transparence
of wealth happens. This is when those distressed assets are on the market,
and this is where the institutions go in and really buy from each other.
At the end of the day, we make that well, yeah, that's
it, and Hey, the smart buyers know when to buy. But look
like we do have sectors of real estate that are once upon a time where
thought to be storybook trophy properties that are now in the dumps and nobody can
quite figure out what to do with them. I'm talking about office buildings because
the entire way that we live, work and shop and it's all changing,
right, So yeah, so opportunity is it residential? Is there opportunity in
those commercial properties that are no longer going to be in use they can be
repurposed and perhaps turn to residential or something else. So what's your thoughts?
Well, see, I think each market's gonna be a little different and the
influence is gonna be a lot on. I hate to say bring politics in
this, but there's a lot of policies that got place. Do you look
in at cities like San Francisco and New York and what's going on there?
Even la those are larger problems and just real estate problems. At the end
of the day, we had the whole pandemic to work from home culture.
A lot of things have changed, but at the end of the day,
I do see a little bit of a thirst for people to work with each
other to come back the office. I am seeing that, I'm seeing some
leading indicators out there, so I would I'm a little bit kind of I
would say bullish on this. If I come across some good office space,
I'd like to put a good offer out there and kind of see where the
tides come in. As far as rezoning, I'm not sure if you've ever
done anything in New York City or some of these news cities that just doesn't
really happen. You could say that, and you know this person or that
person, but I don't see that being a solution on at least a holistic
level. Well, interesting thing is those old buildings in New York. I'm
talking the ones that were built in the late teens, nineteen teens, twenties,
thirties, and forties. Those buildings were much more repurposable, if that's
a word. Then the newer buildings from the seventies, sixties, seventies and
on, because there were smaller buildings due to the building technology of the distance
that they'd go from the elevator core was perfect for renovating, rehabbing, converting
into residential. The newer buildings, you know, you have one hundred thousand
foot floors with no anything, you know, just open space, and they
really don't lend themselves to that repurposing. You got any ideas what to do
with these newer high rise skyscrapers that are no longer going to be occupied for
commercial uses. Yeah, I'm not even touched that. I'm more not so
much of the office space myself that that is something that Yeah, I just
at the end of the day, there's a lot of smart people out there.
I have firm beliefs that someone's going to figure something out to make a
buck off of that with dis kind of ads that someone's going to buy them,
take a gamble on it, and usually figure something out. That's kind
of been History has proven that that people have been resourceful and know how to
reposition assets, especially in the commercial space. So I'm pretty again, pretty
bullish that things will will turn around when I'm not sure, but I'm pretty
sure it will happen at some time. Yeah, it's just it's kind of
the sixty four trillion dollar question, you know, getting back to what you
do, And I'm only pumping you for information because you're an expert in this,
an expert in residential real estate. How do we make it work for
everybody going ahead? How does everybody get to realize the American dream? It's
right now, it's tough. I recently read some on an article about thirty
percent, maybe even more forty percent of homes might be owned by hedge funds,
a large hedge funds. So the American dream is definitely getting tougher to
do, especially in this climate with increased interest rates. We're predominant a multi
family space and we are pretty bullish there. There has its own set of
issues, of course, with all the debt out there rising pretty hard and
the floating rates coming to do with that. So we really do see opportunities
to be purchasers in that space as well as but I haven't really seen residential
single family come down as much as I thought it would be. I think
sellers have just had great rates and so they're not incentivized to sell their homes
for discounts, and buyers, unfortunately, with these higher interest rates, they
need to have those prices a little bit lower to purchase to keep that payment
the same. But there hasn't been since the last downturn that was a tough
one to survive when all those loans can do to those teaser rates, those
ninja loan products out there. We don't have that this time around, so
it's a little different. A lot of people on the sidelines would limited supply.
Hey, and let's not forget that the three percent mortgage has become an
asset, whereas before it was just a liability. But when you have an
undermarket interest rate, then it becomes an asset effectively, and it kind of
traps you because, hey, unless you could buy your place that you're looking
to move into for cash, it's going to cost you more than double what
you're paying now. Assuming if you downsize, you wind up downsizing and paying
the same price, the same monthly payment for a place half the size.
So this has led to a really schizophrenic market, hasn't it. Yeah,
it has, and you're not The bank is not incentivized to allow that loan
to be assumable because they're only making three percent on their money too at the
end of the day. So the whole thing is kind of a conundrum.
At the other day, and looking back at a lot of this came from
trying to solve the issues from the pandemic and how much money did we pump
into the market from the pandemic. It was trillions and twenty trillion dollars into
the market. So this is new territory for us that has never happened before.
And that much money pumped into the market due to the due to something
such as the pandemic. And unfortunately they didn't think things through. Yeah,
well they never do. I mean, we're dealing with let's face it,
we're dealing with government here. What was the last time they ever thought anything
through, right, I mean, let's face it, it's government. They
have their whole separate agenda in place, and their you know, priorities,
everything else, all right. So looking ahead for real estate and then you
do this for a living, we see more appreciation. What do you see
happening here? Oh? I see, I see a slow down across the
board. I'll stay the area we specialize is multifamily. We're seeing a lot
of smaller developers and players having capitol calls loans coming to high loan of value
loans in a lot of trouble right now with that. So I think from
the other perspective is if you're a buyer, I think there will be some
good opportunities for you. Since we've talked about the lack of supply in the
local residential area. Multi family would looks like a strong asset class because people
need a place to live and they're in a rent I don't see think you
can see those rents go up as much as they did. They went up
astronomically the rental price. Maybe you see a little flattening there, but I
don't see that depressing too much. And then again, with that being said,
I think you have to look at each local area across the country to
see those particular markets and how they have changed because there's been a mass migration
through the pandemic and now with a couple of these things we've talked about earlier,
Hey, are we going to bring people back the office? Are people
forced to move out of some of these markets kind of looking at those trends
at the end of the day, or are they stuck in those areas and
they're going to stay there? So what does that all look like? A
lot of moving parts here? That's the truth, you know, that's the
truth. And obviously there are businesses that require the presence of their employees.
On the other hand, the flip side of that is, if you're a
single parent or even two working parents, and you're able to do a hybrid
thing where you can work at home for part of the time and go to
the office for part of the time. This is like the greatest thing that
ever happened to your family. Think about it, you know. So,
while it's definitely killed the commercial real estate market, it's really a great thing,
right, Yeah. I mean if you look at some of the stats
out there, the data says that we have the highest care, highest cost
of daycare in the world, the US. Yeah. No, how do
you have a mom, maybe a single mother, how does she get in
the office? Because of that? That just a numbers just don't work.
So that's where it comes into handy. The work from home culture does do
that. And so the greater issue there is that the cost of daycare at
the end of the day. So there's got to be some kind of balancing
out here. If you want people back in the office and there's a percentage
of workforce that economic economically cannot get back to the office, there has to
be some flexibility there. Yeah, exactly, And so all right, so
residential peaking, but you're still going to get returns. Assume that inflation is
going to continue onward. Then even if you keep up with the rate of
inflation, you're still doing pretty well, aren't you. If you're buying stuff
today and you factor in the cost of the debt and inflation, so in
the future, three, four or five years out, that balance the self
out. You you look at what you bought, you bought a pretty good
deal. So for instance, I'm looking at something I'm buying at a seven
percent interest rate, and let's just say rates in three or four years come
down to just five percent. Yeah, you're going to make some You're going
to you'll make some good money on the asset you bought, as long as
you adjust it with the new the new rate to stay's environment. Sure,
So so oh really, really it looks pretty good for the future. Or
it's certainly better than other autset classes. Right, yeah, And I'm gonna
circle list back. Who really has the funds to hold things long term?
So if you look at how many people have that most people struggle economically at
the end of the day in this country, and the top one percent they're
the ones that, hey, you know, they love this time period because
they could hold, they could buy and hold. They don't have to worry
about their day to day bills. So that's what they do. They go
in, they buy things discounted, they hold on it, and then the
market's good, they sell. So they're not really worried about their day to
day activities, how they're going to pay the rent or the mortgage or daycare
and those things. They're professional investors. They are very rational and they're very
patient at the end of the day. And it's tough. It's tough for
everyone else to have that same mindset. Yeah, yeah, it really is.
But you need to somehow get that mindset right if you want to ahead,
you got to get out of the struggle mindset and into the opportunity mindset,
if you will. Right, it's tough. Yeah, you should be
thinking that way. That's some of the stuff. And I'll go talk about
the financial education that's not really taught in schools or anything, and how do
you learn about how do mess and all that? Could you describe financial education
because there wasn't taught in any school I ever went to. Yeah, I
don't. I don't know. I'm just trying to think if I ever had
that did a lot of schooling saying that No, no, I can't think
of a class that was said in high school college afterwards, I just yeah,
I'm just not really. Yeah, I got fortunate to have some mentors
at an early age to teach me this stuff. But yeah, I don't
remember anything. I couldn't agree with you more. And you know, it's
something that's really in short supply, and you don't know you don't have it
until you find out that you really need it, and then you don't have
it. Right, it's too late usually most of that time. Yeah,
but but there's always hope and look, you can get it, and certainly
on the internet, it's never been easier to obtain that vitally needed financial education
than now. Right, Yeah, I mean in some cases today, definitely.
I don't want to say it's too late for people. There's always an
opportunity to learn. I think there's opportunities today for people to take advantage of.
I really do think the way the economy is with a lot of people
could be creative with their jobs. A lot of people have a side hustles
nowadays. This wasn't here in the past. There's a lot of opportunity for
people to look beyond their W two job and to make some income from themselves,
but really to study how to make long term wealth is very important.
There's still not a lot of education out there about it. There's a lot
of disinformation. I can't understand that disinformation. But we all know when the
algorithms drive the traffic and drive the articles that you read all day long,
every day you're reading right now, where there's a lot going on the news
politically, geopolitically is going on. There's a couple of wars going on at
the end of the day, so there's a lot out there that's being pushed.
But I do hear a lot more about Travis Kelsey and Taylor Swift than
I do about the war in Ukraine, though that find that fast. So
to keep our priorities straight here, what's more important than Taylor Swift? I
don't know the other guys. So Travis I've heard something about on my kids
mention it whatever. Yeah, but yeah, like you could be doing something
useful instead of the stargazing or actually know a couple of other choice words for
it, but we'll just call it stargazing, all right. So, Greig,
people want to find you, want to get in touch with you.
Where do you go to find Craig. Yeah, great, easy pers my
company Diversity Fund dot com or we're active or active platform that's opened up for
micro investors as low as five hundred dollars take advantage of these distress assets in
this downturn. Check me out my social profiles LinkedIn Twitter, Instagram, Craig
Cicilio very easy to find. I don't think anyone else has the name so
excellent. Well, there's a link in the show notes to this interview on
Financial Survival Network dot com. Make sure you go there. Sign up for
our free newsletter, The Guess that's free, like the best things in life.
If you got a question for Craig myself happy to get it answered for
you quickly. The email address is Klahcarrie LUTs dot com. Creig, It's
always a pleasure talking with you. I'd like your global perspective and your holistic
approach and we'll definitely have you on again soon. Trey, Thanks Kerry,
thanks for having me, appreciate it. Thanks for listening to Carrie Letz's Financial
Survival Network, your solution to today's trying times. For the latest, go
to Financial Survivalnetwork dot com. Financial Survival Network now more than ever CRUs