Eric Scovill sits down with Robert Ritzenthaler from REM Capital to continue their discussion of the ups and downs of real estate investing. Robert has an extensive history in real estate, beginning in New York City with a mentor who taught him the ins and outs of real estate in the context of commercial mixed use and development, then moving to his current ventures in conservative multi-family investments.
Here are some topics from today’s discussion:
Episode Highlights:
[02:13] Keeping Your Children From Being Entitled
Growing up wealthy can often lead to problems with children’s development and give them an entitled mindset. For Robert, his father was very successful, but didn’t often talk about his success with his children, so they didn’t think too much about it. Robert continues this with his children by downplaying his success so it’s not a point of boasting for his family. Instead, let your heart show through in your conversations with your kids by talking about your values and priorities so they can know you, your mind, and what God sees as important. Whether you have kids or not, each individual person has to evaluate their heart and themselves and make decisions based on that.
[09:12] The Impact of Wage Growth & Inflation
As the headlines have been sharing for months, our economy is in a strange situation at the moment. Wages are increasing, but so is inflation, and this has a unique impact on multi-family real estate. There is a dichotomy between what the government is doing and what Congress is doing. The excess spending from Congress is causing inflation to rise in places that are not beneficial to the lower and middle class, which is causing wage growth to increase in a way that is not helpful. However, as wages increase, it means that multi-family appreciation only gets better. Then, rents go up and profit is higher. However, this also means that jobs are more at risk and when tenants don’t have jobs they can’t pay rent. That is a problem.
[19:47] Opportunities in Development
Compared to a “fix-up and rent” approach to real estate, development has a longer pipeline because you buy a piece of property and then you’re 1-2 years out before your product ever hits the market. The timeframe in development involves some more risk because you can’t always predict what the market will look like in 1-2 years. Typically in an economic downturn, construction starts to slow down because everyone gets scared, but the demand will come back once the economy starts to recover. So really, you’re playing the long game.
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