On this week’s episode of THE FINANCIAL COMMUTE, Scott Taylor, CEO of Artes Capital, joins Chris Galeski to discuss private lending and real estate. 

Many clients wonder why someone (who is qualified to borrow from a bank) would use a private lender when the interest rate is lower at banks. Sometimes, the time it takes to secure a loan from a bank is the same or more than the time it takes to build a new real estate project. Scott says many clients prioritize certainty of execution and timeliness, and if the loan is short term, the difference in interest rates does not matter much.

Chris and Scott also discuss the current real estate market. Scott says rents are starting to plateau and even decrease in some areas, while operating costs and insurance premiums are increasing exponentially. Rising costs and the inability to raise rents sufficiently to offset expenses are putting real estate owners at risk, especially those with upcoming loan maturities. Because of the banking crisis, many regional and even larger banks have pulled back, creating a capital shortage. Therefore, private lenders may benefit as they can provide loans to quality sponsors that may not have access to traditional financing. 

As for Scott’s team at Artes Capital, they are aiming to increase yield for investors while decreasing risk. Scott says Artes is placing more emphasis on identifying higher-quality sponsors to partner with and is mitigating risk by strengthening their loan loss reserve, which provides a financial buffer should they incur losses due to defaulting borrowers. 

Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski welcomes Justin Mitchell, Founder of Realworld Asset Group, to discuss investment opportunities in real estate. 

Firstly, Justin and Chris review SB 9, an act that was passed in efforts to improve housing supply issues and affordability in California. This act allows homeowners to create up to four homes on an existing parcel. Therefore, real estate investors can turn a lot that is large enough into multiple rental units. Justin recommends investors who are considering this option to look into properties with detached garages since they allow more flexibility when building and adding units. He also urges investors to do their research on zoning rules, which can be specific to different municipalities.

Furthermore, Justin says the increase in interest rates will affect multi-family home construction projects as developers try to obtain loans. Regional banks are generally more open to creative financing than big banks, so if more clients continue to leave regional banks, there will be less access to borrowing for real estate developers. Therefore, Justin and Chris agree this will increase opportunities in private real estate lending. 

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On this episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Managing Director of Investments Sasan Faiz to discuss current trends and investment opportunities. 

Sasan believes there are many growth opportunities in credit and there may be higher return in credit than equities. Even though the stock market is up nine percent, only a handful of companies are driving the market upwards like Microsoft, Apple, NVIDIA, etc. If inflation and deglobalization continue and prices increase, companies’ profits will shrink unless they pass costs down onto their consumers. Eventually, Americans will not be able to buy as many goods and services as before, thereby negatively impacting the stock market. 

Sasan also says we are becoming more involved in private credit right now because of the regional bank crisis. Since banks have been pulling back, there are more opportunities for investors in private lending. 

Another current macrotrend is decarbonization (the shift to renewable energy) which may bring more investment opportunities in natural resources. Sasan recommends listeners to consider researching companies in the mining, extraction, and processing of natural resources. Another trend that is happening is with capital expenditure cycles- in the past, when commodity cycles boomed, companies would generally invest to take advantage of higher prices. This cycle has been different, though. Companies are fiscally prudent right now and are returning capital to shareholders.

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On this episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Advisor Kevin Rex to discuss how time has decreased the value of money. 

Chris and Kevin agree that many products and services have gotten much more expensive over the years. For example, food and real estate have generally increased in price over time- and the best way to combat inflation is to invest with a long-term mindset. Because interest rates have increased, many people have been investing in treasuries which can be a great short-term investment; however, treasuries typically do not appreciate enough to keep up with inflation. 

Chris and Kevin recommend listeners to investigate owning commodities like gold and investing in real estate and stocks, as history shows these assets do increase in value over time and can help increase one’s purchasing power. 

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Advisor Beau Wirick to discuss our new service offering, Modearn. 

Beau says while ultra-high-net-worth clients are the typical demographic served by wealth management firms, the financial services industry is overlooking a crucial segment of prospects: NextGen individuals who are still building their wealth, careers, and families. Modearn is here to bridge this gap.

Regularly, Modearn clients will be in touch with their advisor to review a specific topic like tax planning, debt management, maximizing credit card benefits, estate planning, company benefit planning, etc., so every aspect of one’s financial picture is analyzed in a digestible way. Modearn clients will also be introduced to our network of experts, coaches, lawyers, and accountants to ensure access to a wide range of knowledge and advice. Beau and Chris are excited for our team of advisors to help Modearn clients enjoy the present, save for the future, make the best financial decisions for themselves and their families, and improve their financial literacy.

If you would like to learn more about Modearn, visit our website and follow us on Instagram.

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On this episode of THE FINANCIAL COMMUTE, host Chris Galeski and Chief Investment Officer Meghan Pinchuk discuss the debt ceiling.

What is the debt ceiling? It is a legislative limit on the amount of national debt the United States government can incur. The government hit the debt ceiling of $31.4 trillion in January, but the Treasury Department provided the government with more cash while it figured out its next steps. Currently, Congress is trying to decide which spending cuts and requirements need to be in place before raising the debt ceiling. Unless Republicans and Democrats come to a compromise by June 1st, the government will default on its debt which could delay social security checks and payrolls, jumpstart a recession, and cause millions to lose jobs. 

Even if the debt ceiling is raised, it is a short-term “fix” to a growing problem. A high level of federal debt leads to a more vulnerable economy, higher interest rates, and a more volatile stock market. So, what should people be doing to protect themselves? Meghan says investors should prepare a resilient portfolio with lower stock exposure and consider investing in gold and private lending.

As for the government’s solutions, Chris says there are only two ways for it to pay off its debt: raise taxes or let inflation rise so the real value of the government’s debt is reduced. Although it is a possibility that a temporary government shutdown could happen as Congress tries to reach an agreement, Meghan and Chris are optimistic that the debt ceiling will eventually be raised.

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Chief Compliance Officer Menachem Striks to discuss cybersecurity, how we protect our clients’ information and how you can defend yourself.

Menachem says we constantly keep our networks and systems updated. We work closely with a third-party partner to run diagnostic tests, keep an eye out for suspicious activity and solve technical issues. Furthermore, we run monthly phishing tests to make sure employees know not to click on suspicious links. 

Menachem also suggests being intentional about creating and maintaining passwords. There are password managers like 1Password, which you can access with one master password while it generates various strong passwords for different accounts. Chris also recommends creating a different email account for your financial accounts that is separate from your personal email. 

Furthermore, Menachem says it is a requirement in the financial services industry for advisors to monitor all substantive business communications; therefore, WhatsApp and iMessage are not viable ways to communicate with clients because they are not subject to archiving and monitoring. We stick to methods of communication like email, calling and an approved way to text clients that improves convenience while still adhering to guidelines and protecting sensitive information.  

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski welcomes back CEO of Morton Wealth, Jeff Sarti. They discuss recent bank runs as First Republic failed early last week, and PacWest confirmed last Thursday that it is exploring “strategic options” after its share price fell more than 50%. 

Jeff says banks have a fundamentally flawed business model as depositors can leave at any time. Chris also notes that many banks have been locked into long-term bonds or mortgages at low fixed interest rates while borrowing short-term loans themselves. Thus, when the Fed raised rates from zero to 5.25% in a matter of 12 months, banks had to pay a higher interest on the money they were borrowing but were not receiving much more interest from their fixed-rate bonds.

According to Jeff, many banks were too hopeful that rates would never rise and should be more intentional with risk management moving forward. Many people are wondering if more banks will collapse, but Jeff says no one can predict the future. Thankfully, Morton Wealth has always been mindful of the possibility that rates could rise and has prepared in advance by prioritizing resilient and diversified investments. 

Chris raises the point that if more regional banks fail and are bought by larger banks, there may be more opportunities in private lending as these bigger banks do not engage as much in creative financing or small business loans. Morton has been invested in private lending since 2009, and Jeff says he is already seeing private lenders charge higher rates. 

Disclosure:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On this episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Managing Partner of Keyes Real Estate, Brad Keyes, to discuss the real estate market in Los Angeles in the wake of heightened interest rates and the Measure ULA tax. 

Brad says residential real estate in Los Angeles is resilient because there is a shortage of inventory, this city is affluent, and people are coming to terms with the fact that interest rates are around 5-6%. Although this is an obvious increase from the zero percent environment we were in for so long, it is still a decrease from where it was in late 2022 (around 7%). 

Brad and Chris also discuss the importance of small and medium-sized banks in creative financing. For example, First Republic Bank has been known as one of the best banks for real estate and development. However, now that concerns are mounting around First Republic, Brad says this could potentially slow some deals and development projects.  

Brad also explains the recent Measure ULA tax and how it may slow the real estate market in the City of Los Angeles while benefiting surrounding areas like Calabasas and Beverly Hills as the mansion tax does not apply to them. Therefore, Brad says this heightened tax may actually cause revenue to leak from the City of Los Angeles and ultimately, home buyers and tenants may suffer the costs as sellers and landlords will increase their prices. 

Finally, when it comes to investment opportunities, Brad recommends listeners to consider investing in single-home family properties in Eagle Rock as it is an undervalued neighborhood, and they are exempt from the Tenant Protection Act of 2019.  

Disclosures:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and do not represent the views and opinions held by Morton Wealth. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.

On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Planner and Estate Attorney Brian Standing to discuss the Measure ULA tax that went into effect for the City of Los Angeles on April 1, 2023. This new law has increased tax from 1% to 4% on the sale of any real estate in the City of LA that is at least $5 million in gross value. If the property sells for over $10 million, the tax will increase to 5.5%. This includes any type of property (residencies, commercial, etc.). This heightened tax does NOT apply to gifting, inheritance, spousal transfers, or transfers into business entities.  

The intent of this increased tax is to raise money for affordable housing and rent assistance. However, Chris and Brian agree this tax law may potentially increase rent; by discouraging development in the City of Los Angeles, fewer new residences will be available to meet rental demand, leading to an increase in rental prices. Furthermore, if buyers of rental real estate bear part of the increased costs (as sellers may require), those costs may ultimately pass through to the tenants as increased rent.

Brian recommends listeners to wait and see how Measure ULA plays out before trying to execute tax-saving strategies. Some people have been considering selling their property in increments, but Brian says strategies like this may not work since Los Angeles may still recognize it as one whole property. 

Disclosures:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and do not represent the views and opinions held by Morton Wealth. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.