Andy Rad
Founding Partner & Senior Wealth Advisor
Andy Rad retired financially secure at age 55, after 32 years with Hewlett-Packard, where he functioned as a Quality Engineer, Computer Information System Engineer, and Program/Release Manager. He and his wife, Julie, followed the Dave Ramsey principles long before they ever heard of Dave; that is, they utilized the cash envelope budget system shortly after college, lived below their means and invested the difference. Reading Dave’s book “Total Money Makeover” was like reading a biography of their life’s money principles.
Andy managed his own investments, but required an independent advisor to access the alternatives market. This is where he began his relationship with Legacy Wealth Management several years prior. Upon retirement, he desired to continue doing what he enjoyed and that was investing, keeping up on tax changes, and helping others. However, now he is not only investing his own funds but bringing clients alongside him. Andy seldom puts clients into something he doesn’t own. He prefers alternatives investments and spends a fair amount of time traveling while performing “due diligence”. He looks for investments that he feels comfortable putting his money in. His clients appreciate that he’s investing in the same assets he recommends.
Andy’s clients are receiving sophisticated and objective planning of their investments, while earnestly listening to and meeting their individual goals. He strives to provide the highest level of service, as well as client experience, by satisfying their individual financial needs.
Andy and his wife, Julie, were married in 1978. They enjoy spending time outdoors on extended backpacking and day hike trips, snowshoeing, and quality time with family, their 3 children, and 5 grandsons. They are also getting acquainted with some of the “Snowbird” experiences. Along with backpacking, he enjoys wood working and metal working on his CNC lathe and mill.
andy@legacywealthmg.com
Institutionalization of Single-Family Homes
2023-06-10 Andy Rad
Like it or not, Single Family Rental (SFR) landscape is changing as institutions are moving into this space. Over the last few decades, Institutions/pensions/endowments have been moving away from publicly traded stocks (traditional stocks) and more into non-publicly traded assets; be it Private Equity, commodities (mining/oil/gas), Private Debt, and Real Estate. Go back a few decades and multi-family was predominately non-institutionally owned, yet today it is commonplace. Some of that is the search for return, stable cash flow, and hard assets, but don’t discount the growth in technology that has assisted in the management.
SFR’s are still primarily a mom-and-pop asset, but that is changing as institutions look for more opportunities and the development of technology. No longer does the landlord/manager have to meet a prospective tenant, but through electronic locks and webcams they can schedule an appointment, the prospect shows up, is verified through customer support desk, allowed access to the home and monitored while viewing it. Maintenance is also automated through online portals and automated dispatch.
In some instances, whole neighborhoods are “Build To Rent”; the institution purchases a block of land and develops 20 to 200 SFRs; think of them as Horizontal Apartments. I recently visited a Build-To-Rent community in NC where the homes are replicas of each other; same paint, appliances, flooring, back yard fencing, and technology (all the way down to moisture sensors on the water heater). The walls are not-textured (easier to repair than textured), Luxury Vinal Plank throughout the house, and carpet only in the bedrooms. Their primary renter is the single female with a dog, as she feels a lot safter taking the dog into the back yard to relief its self than into a more public location. Sure, the cost of rent is a bit higher than an apartment, but there is demand for that small house without common walls between neighbors.
Build To Rent has primarily been driven by the lack of housing inventory as that is generally their first choice in building a portfolio, however more and more investment fund providers are doing only Build To Rent as it fast development and generally the most economical per SqFt.
Not all institutions are on board with the SFR concept because it is relatively new and are taking a wait-and-see approach; waiting for a full cycle to see how the numbers pencil out. A house certainly has more maintenance, but how will these blocks of homes sell in 10 years.
As for our investors, Legacy Wealth has been tip-toeing into this asset class through institutional partnerships; where accredited clients are able to get in for as little as $50K and expect to hold the investment for 4 to 7 years. Additionally in a similar manner, we have teamed up with institutional Manufactured Housing Community programs, whereby investors become partners in diversified parks throughout the US. These have traditionally been mom-and-pop owned, and institutions are moving into that area as well.
In both cases financing, insurance, and maintenance costs are lower though size and volume (bulk purchase of supplies and a dedicated service crew).
This transition has both negative and positive attributes; the negative is institutions are competing against individuals in purchasing homes with all cash offers. The positive is they are building homes to satisfy housing needs as well as providing SFRs to those that otherwise would be forced into an apartment.
Source: John Burns Real Estate Consulting
A recent study published by Bloomberg
ESG and Energy
-by Andy Rad 2023/03/04
First, I need to state that I’m biased toward hydro-carbon energy, as it is by far my largest personal holdings through mineral rights and drilling related partnerships. For myself and investors this is not a recent phenomenon, as we began significantly investing in the energy sector in 2017. I bring this up as “confirmation-bias” is always on my mind!
As ESG (Environmental Social Governance) was pushing devesting in oil/gas, Legacy Wealth Management (LWM) and myself were continuing to add to portfolios at discounted pricing. The ESG tide is starting to turn and even EIA (US Energy Information Administration https://www.eia.gov) is recognizing that renewables are not the panacea being marketed. One of the large investment banks pushing ESG, BlackRock, lost $1.7 trillion in the first 6 months of 2022, mostly due to technology investments. They had embraced ESG/ progressive movement, meaning the ousting of conventional energy from their portfolios. This “Greenwashing” has led several state pension plans to remove them from their portfolios as the losses could have been mitigated had BlackRock taken a more balanced approach to investing and not pushing their ESG/non-oil agenda.
Engine #1, an ESG activist group, forced Exxon to change course (took over 3 board seats) and reduce their focus on acquiring new reserves/exploration. Chevron and others saw the influence of Engine #1 and have followed suit. This translates to less capital being deployed toward the traditional oil/gas sector. Instead, they are providing higher returns to investors at the expense of consuming their reserves. Likewise, this translates to less oil/gas coming online, leading to higher prices. The Biden administration is frustrated (at least publicly) that big oil isn’t stepping up exploration; but why would a CEO be inclined to invest when the same administration shut down a pipeline and hampered the Federal Lease program? It is estimated that the world needs $4 trillion of drilling funds to recover. The world was heading into an energy crisis before Russia invaded Ukraine, Putin simply moved the timetable forward.
Cheap Energy Fuels Growth
Wind/Solar is starting to be recognized as requiring high levels of oil/gas to produce and are just “less harmful.” Goehring and Rozencwajg studied the return on energy, meaning for every unit of energy put into a system what amount of energy is returned; Energy Returned on Energy Invested (EROEI). Go back to pre-coal days in Europe, a considerable amount of energy was required to feed animals, gather wood; think substance living. Then coal was discovered, and this freed up resources to pursue economic growth; think cheap energy. This eventually translated to oil and the industrial revolution.
For every unit of energy to bring on Oil/Natural Gas, 30 units are returned 30:1. For most of human history it was 5:1, when considering the energy required to produce food for animals, wood, and etc. Early coal-driven steam and biomass are estimated to be 10:1. The top-performing wind turbines are 12:1 and solar at 8:1, however, add in the infrastructure to support them and it drops to 4:1 (after adjusting for intermittency (storage) and redundancy (power grid in the background). Nuclear is 100:1 (I have yet to find a risk/adjusted pure play way to invest in what I feel is the future).
Often overlooked is the time required to recognize the return; drill a well and within months it is producing considerable energy. Build/install renewables and the energy output is considerably less but goes on for 20 years. Throwing money into renewables to solve an immediate demand is counter-productive; the energy input requires several years of output to break even.
Even setting my bias towards hydro-carbon energy to the side, the market conditions and demands, seem to indicate that now is still a good time to be investing in this sector and we at Legacy Wealth believe this is an important piece of a well-balanced portfolio.