Good news! Data scientists, data engineers and business analysts positions are in very high demand in the USA and North America. Don’t take my word for it and see the report published by Burning Glass Technologies:
This looks opportunistic. U.S. and Canadian job hunters express a lot of interest in data analyst positions. At the same time, many companies claim they struggle to fill those positions. Furthermore, most recent research indicates the programming language most potential recruits intend to learn is also the dominant language for data science: Python. The difficulty employers have filling DSA roles drives up salaries, and relative to other jobs, DSA jobs pay quite well. Some DSA jobs, such as Data Scientists and Data Engineers, demand salaries well over $100,000.
“Americans are most interested in data analyst jobs, with an average of 26,000 online searches per month”
Due to massive automation, networks are virtually running themselves. People with data science and data analytic skills are in demand to train the algorithms to run the networks. Data science is hot!
“… demand for data science skills will drive a 27.9 percent rise in employment through 2026…”
The U.S. Bureau of Labor Statistics
Four years straight, Glassdoor nominated data scientist job as the number-one in the USA. Knowing how to interact and manipulate big data sets is going to be extremely valuable to your employer.
BEST PLACES TO FIND DATA ANALYST JOB in Canada
Research provided by the government of Canada suggests that data analyst professionals have different job prospects depending on their physical location in Canada. The map below highlights the hottest job markets for analysts in Canada.
Job Bank of Canada
Top 6 BEST and worst places to find data analyst jobs IN CANADA
BEST
WORST
British Columbia Manitoba New Brunswick Ontario Quebec Saskatchewan
Northwest Territories Nunavut Prince Edward Island Yukon Territory Nova Scotia Newfoundland and Labrador
Best places to work as a data analyst (Break down by province)
British Columbia
Lower Mainland–Southwest Region
Thompson–Okanagan Region
Vancouver Island and Coast Region
Quebec
Capitale-Nationale Région
Estrie Region
Laurentides Region
Laval Region
Montréal Région
Montérégie Region
Outaouais Region
New Brunswick
Fredericton–Oromocto
Moncton–Richibucto Region
Saint John–St. Stephen Region
Saskatchewan
Saskatoon–Biggar Region
Regina–Moose Mountain Region
Manitoba
Winnipeg Region
Ontario
Hamilton–Niagara Peninsula Region
Kingston–Pembroke Region
Kitchener–Waterloo–Barrie Region
London Region
Muskoka–Kawarthas Region
Ottawa Region
Stratford–Bruce Peninsula Region
Toronto Region
Windsor-Sarnia Region
How to acquire necessary data analytics skills?
Educational Institutions Certification programs
For example, Harvard offers an online program called Analytics Certificate Program for Business Leaders. In this program, students learn business analytics, emerging technologies, big data, and data visualization.
Top Technology Companies Certifications
For example, IBM, Microsoft, and SAS offer analytics and big data certifications. According to this article, there are several “must-have” data analytics and big data certifications:
Certification of Professional Achievement in Data Sciences
Certified Analytics Professional
Cloudera Certified Associate (CCA) Data Analyst
EMC Proven Professional Data Scientist Associate (EMCDSA)
IBM Data Science Professional Certificate
Microsoft Certified Azure Data Scientist Associate
Microsoft Certified Solutions Expert (MCSE): Data Management and Analytics
Open Certified Data Scientist
SAS Certified Data Scientist Using SAS 9
Data analyst salaries
According to Indeed, the average salary for data scientists is around $104,000. That’s average and does not include bonuses and extras. On the lower side, Advanced-HR, a San Francisco-based source of compensation data from venture capital and private companies, indicates that compensations for entry-level data scientists in North America fluctuate between $55,000 and mid-$70,000, however, can reach $100,000 a year.
References
Quant Crunch | Data Science Job Market | Burning Glass Technologies Quant Crunch | Data Science Job Market | Burning Glass Technologies. (2020). Retrieved 15 August 2020, from https://www.burning-glass.com/research-project/quant-crunch-data-science-job-market/
Data Analyst – Informatics And Systems in Canada | Job outlook. (2020). Retrieved 15 August 2020, from https://www.jobbank.gc.ca/marketreport/outlook-occupation/17882/ca
Database analysts and data administrators (2172) | Canada | LMI Explore | Outlooks. (2020). Retrieved 15 August 2020, from https://clmi-explore-icmt.ca/viz?page=outlooks&lang=en&noc=2172&geo=0
Doing what will not feel like work at all, but bring your financial resources?
What type of activity can you do better than anyone else?
What are you good at?…
Follow my thought process, as I answer these questions for myself.
1. Define Your Strengths
If you are in your mid-late 20th you better be knowing what you are good at and where you can improve. I don’t ask you to name your purpose in life. Just tell me, what is it that you think you might be good at? What do other people say?
Meet with your close friend for a coffee, call your family and ask: What do you think I am good at? What are my strengths? The people you ask should’ve known you for at least five year, to give you useful feedback. Don’t forget to inquire about your weaknesses. What are the things that you suck at? Don’t limit your research to only a close group of people. Ask your ex(s) if you can. Ask your boss. How about the people you went to school with? Ask them too.
I keep a strategic list of my core strengths. Asking my friends, family and co-workers had helped me to recognize some of my strengths and weaknesses I was blind to.
Ex-girlfriend: You don’t give up. You always find the way.
A former classmate (friend):You are committed (dedicated, loyal). Commitment is your strength.
Mom: Calmness and perseverance.
Dad: Genuine and open. Weaknesses become your strengths.
Brother: Mindful, caring, hard-working.
Former manager: You are a smart guy. You have the ability to sit down and attack the problem methodically over an extended period of time. You are able to dig into details – that’s your strength.
Three pillars that make me who I am. Once identified yours, build on them. Your ideal job will allow you to apply your best skills and qualities.
Analysis
My mind is very analytical and analyzes everything. I ALWAYS analyze. It is my strength and also my weakness. I feel good analyzing and finding the hidden things based on my analyses. I have the ability to dig into the root cause of things. My power is to throw myself into something and analyze the crap out of it. I strive to understand, I want to know.
I take the analysis a bit further. Documenting and writing about my experiences is a process of analysis. Whenever I face the obstacle or get consumed by a daemon, I always find a way by analyzing. I can analyze the crap out of anything. Analysis sets me free from my misbeliefs or things that don’t serve me. If you can analyze the situation – you can act on it.
Discipline
I have developed extraordinary discipline. Such discipline allows me to work methodically, day after day, step by step. I have the ability to sit down and attack the problem consistently over an extended period of time. This is my superpower. I realize that not every person can do that – methodically and consistently hitting the same goal and not giving up. I have developed into the sharpest tool which can crack anything. If I commit, be sure I will have enough discipline to complete the task and keep the promise. Day in – day out.
Confidence
I look straight and don’t blink. My eyes are the eyes of the hunter. I am calm. I am cold-blooded.
2. Look Back
Go back in memory and pull up the jobs you’ve done in the past. What are those? What did you like doing? What aspects drove you crazy? Make a list, similar to mine:
Systems Administrator
LIKE
HATE
Office gym Plenty of time to myself Feeling useful when helping others to solve their problems Learning new things and systems
Feeling useless when things were going slow Limited/No growth opportunities. Knowing that it was a contract job, I could never get promoted Having to deal with some people I didn’t like Low salary. Barely making the ends meet Monotony of everyday office life
Self-Driving Car Reliability and Test Engineer
LIKE
HATE
* Constant learning. Everything was always changing and evolving. I had to adapt * Freedom to choose the projects to work on * Flexible schedule. Being able to combine my triathlon training and work * Great management * Travel. Frequent business travels * Very good salary and bonuses * Working with smart, very intelligent people * The feeling of being a part of something big and great * The fact that I was developing the cars that drive themselves
* Lack of clear directions and expectations * Fear of losing the job * Daily long and boring meetings * Reporting on the job I’ve done. Detailed, granular reports * Corporate politics and rules. Facing misunderstandings and always being very careful with what you say and do. Race, gender, sexual orientation etc. Behind the scenes of the managerial world. Fights for power, Gossips.
Based on the brain vomit above, what do you value the most?
I Value
I Struggle When
* Freedom Comes from a flexible schedule and the ability to choose the projects to work on. Also, remote work is a must. * Money I perceive money as freedom. Those are synonyms to me. * Sense of Belonging Working on something big. Working on something in team with others. Working on things, which I believe have the potential to impact the world.
* I don’t feel secure at my job. The fear of losing income gives a lot of stress and anxiety. That’s the common theme. * The job is too easy and things are slow. * I don’t have a clear sense of direction and expectations are not clearly defined. * Monetary compensation does not seem to match the effort I put into my work.
3. Look Forward
Goals, goals… blah blah. I know, I am sick of this word myself. All I want you to do here is just answer this question: What do you want? In terms of job and employment, what kind of work do you want to be doing? Based on your strengths and preferences, formulate exactly what you want to be doing. What kind of work will make you happy
Ask the right questions
What kind of work do you think you would enjoy doing?
How much money would you like to make?
How many hours a week do you want to work?
Are you comfortable working from the office or you need flexibility and freedom of remote employment?
What about the benefits?
Would you care if there were none?
Do you want to stay in the field or you want to try yourself at something new?
If you get stuck, these were my answers:
I want a job, where I can utilize my analytical thinking and problem-solving skills. Any kind of data analysis, preferably in the sphere of business and investments. I want to make at least $100K a year. I don’t care if I get paid bi-weekly, monthly or annually. This amount of money will allow me to support my basic needs, travel and use the rest towards other businesses and ventures. Benefits are preferred (especially dental), however, the absence of them is not the deal-breaker. I want to have a flexible schedule. This will allow me to balance my training and other pursuits with work. Remote work – is a must, to live the lifestyle I wish. To be able to work from anywhere in the world. I want to be doing work, which won’t feel like work because I enjoy it.
There are a lot of other things that would be “nice to have”, however, those are not mission-critical. Freedom, meaningful work to do, financial resources. By meaningful work I mean to be doing the work of your calling. The job that you can do better than anyone else. Finding your “special sauce” and monetizing it, while bringing the value to the world.
Great! What you just spilled out is a long-term vision. You will get there, but not tomorrow or even the next week. The next week though, you will have to pay the bills and get groceries to eat. Therefore, let’s step down a level and ask the same “What do you want?” from the short-term perspective. This changes things up a bit and my answer would be this:
You need to create a stream of income that will allow you to live life on your terms. You need to cover the basic financial needs before you aim for the stars. You can not dream and think straight when your stomach is asking for food. You can not live in a shithole and convince yourself that this is your dream life. Well… you can, to a certain degree. Close your eyes on the bad stuff and look the other way. However, you can full others, but not yourself. If you don’t like your living situation, frustration will accumulate over time until you explode. To create, you need to be fed and comfortable. It is hard to create something meaningful in desperation and anger. I am not a very big fan of Maslow’s hierarchy of needs, but it might be appropriate to include it here. Cover your basic needs first.
4. Jobsthat fit
There are thousands of different jobs that could potentially be a good fit for you. A good fit is when the job requirements fit your strengths while remaining challenging and stimulate personal growth. What kind of jobs would that be? I don’t have the answer, but Google does. Look over the posted job requirements and compare them to what you’ve got. Also, don’t limit yourself to the skills that you currently possess. If the job demands a certain skill or knowledge that you don’t have but would like to learn – that’s your job. Below is what I found to be a good fit for myself, at least in theory.
Data scientist Average salary: $129,806
You’ll need specific training and computer language competencies, but it doesn’t hurt to have an advanced degree in math, statistics, engineering or computer science. Data scientists use computing frameworks to analyze large, raw data sets and develop actionable insights in a variety of industries. The non-technical aspect of data science is storytelling — what is the data telling us?
Actuarial analyst Average salary: $102,734
This is a risk management role that uses statistical models to assess the risk and cost that comes with potential events, such as death, accidents or property damage. Actuary jobs require professional certification.
Business Analyst Average salary: $102,936 (Senior Level)
Senior business analysts collect data in order to understand the challenges and needs of a business. The role is very collaborative, and you’ll be working with managers across the organization to implement best practices and ensure the recommendations are working. Serious problem-solving skills and good time-management is a must. Also, your communication skills need to be on point; you’ll be writing a lot of proposals and working with managers and their teams on various projects. Any work experience in management, human resources or information technology will increase your value.
A product manager is charged with managing product oversight — from concept to production. While senior product managers should have extensive experience in business and commerce, you don’t need an M.B.A. You should, however, demonstrate familiarity with technical processes, as well as acumen with business and marketing.
Information Security Consultant Estimated salary: $123,039 (Senior Level)
This role is responsible for a business’s network security and remediation strategies. Primary duties include performing risk assessments (via IT audits and penetration testing), as well as helping the business meet compliance obligations. How to get the job: While certification isn’t required, it helps to have relevant licenses in CISS, CEH/OSCP, CISA, CIA, QSA, CISM, IRCA and ISMS. Highlight your past experience in IT security (e.g., penetration testing, audit, assessment and compliance).
Investment analyst Average Salary:$60,517(+ bonuses)
Investment analysts collect information, perform research and analyze assets, such as stocks, bonds, currencies and commodities. Investment analysts often focus on specific niches to become experts in their chosen fields, such as a particular industry, a geographical region or a specific asset class.
Hey, wait! It is important at this point to remind yourself that those jobs are only short-term to provide you with a cash flow NOW. You have to create a cash flow to support yourself and your lifestyle now, so you can plan ahead and build a foundation for something greater. Your goal here is not to build a career, but to create a steady income while living the life on your terms.
Alright, with that being clear, let’s get back to the jobs we identified that you might like doing. What’s the next step? Don’t rush to sending your resume all over the places that hire those types of professionals. In my next post, I’ll share my approach to contacting people and companies. It’s not just uploading the Resume and hitting “Send”. Stay tuned.
If you were to ask me: Alexander, could you please explain in one word, what do you want to be doing for work? My response would be short and simple: Analysis. Data analytics, data science and research. I like digging into data and make sense of it.
What industry? I am not sure. Ideally, something that involves autonomous vehicles and AI. Why? I believe this is a future, and also because I have experience working in this sphere.
What is it exactly that you want to be doing as an analyst? That’s a good question. I am not sure. To answer this question, first I need to understand why do people hire analysts. It doesn’t matter what we analyze, we do so to understand what they mean to us. Why? To make decisions. Going back to your question: I want to be the person, or a company, that helps others to make better decisions. I will use analytics tools, my business knowledge and unique experience with self-driving technology to CONSULT other people and companies. This is it – a Consulting Company. More specific … Autonomous vehicle technology consulting company (agency). Terabytes of data are being recorded and stored daily, throughout autonomous vehicle development. Of course, there are systems in place that would analyze it and present the summary in “user-friendly” reports. However, it is extremely time-consuming and a lot of it is being lost or missed. What if companies that develop autonomy were to outsource some of their data analysis processes? This way, they would be able to dedicate more focus on the developmental side of things. Of course, there are companies that already do it. For example labelling and tagging for map building. I am not reinventing the wheel, I explore the ways to apply my mind. My company would be the “third party” that will process and make sense out of data received. What kind of data? I am not ready to answer this question yet. Raw data. We can also work as a “triage agent”, who processes different metrics and outputs PASS or FAIL report. Just one of the avenues of development, one of the services. Most, if not all the companies are already doing such a “triage” type of job on their own, so they might not need extra help. However, I am sure that there are things they struggle to process and analyze. I am not sure what they are, but I know there are needs that my company can fulfill.
My ultimate goal is to build something of my own. I am an entrepreneur in my core and I look at every potential job, as at the classroom where I learn and grow.
Easy is Boring
If the job I do start feeling too easy, I’ll start struggling. If nothing will change and I won’t find a way to make it challenging and interesting – I leave. The job I would like to have will be in the company that is very well-known and respectable. Respectable for what they do and how they do it. The high-quality job – étalonin the industry. I want to be inspired to build something similar or better. I want to be inspired by its story and look up to the founders as role models.
I have no time to waste on easy things. Show me the tallest mountain and I’ll climb it.
For Example:
CGI is among the largest IT and business consulting services firms in the world. Operating in hundreds of locations across the globe, CGI does strategic IT and business consulting, systems integration, intellectual property and managed IT and business process services.
Sigma collects data, transform it for analysis, runs analytical algorithms, and prepare visualizations to return the critical findings.
I love it. Collect data and make sense out of it. That’s me.
What about the autonomous vehicle industry? Surprisingly there are not too many companies that provide such consulting services. My google search showed 5-6… definitely under 10. The one that stood out was McKinsey. This is what they have on their website:
McKinsey Center for Future Mobility: We help leaders across all sectors relevant to the autonomous-driving ecosystem develop a deeper understanding of the disruptions and opportunities ahead.
No need to continue. Less thinking, more doing. I’ve got the direction to move towards. I know what I want and I am confident in my decision.
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If you’ve been laid off due to COVID-19, you are not alone. Hundreds of thousands of people lost their jobs because of the economic crisis caused by the pandemic. This sucks! I feel bad for all the people who got laid off. I feel terrible for my co-workers and friends, all the bright people who got let go. I know exactly how they feel, as I’ve been laid off myself. I am not a victim and don’t plan to stay without income or rely on a government to buy me food. I am a young, smart and healthy man. I’ve been through a lot and certainly prepared for the times like this. As I pull myself out this hole, I want to help others. How? I’ll write. I will write about the actions I take, thoughts I have to live the trace behind me for other to follow… or not.
My friend, you just “got kicked in your balls” pretty hard. The head spins from Whys and Ifs. Future is uncertain, however, there are few things that I can tell you for a fact:
Your life will change dramatically from now on. Things will never be the same.
You will feel uncomfortable.
You will have put the work to stand back up.
You will need to step over your ego and ask for help.
Realize, that thousand of people are in the same boat as me and you. Realize that NOBODY, I repeat, NOBODY knows what to do. We all just got equalized. This is not the finish, this is a start. The second you got your last paycheck, the gun went off.
“Take a break, you’ve been working so hard for so long. You deserve some time off.”
They say
That’s an option… for someone else. Buds, we’re a different breed. This is not an option for us.
“You’re young, you’ve got a lot of time. Relax.”
They say
The first part of this statement is true – you are young, however, I disagree with the second piece. You have no time! There is no time to waste on goofing around, blaming the virus, your employer, and feeling sorry for yourself. Life is just too great to waste it on those things, the world is too big to sit still. Take action!
Easy to say, but what exactly do I do now? Where do I even start?
Sit down, let’s brainstorm. You are not alone and I will help you figure things out. I don’t have all the answers, but I know the direction. I will help you clear things up and bring more clarity into your head.
First things first: Food and Shelter
You need something to eat and you need the place to live. It all costs money, therefore the first step for you is to run some numbers and make financial projections.
Financials. How long will you last?
Your bank account is not the flowing steam anymore, it’s a pond. There is no income coming in, so the pond starts to dry out. If you don’t change anything financially, it will dry out completely, leaving you broke AF. It’s not even a question if, but when. Know the exact date.
You have some savings, how much? Put together all the cash saved from different accounts. Know exactly how much you have on hand.
What are your monthly expenses? Go to your bank account and pull all the charges for the past three months. How much did you spend a month on average? What were the top 3 expenses? Know the numbers.
Run financial forecasts. Experiment with different scenarios. See the example below for $100k saved. It shows how long you will last with this much income at different expense levels:
Calculations won’t be accurate without accounting for inflation. Not many people are aware of, however, this silent sucker takes the money out of your pocket at the rate of 2.27% (May 2020). Because money is not backed up by gold and the government prints it like crazy -> inflation will rise and your $100k will worth less as you go. The worst part is that this number is expected to rise over the next few years, moving the date of your bankruptcy closer at a higher speed.
At the current Inflation rate, your $100k will worth:
2 years -> $95k
3 years -> $93k
4 years -> $90k
6 years -> $86k
8 years -> about $80,000
Over the course of 8 years, you will lose at least $20,000 due to inflation. Of course, the number will fluctuate, however, don’t expect it to be much lower and prepare for the opposite.
Time is money, so how many months of living will the inflation shave off?
2 years -> ~3 month
3 years -> 6 month
4.2 years -> almost a YEAR!
8 years -> ~ 4 years…
As you can tell, the numbers grow exponentially…
Key Takeaways
Know your numbers
Play out different scenarios
A dollar today > A Dollar tomorrow
By holding onto your cash, you lose money daily
You need to find a way to put this money to work, where they at least don’t lose in value over time
If you don’t take action and change anything, your pond will dry out faster than you think. You will go broke
So what do you do now?
Immediate Action Steps
Minimize your expenses. Cut down your expenses and stop spending your resources on anything you can’t eat and/or does not have direct implications on your health
Cancel all you travel and vacation plans (if you had any)
Review your grocery bracket. Only necessities
Do you REALLY need the car? Consider selling your vehicle. This will eliminate car insurance payments, gas, and amortization expenses. If you can’t live without one, get yourself something cheaper. The old beat-up sedan is an excellent choice.
Lower your rent payments. Downside. If you are renting, this is probably one of the biggest expenses on your balance sheet. Can you move to a cheaper place? How can you minimize the monthly payments? No matter what you do, don’t move into the basement. I’ve got more on it here: 6 Months in Basement. It is not worth the savings! Lessons Learned.
2. Make a Long-Term Plan. Sit down with a pen and lots of paper. You need a plan! Three major questions you need to answer:
How do I develop several streams of income?
How can I get out of deflationary assets (cash)?
How can I make a living with only the internet connection?
3. Execute Immediately. Stand up, wash your face, and get to work!
What Will it Take to Create Such Passive Stream of Income?
So you want to be financially free you say? Ok cool. I want to be an astronaut. There is a gap between what I want and what I have. I am about to make you feel uncomfortable by asking straight questions and telling you the things you don’t want to hear.
To begin with – you are currently not “financially” free. Just because you say you want to be free, I assume that you are currently not.
“No-no. I am free. I just want to have more freedom” – I hear you say.
Alright, let’s define freedom. Merriam-Webster Thesaurus gives two definitions of freedom:
1. The state of being free from the control or power of another 2. The right to act or move freely
According to the first definition, freedom is a state of being. Also, it assumes that there was some sort of power or another person who was trying to control the one. Question: is the controlling force necessary for being or becoming free? If not, then definition should be the following: freedom is a state of being. Much shorter and simpler, isn’t it?
The second definition states that freedom is the right. Alright, what is the “right”? Google defines it as justified, acceptable, true, or correct as a fact.
My next question is: who is the one that justifies and defines what is acceptable, true, and correct?Who has the authority to extend you the right to be free? I personally don’t know anyone authorized to grant the right to be free. However, I know that the judicial system claims to have the right to limit or take away your freedom by putting you in jail or restricting you from doing certain things and being in certain places. So if there is no-one to ask for freedom, do we get it by default, at birth? Or maybe we need to obtain it somehow, somewhere? It’s confusing and neither of two definitions brought clarity into explaining what freedom is. Maybe other sources have better explanations.
Roget’s 21st Century Thesaurus says that freedom is the license to do as one wants and defines the following as the synonyms for it:
So freedom is a license. To be free, I need a license. Again, who is authorized to issue the license to be free? Does anyone know what it looks like? What are the requirements for obtaining one? Does it have an expiry day? How much does it cost? Again, the more I ask, the more questions I get? Let’s move on. Maybe if we try from the opposite end of the spectrum, we will be able to get to the truth.
What is the opposite of freedom? Below are the antonyms for freedom, according to Roget’s 21st Century Thesaurus:
Dependence and captivity… According to this definition, freedom is some sort of independence from some external force or power. Therefore to be free means to be in a state of independence. Let’s leave it as is and not dig deeper because I feel it’s a rabbit hole that has no end to it. Independence.
Impotence, inability, weakness…? This is ridiculous. Are there better ways to describe the lack of freedom? Let’s ask Google, he knows everything:
Financial Independence
Every person has his own magic number that will change everything and unlock the way to a beautiful, stress-free, happy life. Ha-ha… Anyways, let’s say you need about $5,000 /month to live comfortably, cover all your expenses. You strive to create a passive stream of income of $5,000 /month that will require little to no work from you. The money will simply land on your bank account while you lay on a couch and repost on Instagram the quotes about successful success. With this money, you don’t worry about where the next paycheck will come from. You think you outsmarted the entire world around you and the sky is not a limit for you. You figured it all out and now you are able to manage your time only as you decide to. No bosses, nowhere to go, nothing to do, only unless you decide otherwise. That’s cool? Sure it does.
You heard a lot of “success stories” in which people obtained that financial freedom or financial independence I should say, by investing in real estate. People often start their stories remembering the times, when they busted their asses at work, trying to squeeze as much cash as possible from their full-time jobs. Then savvy folks would pour all their savings into the rental properties for the monthly cash flow. By cashflow I mean the income you have left, after the mortgage, taxes, and other operating expenses. You hear a lot of stories like that and it seems that real investment is a way to go. You will need to build a portfolio of rental properties, which generates your passive income. Now you see the path. Pull up the pants, wipe your runny nose, grab the diet Coke – we are going to get FINANCIALLY FREE.
How much time do you think it will take you to set everything up? What did successful stories tell you about the timelines? Let’s see what it takes to build the stream of income that will generate you $5,000 /month.
“People who make $90,000 a year, actually earn more than 87% of the U.S. population.”,
(Keshner, Feb 4, 2019)
Let’s say you are an educated, hard-working middle-class citizen, who annually makes approximately $100K. Day in, day out from 8 to 5 you grind your way to success working the full-time job. Your life is simple, you don’t overspend and have pretty good financial behaviors that allow you to set some money aside. You saved quite a bit and you are ready to step on the real estate investing path. You are about to buy your first property and already feel like a complete success. Life is great and easy, you figured things out. Everything goes as planned. Few months of house hunting and you finally bought your dream house. A bit of renovation, marketing and you have the tenants moved in. The house brings you about $500 a month of hustle-free cash flow. You feel on top of the world, you nailed it. Indeed, that’s great cash flow. To become financially free you only have left $4,500 /month. No problems, just repeat what you’ve done 9 more times and you can retire. The only problem is that you are out of cash after your first purchase. It’s hard to buy a property without a downpayment. Let’s do some napkin math to see how much time it will take to buy 9 more houses and get your freedomlicense.
If you are fortunate to live in Canada, please pay 27% taxes on your annual income. Taxes are a whole nother topic, which deserves separate attention. However, stay on the track, we are not getting into taxes here. Deduct the basic expenses from your annual income. They are different for every person (I don’t include the stacks of toilet paper you purchased during COVID-19 pandemic. Let’s keep it as your little secret). Deducting :
Food (one person)
Entertainment (movies, 1-2 nights out, nothing crazy, really conservative)
Pet (a small dog shares miserable existence next to you)
Commute ($7-10 /day)
Car insurance payments
Rent (So cheap because you try to save money and live in a shithole. It also includes utilities)
Travel (Once a year you fly out to a warm country. You work hard, you deserve it (sarcasm))
You don’t buy new clothes, toys, electronics, gadgets. A new iPhone is just a dream you can’t afford. No Christmas or birthday presents to yourself. Cancel Netflix and Spotify subscriptions. No kombucha or Starbuck coffees. No cab rides. You don’t pay for that cute chick at the bar, sorry honey. No new books or journal subscriptions. You don’t get sick. No dental treatment, no out of pocket medical expenses. You live a monk’s life, literally. From 8 to 5, day in – day out. You have a goal and you are committed to achieving it no matter what it takes. You’ve decided that you want to be free and this is the way to get that freedom. The napkin math showed you clearly – 10 houses – $5,000 /month.
A year later you saved $40,000. You look a little tired, but that doesn’t matter. Well done boy! Now let’s put this money to work and buy a second house. You’ve found a beautiful property listed for little over $300K and your ass got lit on fire. You expect to add another $500 to your monthly cash flow. $1,000 a month, doing little to nothing. No kidding, sounds great, let’s pull the trigger on it. A typical down payment is 20%, which equals $60,000 on a $300K house. What a bummer, you can’t buy it, because you have only $40K saved. You will need to work another six months to make up the difference. You realize that it takes approximately a year and a half to put aside enough money to buy a $300,000 property. Don’t forget that you will need to live the monk’s life and say no to anything that you can’t eat. How long do you think it will take to save up enough cash for ten of those $300k properties? Do you think you will still want that freedom by the time you reach it? By the way, how long do you expect to occupy this planet? Silence…
Ha-ha! Exactly! Don’t freak out yet… Such variables, like appreciation rate and investment income will make things look slightly better. Let’s add them to the equation.
According to Remax: “Healthy price increases are expected next year, with the RE/MAX 2020 Housing Market Outlook Report estimating a 3.7 per-cent increase in the average residential sale price.” According to the Royal LePage Market Survey Forecast: “The aggregate price of a home in Canada is forecast to rise 3.2 percent year-over-year to $669,800 in 2020”.This is a conservative number and it greatly varies, depending on the area of your purchase. We will use it for our financial projections. The number of 3.7% means that the house you purchased for $300,000, next year should increase in price for about $11,100. Will put appreciation to the side for now and run the numbers only including the rental income.
I assume you are being a good boy and don’t touch the monthly $500 you get from your rental property. You are not selling the house, therefore we don’t account for appreciation and use only the money you saved from the monthly cash flow. Annually the rental generates you $4,380 ($6,000 minus 26.8% tax deductions). This extra cash will save you about 3 months of hard work at your full-time job. You will need to hassle for 16.2 months (70.4 weeks) to save $60,000 of a down payment on your second house. (It’s almost 2 months faster having the cash flow of $500 /month from the first property).
One year and a little over 4 months, since you’ve become the landlord, you pull the trigger on the second property. Now, you are the happy owner of two properties which generate you (hopefully)$730 / month ($1,000 /month minus taxes) on top of your annual savings of $40,000. You continue living on the edge of starvation for another year and six weeks to save enough money to purchase your third house. Same deal, $300,000 purchase price, $60k downpayment. Rental income from the two houses you already own allows you to set aside $60,000 a little bit faster. To be exact, 2.7 months faster since the purchase of your first house. Great job, you’ve got the third house. All three properties bring you $13,140 in cash flow annually which correlates to $1,095 /month. It’s been a while since you stepped on this RE journey. Let’s do a quick check-in. How do you feel living the way you did? Because you were able to save $40k every year, I assume life has been very steady for you. No emergencies, no unexpected expenses. You didn’t get sick, nor met a loved one. No kids were born and your parents stayed healthy and well. All your tenants paid on time. No convictions. The vacancy rate is down to zero. No maintenance expenses, whatsoever. What a stress-free life! By the way, how long did it take you to come to this point, where you build such a passive income stream of “whopping” $1,095 /months?
2nd Home = 16.2 months 3rd Home = 14.8 months
Time Spent =31 months = 2 years 7 months
For the past 2 years and 7 months, you lived like a monk. Skinny, tired, but determined to make it work. $5k /months is your dream and nothing can stop you. Great! I like the persistence with which you dig yourself into the grave. Now, please sit down for a second and answer the following questions:
With three behind your belt, how many more houses will it take to get you to your goal?
How long will it take to obtain those properties if you continue down this path?
Let’s run some numbers:
It will take 9 houses to generate almost $40,000 /year of income after paying taxes.
Yellow line all the way down indicates the point at which your rental properties generate you $5,110 a month. This will happen 12 years later when you rent out 14 houses.
Just think about it, it will take you somewhere about 12 years of living like a monk, busting your ass day in – day out at the full-time job to finally get to the point where you can quit. How realistic is it to maintain such a lifestyle? Is it worth it? Are you ready to pursue this for 12 years? What are your thoughts?
Numbers above don’t include a lot of important things, such as:
Renovation/Maintenance Expenses. Houses break, the roof will leak, AC will break, the basement will get flooded. None of those unexpected experiences were included;
Evictions. Tenants don’t always pay rent and you will have to deal with courts, late payments, and evictions. Rooms stay unoccupied – rent doesn’t get paid;
Life Situations. People want new clothes, people want ice cream from time to time. People get married, get sick, and die. People make babies. People divorce. People lose jobs, people find better jobs. None of those were included in calculations. Not a single calculator in the world can predict and account for the life situations that WILL happen to you;
Property management fees. It will be hard to manage 14 houses without some sort of property management assistance. Especially if you are working at your full-time job. Especially if you want to make this income as passive as possible. As a baseline, expect to pay a typical residential property management firm between 8 – 12% of the monthly rental value of the property, plus expenses. Some companies may charge, say, $100 per month flat rate. 10% on your monthly rental income of $5,110 is $511. That’s an extra house for a second… Now you will need 15properties to keep you afloat;
House appreciation. Typically, over the years, your house will be worth more than you paid for it. This extra value can be refinanced and put towards the purchase of the next home. It can be a huge help and dramatically speed up the process at which you get to your goal. It is really hard to predict how much the property will cost over time and the further you shoot, the more off you will be;
Over the course of 12 years, you have saved and re-invested $840,000 worth of down payments (14 houses x $60,000) to buy 14 homes. Let’s see how well your investments paid off.
Capitalization Rate
Cap rate is the crucial piece of information that investors use to make their decision. You need to know for two main reasons:
Analyze the performance, or expected performance, of your rental properties. For example, if there are three houses in your price range for sale, calculating the expected cap rates for all three can help you determine which is the best investment.
Determine your property’s fair market value (FMV). This is important if you’re selling a property. If you know how your property’s net operating income and the industry average cap rate, you can determine your property’s fair market value. Market value = net operating income / cap rate.
Cap Rate is the ratio of the property’s net income to its purchase price (or current market value). While the purchase price remains the same, the market value of the house raises year over year and gives more accurate calculations. $500 /month of cash flow results in a cap rate of 7.3%. What’s a good cap rate, you might ask? On the right are the averages according to CBRE’s North America cap rate survey for the first half of 2019. 7.3% is a good investment. Also since we included mortgage repayment into these calculations it can be considered a cash-on-cash return. Mortgage repayment is the variable that differentiates the two.
Inflation, The Rule of 72, and Home Appreciation
In light of recent, or I should say current events surrounding the COVID-19 pandemic we begin seeing the combination of inflation and low mortgage rates. What does it mean to real estate investors like us? High compounded rates of home appreciation. As a tenant or a typical consumer – you lose, because increasing rates of inflation are not very helpful for your consumer purchasing power of basic goods and services like food, utilities, gas or transportation prices. However, if you own the property, you should smile, because the best traditional hedge against inflation is, was, and probably always will be – the Real Estate. This is true because home values tend to increase at least as much as the reported annual rates of inflation. Let’s play around with numbers and calculate how soon your investments will double in value. We will use The Rule of 72. The use of it is very simple: you divide the number 72 by an estimate of annual appreciation gains. A home that appreciates at 10% per year (72 divided by 10 = 7.2 years) may double in value every 7.2 years. Another home that appreciates 7% each year can double in price every 10.2 years during a relatively strong economic time period. Or, as in our case, home appreciating in value at 3.5% per year is quite likely to double in value every 20.6 years. However the rule of 72 is not 100% precise, it gives a quick glance at the real estate market condition.
As the house owner, you should also be familiar with Compound Interest. It refers to the idea that when you earn interest on an investment, that earned interest is rolled back into the investment and starts to build on itself. Let’s look at an example on the left. We know that the average annual appreciation rate on your house in Ontario, Canada is 3.5%. Therefore we assume that your $300k house appreciates in value by 3.5% at the end of the first year of ownership. You just made $10,500 out of nowhere it’s put into your home’s value. The next year you’re earning 3.5% on the new property value of $310,500. At the end of the following year, you’ll actually earn $10,868, which is $368 more from the previous. Your earning has gone up, even though you haven’t done anything more than just leave the money in place. If you have enough patience and allow the power of compound interest to do its magic, the house you bought for $300k will double in value in about 21 years.
Inflation is the counterforce and works in the opposite direction. You probably remember as a kid, buying a can of Coke for $0.50? The increase in prices over time is inflation, and it basically means that a dollar today simply does not buy as much as it once did. According to Statista.com, in 2018, the average inflation rate in Canada was approximately 2.24 percent. So let’s use that as the example here. Things don’t look so bright anymore. After keeping your property for 25 years, it will increase in price only by $105,165. Inflation just ate $279,834 of your money…
To make things worse I’ll remind you that you haven’t paid your taxes yet. According to the Government of Canada: “When you sell your home, you may realize a capital gain. If the property was solely your principal residence for every year you owned it, you do not have to pay tax on the gain. If at any time during the period you owned the property, it was not your principal residence, or solely your principal residence, you might not be able to benefit from the principal residence exemption on all or part of the capital gain that you have to report.” This means that if you are considering selling your principal residence, you can be reassured that you likely won’t have to pay any tax on your home provided that you meet certain conditions. However, if you are considering selling one of your investment properties, the tax implication can be a bit more complicated. There are two streams of income you would need to pay tax on:
Capital gain. Say you purchase a property for $300,000, and you sell it for $405,165 in 25 years. Capital gain = $405,165 – $300,000 = $105,165. In Canada, 50% of capital gain is taxable, hence 50% of $100,000 is taxable = $52,582. If you own the property in your own personal name, this $52,582 is added on top of your other income and is subject to the marginal tax rate for the respective tax brackets you are in. For example, let’s use the tax rate we used in previous calculations – 26.8%. Hence tax liability is roughly $52,582 x 26.8% = $14,092
Recapture. You are allowed to claim the wear and tear on the property to defer your rental income. The wear and tear are called capital cost allowance. Assume that 90% of the value belongs to the building and 10% of the value belongs to the land, the capital cost of the building is therefore 90% x $300,000 = $270,000.
Where am I getting with all this?
Conclusions
It will take time. A loooong time to build the income that will support your lifestyle and allow you to retire. And if you start late enough, you might retire around the retirement age. The example used in this study is just one of the ways things might unfold. It is steady but very freaking slow to build your way out of the 8-5 system. Now I am going to ask you:
Does it worth spending 12 or even 10 years of your life living only on rice and beans?
Do you think, 12 years later, when you get that $5,000 check it will all seem worth the time and effort you put in?
Will you be able to hold on to your full-time job for at least another decade? Or find another boss, who will pay you at least the same salary.
I am pretty sure that those questions got you thinking. Here is a thing, if you want to break free from the hamster’s wheel, you have to get creative! There are ways to speed up your way to the goal of yours. Some, but not all of them are:
Reinvest Positive Cash Flow;
Re-finance;
Keep the full-time job. If you quit your day job early you will lose your steady and secure income stream and lenders may refuse to lend to you because they believe you cannot support the repayments that the loan requires;
Tax Advantages of Real Estate Investing. Real estate is one of the most tax-advantaged investments compared to other investments.
1031 exchanges
Tax-free or tax-deferred retirement accounts
Appreciation;
Equity Build-up;
Team up with others.
Syndications
Partnerships
Simply saving every dime won’t get you far… Saving is definitely better than spending, however, it will not make you rich. Don’t spend your cash on stupid stuff, but realize that it’s better to make more, rather than save more. Doesn’t matter how savvy you are, you can not save your way to wealth. In 99% of cases, your full-time job’s salary will be enough only to meet your basic needs. See below the Maslow’s hierarchy of needs:
You will live a pretty comfortable life:
Always fed, never hungry;
Live in a comfy warm little cave;
Healthy, with access to quality medical treatment;
Happy in your relationships with friends and family…
Indeed, that’s a great life to live. However, there are a lot of people I know who live such lives, but they don’t seem to be very happy. There are people who are different breeds. Those folks stagnate in the certainty and safety that the modern world brings. They strive for a challenge, they are hungry for achievement. Those people strive in crisis and hardships. When it comes to your life – you are the ultimate decision-maker.
You decide, either navigate for miles on woods roads or play it safe take a short trail.
RENTS IN THE DISTRICT OF COLUMBIA The hearing of June 17, 1932, which appears below, was held prior to the approval by the Senate of Senate Resolution 248, directing an inquiry into the rental situation in the District of Columbia. The record of the following hearing is included herein, however, because of its close relationship to subsequent proceedings under the resolution.
FRIDAY, JUNE 17, 1932 UNITED STATEs SENATE, CoMMITTEE on THE DISTRICT of Columbia, Washington, D. C.
Mr. BRINKMAN. In a case where a building is mortgaged for $200,000 and the interest is 6 percent, if that interest rate were lowered to 5 percent and some of the excessive commissions charged for renewals every three years on these loans were eliminated, you would have a saving in interest charges and commissions of $2,500 on that loan. The usual rental of a building of that type is about $33,000. You could give the tenants of that building a 7 percent reduction in their rent, without diminishing the return to the owners at all, simply by lowering the interest rate 1 percent.
Mr. BowTE. Do you mean a building that you would loan $200,000 on would only produce $30,000 a year? Mr. WHITEFORD. That is the worst loan I ever heard tell of. Mr. BRINKMAN. $33,000. Mr. Bowie. Nine times. Mr. WHITEFORD. You talk about vicious loans. I am surprised at how little you know after all your study about this. Mr. BRINKMAN. Thank you for the insult.
The Rust firm took in the ‘Clifton Terrace Apartments at $750,000. The income from that property is sufficient to produce a net return of about 13 percent on the investment.
Apartment-House Game
Senator Copeland. Are you familiar with the apartment-house game at all? Mr. GoRDON. Fairly well. I know they are all broke. Senator Copeland. Well, is your business comparable to theirs? Are they better or worse off than you are? Mr. GoRDON. Well, I would say—I can not swear to this—more than half of the apartment houses in Washington have been foreclosed through the inability of the people to carry them. Either the Second or first trusts have been foreclosed and the people lost them. I think that is the best proof that they do not pay. Senator CAPPER. Well, were not the most of them financed for a great deal more than they had in them? Mr. GoRDON. Some of them, although a few firms here, which you probably know about, did some very wildcat financing, but we don’t account that. That was the exception. Most of our lenders here lend on an apartment house about 60 percent to 65 percent of the actual cash cost of the building and ground. That isn’t bad. Then, this man will have a second trust above that, maybe of 20 percent, and then when a smash comes, he gets squashed. Senator CAPPER. The second trust is where the high financing took place? Mr. GoRDON. Not necessarily. Senator Copeland. Your idea and contention is that even though there has been a foreclosure and new owners have taken possession, that with the amount of the investment they have to make, it goes up to the original cost? Mr. GoRDON. Well, maybe not that. He takes it over at $150,000. Maybe he will have to spend $15,000 to fix it up, but he may lose that much in vacancies before it is filled up again. Sometimes you have to take these houses and fumigate them with poison to get the bedbugs out. Senator KING. What do you allow for deterioration in buildings here per year? Mr. GoRDoN. Well, 2 percent or 3 percent. Senator KING. In 10 years a building costing $200,000 would deteriorate 20 percent? Mr. GoRDON. It may go further than that; and if the neighbourhood goes back, you get hit awful hard. It is a very risky business. Senator Copeland. Well, the present investment in an apartment house, according to your figures, is at least 25 percent less than the investment made by the original builder? Mr. GoRDON. I would say so, yes; but he hasn’t got a new building and is not getting the same rents, either. Keep your mind fixed on this: One-half of the apartment-house owners have lost their buildings because they would not pay. That is a fact. Look at the Star every evening and you will see big foreclosures all the time. Senator CAPPER. Do not the loan companies—the loan companies. are companies—the loan companies who are doing the financing—make the clean-up? They get the money.
House Values
Senator KING. Has there been a reduction in the value of the real estate in Washington during the past few years? Mr. GoRDoN. You can build houses now, the actual cost bein about 30 per cent less than you could four or five years ago. Ground has held its own. I am surprised it has, really. In many places vacant ground has gone up a little bit. Senator CAPPER. Are conditions in Washington in that respect better than probably any other city in the country? Mr. GoRDON, I consider Washington the safest city in the world. Senator CAPPER. Is it not due largely to the fact that there is a steady payroll here out of the Government Treasury? Mr. GoRDoN. Yes, sir. Senator Copeland. And no industrial life.
Construction and building new houses had become 30% cheaper. During the financial crisis, it is safer to live in non-industrial cities.
Land Value
Senator Copeland. And, as a matter of fact, the present value of the property is probably not half that? Mr. GoRdon. No; I would not say that. I would say the building is 30 percent off and the ground has held its own. I think that is it. The ground has held its own. Senator Copeland. Then, your judgment is that the average apartment house, thoroughly modern, is worth about 30 percent less? Mr. GoRDON. The building; yes. The ground at the same value. The ground has held up very nicely.
Buildings had lost about 30% in value!!! However, what is really interesting is that the land price remained the same… Investments in lad are much safer.
Senator Copeland. What about land values?
Mr. Do YLE. They are off in the majority of cases. There are instances where surrounding improvements naturally are holding or maintaining values, and in some places, they are going up, depending on the use of the particular property. Senator Copeland. Has there been anything abnormal in that? Mr. Do YLE. Just a general lack of demand caused by general conditions. Mr. BRINKMAN. If a building is worth given amount to-day, and if it would cost to reproduce that building 25 percent less than it cost to put it up originally, ought not rents to come down proportionately assuming the building was on a fair rental basis before? You would have a building worth less and you could not sell it on the market for the same price as when it was constructed. Should there not be a reduction of rentals? Mr. Doyle. There is no arbitrary situation where the landlord can dictate what he will get out of his property. He has to take what his tenant will pay. That is regulated by supply and demand. Mr. BRINKMAN. How much of a reduction should occur? Mr. Do YLE. It is not dependent on what costs have gone down, because we have in mind normal conditions and not abnormal conditions. Mr. BRINKMAN. You had a good many vacancies at 3901 Connecti cut Avenue, had you not? Mr. Do YLE. Yes. Mr. BRINKMAN. You reduced rents substantially, did you not? Mr. Doyle. They have been reduced. Mr. BRINKMAN. Did you rent a great many of the apartments? Mr. Do YLE. When we first took it over we did not reduce them as much. Vacancies occurred to some extent afterward. Rents were reduced in the last two months quite materially, and old tenants were given a month’s rent. Mr. BRINKMAN. And you were able to rent some of those empty apartments? Mr. Doy LE. It has been, through very careful and good management, rented up, and I think it is practically 100 percent rented. They are very reasonable rents, but it pays no return on its cost.
Construction Costs
Mr. BRINKMAN. How much have apartment building construction costs come down approximately in the last few years? Mr. Doyle. Approximately 25 percent. Mr. BRINKMAN. Twenty-five or 30 percent, would you say? Mr. Do YLE. I said 25. Of course, I am testifying.
The cost of construction reduced by 25%. It got much cheaper to build, hence it made sense to buy deteriorated houses just for the value of its land. Demolish -> Build a new house. However, if you wanted to build an apartment house and had to have a first-trust loan of $300,000 or $400,000, I do not think it would be humanly possible to get it. Build for cash?
Mr. WHITEFORD. I would not put a dollar in any building enterprise, and I do not think any other sagacious businessman would. Senator Copeland. I know you can now build property very much less than you could two or three years ago. I built a building three years ago and another this past summer. My cost on the second building was about one-third less than on the first one. There is not any question about that.
Rents
Mr. WHITEFORD. … we hear these complaints of distress that can not pay any rent. I know of people who are living in houses, in apartments, where they are not paying rent. They can not pay it. There are homeowners who can not keep homes. A man came in my office yesterday and asked me to loan him $200 to pay the little installment of interest due to his home, and it is a nice, great big home worth $20,000 odd. That man is suffering. He is in danger of losing his home for a few hundred dollars, but you can not do it by wishing you could. These property owners are in a jam. They are in difficulties and have their properties on valuations and purchase prices that go back for several years. Many of them are losing them now. Their security is jeopardized, for a lot of these properties are not worth the trust.
A drop of 2.5 percent in rents in Washington between June 1929 and June 1932.
The CHAIRMAN. In looking over Mr. Brinkman’s report I see that the reductions are very small. Mr. BRINKMAN. That is correct. Senator KING. You mean it is to the personal advantage of an owner to take charge of the rental of his own property? Mr. BRINKMAN. If I were the owner of the property I would not put it in the hands of a real estate agent, because I would have to pay them 5 percent commission, have to let him manage the property, buy supplies for it; pay in some cases 8 to 10 percent discount on purchases for the property, let them fix the scale of rates, and if a tenant is already a tenant of another member of the Real state Board, they will not accept him as a tenant. I will say it is a disadvantage in many respects for an owner of a property to turn it over to real-estate agents.
In order to reduce operational costs, owners will start managing properties on their own. Not the best time to be in the property management business.
Increase in rents by colored people
Mr. J. C. OLDEN. I represent the Better Citizens Bureau. I have made some further investigations with reference to the reduction of rent during the last week or so. I was to bring that further testimony to Mr. Brinkman, but they said they had closed reports on that matter. I can give the facts to this committee; as far as I have been able to find out in the apartment houses and houses that are rented by colored people there has been an increase in rents in the last three years and in some cases no reduction at all, possibly $2.50 or $3 reduction in an apartment. Senator Copeland. Does this cover a good many houses? Mr. OLDEN. Practically all the apartment houses rented by the colored in Washington. Senator KING. Are any of those apartment houses owned by colored people, to which you refer? Mr. OLDEN. No; they are owned by white people. Some have white agents and some have colored agents. Might not be the case in the modern world. I suspect there was much more racism back in the 30th. Mr. BRINKMAN. Properties are not worth the assessments? Mr. WHITEFord. Not to-day, they are not. Senator Copeland. I do not know any reason in the world why the landlords of Washington expect they are going to make money when nobody else in the world is doing it. Mr. WHITEFoRD. Most of them are not. Property owners and landlords, in particular, are losing money. If you had $500,000 you would not buy a piece of property and pay for it in cash. All large rental properties have trusts or mortgages on them made by an insurance company or trust company. There is no way in heavens world that they can escape paying 5 or 6 percent interest on their trusts and that interest rate was incurred several years ago. When you figure these properties have got to go on and pay that interest if they do not they will lose them.
Cash is King. Save cash, leverage.
Mr. WHITEFORd. The landlord gets to it every six months when he pays his interest. Sixty percent of the assessed value represents a fair mortgage, which is a fair way to approximate it. Senator Copeland… What percentage? Mr. WHITEFORD. Sixty percent of the assessed value. If that be true, then our figures show the property owner is getting less than 3 percent on his equity. Mr. WHITEFORD. Yes; and as Mr. Lusk says, it is less than savings bank interest; it is less than Liberty bond returns. Senator Copeland. Do you not think he would be lucky if he got enough to pay carrying charges? Mr. WHITEFORd. That is true. When you reduce the rent, you will have people that can not do it which will result in a series of foreclosures in the community.
Only sixty percent of the houses’ value is backed up by mortgage.
It seems to me that the owner and the agents overlook the great opportunity to increase the number of their tenants, and increase their income by reducing the rent.
Senator Copeland. I will tell you about my experience. I just came from Michigan where I went to see my father. My sister and I own some modest little homes and I asked her how she was getting along with the tenants. She said she cut the rent in two, in each instance, because by doing that she kept the tenant. They could not pay more than that, and if they had moved out because of the rental they had been paying, certainly she could not have rented the property to anybody else, because nobody else would pay it, but by making those reductions houses are occupied. As the chairman said, it seems to me in view of this great crisis, as it is going to be worse after this Congress adjourns, we have got to do something to take care of these people, and the landlords have just got to face the situation. If they do not cooperate they are go ing to lose anyhow, because these people can not the rent. They will have to reduce them or they will move out.
Mr. WHITEFord. We are reducing them. We have shown a lot of reductions, and experience shows it every day. Many of them are losing their property under foreclosure, anyhow, whether they reduce them or not. Senator KEAN. In the city of Elizabeth, where I come from, there is a row of apartment houses that used to rent for from $55 to $60 a month. They had been getting it right along, but now they are down to $27. Mr. WHITEFORD. If they have any trusts on the property they can not carry them.
Increase the number of their tenants, and increase their income by reducing the rent. How many tenants can you put under one roof? Now there are a lot of regulations that will restrict that.
Reference
United States. Congress. Senate. Committee on the District of Columbia. Subcommittee on Rental Investigation. (1932). Rents in D.C.: hearings before the United States Senate Committee on the District of Columbia, Subcommittee on Rental Investigation, Seventy-Second Congress, second session, on June 17, July 28, Sept. 9, Nov. 10, 30, Dec. 1, 2, 17, 20, 21, 23, 27, 29, 1932. Washington: U.S. G.P.O..
Below is my excerpt accompanied with main takeaways from the study published by Ray Dalio – an American billionaire hedge fund manager and economist, on April 23, 2020. (LinkedIn post)
We shouldn’t rely on governments to protect us financially.
We should expect most governments to abuse their privileged positions as the creators and users of money and credit.
All countries can print money to give to people to spend or to lend it out. However, not all money that governments print is of equal value.
You cannot create more wealth simply by printing more money and creating credit. To create more wealth, one has to be more productive. The relationship between the creation of money and credit and the creation of wealth (actual goods and services) is often confused yet it is the biggest driver of economic cycles.
Money and credit are stimulative when it’s given out and depressing when it has to be paid back. When the economy is growing too quickly and the government wants to slow it down, they make less money and credit available, causing both to become more expensive. When there is too little growth and central bankers want to stimulate the economy, they make money and credit cheap and plentiful, which encourages people to borrow and invest and/or spend.
The short-term cycles of ups and downs typically last about eight years. These short-term debt cycles add up to long-term debt cycles that typically last about 50 to 75 years. The last big long-term debt cycle, which is the one that we are now in, was designed in 1944 in Bretton Woods, New Hampshire, and was put in place in 1945 when World War II ended. However, these long-term debt cycles take about a lifetime to transpire, unlike the short-term debt cycles that we all experience a number of times in our lifetimes so most people understand better. When it comes to the long-term debt cycle most people, including most economists, don’t recognize or acknowledge its existence because, to see a number of them in order to understand the mechanics of how they work, one has to look at them operating in a number of countries over many hundreds of years in order to get a good sample size.
When it is widely perceived that the money and the debt assets that promise to receive money are not good storeholds of wealth, the long-term debt cycle is at its end, and a restructuring of the monetary system has to occur.
When countries were at war and there was no trust in the intentions or abilities to pay, they could still pay in gold. So gold (and to a lesser extent silver) could be used as both a safe medium of exchange and a safe storehold of wealth.
A person puts money in a Bank in exchange for interest (profit) -> Bank lends that person’s money to somebody else in exchange for a higher interest (profit) -> Those who borrow the money from the Bank like it because it gives them buying power that they didn’t have. Everyone is happy.
Trouble approaches when either there isn’t enough income to survive one’s debts or the amount of the claims (i.e., debt assets) that people are holding in the expectation that they can sell them to get money to buy goods and services increases faster than the number of goods and services by an amount that makes the conversion from that debt asset (e.g., that bond) implausible.
Think of debt as negative earnings and a negative asset that eats up earnings (because earnings have to go to pay it) and eat up other assets (because other assets have to be sold to get the money to pay the debt). When incomes and the values of one’s assets fall, there is a need to cut expenditures and sell off assets to raise the needed cash (to pay the debt).
When that’s not enough, the following happens:
Debt restructurings where debts and debt burdens are reduced, which is problematic for both the debtor and the creditor because one person’s debts are another’s assets
Central bank printing money and the central government handing out money and credit to fill in the holes in incomes and balance sheets (which is what is happening now). It occurs when holders of debt don’t believe that they are going to get adequate returns from it.
When people go to Banks and take the money they invested (for interest) out of it to buy goods and services, the bank has two choices:
Allow that flow of money out of the debt asset (raise interest rates and cause the debt and economic problems to worsen).
Print money.
An important difference between money and debt. Money is what settles claims—i.e., one pays one’s bills and one is done. Debt is a promise to deliver money.
This Already Happened Before… Several Times
In 1971, on the evening of August 15, when President Nixon spoke to the nation and told the world that the dollar would no longer be tied to gold. This led to stock prices rising. On Sunday evening March 5 President Franklin Roosevelt gave essentially the same speech doing essentially the same thing which yielded essentially the same result over the following months (a devaluation, a big stock market rally, and big gains in the gold price). That happened many times before in many countries, including essentially the same proclamations by the heads of state.
The coronavirus triggered economic and market downturns around the world, which created holes in incomes and balance sheets, especially for indebted entities that had incomes that suffered from the downturn.
When credit cycles reach their limit, the following events take place:
Interest Rates fall down. When there isn’t much room to stimulate by lowering interest rates (or printing money and buying financial assets) the greater the likelihood that there will be a monetary inflation accompanied by economic weakness. Stimulating money and credit growth by lowering interest rates is the first-choice monetary policy of central banks.
The government prints more money and creates additional debt. It is both the logical and the classic response for central governments and their central banks to create a lot of debt and print money that will be spent on goods, services, and investment assets to keep the economy moving. That is what was done during the 2008 debt crisis when interest rates could no longer be lowered because they had already hit 0%. As explained that was also done in response to the 1929-32 debt crisis when interest rates had been driven to 0%. This creating of the debt and money is now happening in amounts that are greater than at any time since World War II. The European Central Bank, the Bank of Japan, and—to a lesser extent—the People’s Bank of China made similar moves.
People will shift their wealth into other things. Current money printing increases the chances that money will be printed too aggressively and not used productively so people will stop using it as a storehold of wealth and. They also often move their wealth to other storeholds of wealth like gold, certain types of stocks, and/or somewhere else (like another country that is not having these problems).
People will seek to sell their debt assets and/or borrow money to get into debt that they can pay back with cheap money.
Such periods of reflation either stimulate another money and credit expansion that finances another economic expansion (which is good for stocks) or devalue money so that it produces monetary inflation (which is good for inflation-hedge assets such as gold).
Economic stress caused by large wealth and values gaps, will lead to higher taxes and fighting between the rich and the poor. The rich move to hard assets and other currencies and other countries. Those countries that are suffering from this flight from their debt, their currency, and their country will want to stop it. Expect governments to try to make it harder to invest in assets like gold (e.g., via outlawing gold transactions and ownership), foreign currencies (via eliminating the ability to transact in them), and foreign countries (via establishing foreign exchange controls to prevent the money from leaving the country).
When there is a large wealth gap, big debt problems, and an economic contraction, there is often fighting within countries and between countries over wealth and power. Also this will lead to domestic and international political changes.
The governments will go back to some form of hard currency (e.g., gold or a hard reserve currency) to rebuild people’s faith in the value of money as a storehold of wealth.
People will start selling their assets. To deal with that monetary inflation crisis and break the inflation, the supply of money will get tightened, which will drive interest rates to the highest level “since Jesus Christ”. Debtors will have to pay much more in debt service at the same time as their incomes and assets fall in value. This will squeeze the debtors and require them to sell assets.
We shouldn’t rely on governments to protect us financially.
We should expect most governments to abuse their privileged positions as the creators and users of money and credit.
There has been a lot of hype around the subject of 5G Technology. I’ve been getting bombarded with information for it. What actually is this “5G” all about? Put simply, 5G is a next-generation wireless network that will give you much faster internet connections. But, because of the way it works, it’s about to change the way lots of other things connect to the internet, too, like cars and TVs, and even things like connected lights on city streets. More about this below.
In this Article
5G in HEALTHCARE
5G in MANUFACTURING
5G in AUTOMOTIVE
5G in RETAIL
5G in ENTERTAINMENT
5G in ENERGY
5G in AGRICULTURE
5G in FINANCIAL SERVICES
5G in SUPPLY CHAIN MANAGEMENT
WHAT’S NEEDED TO IMPLEMENT 5G?
BLOCKERS
5G STOCKS
While smartphones and other mobile devices are the obvious use cases for 5G, there are many other applications for the technology. The internet of things (IoT), for example, will benefit tremendously from the speed and bandwidth provided by 5G, especially as the industry grows: Gartner estimates that over 20B IoT units will be installed by 2020, while IoT-related spending will reach nearly $3T. Autonomous vehicles, robotic surgery, and critical infrastructure monitoring are just a few of the potential applications of 5G-enabled IoT.
Industries such as healthcare, manufacturing, and auto are already adopting technologies and becoming more connected. Once 5G becomes widespread, the effect on these industries could be transformative for 3 main reasons:
5G devices are lower latency, enabling faster transmission of larger data streams
5G devices are more reliable, enabling better transmission of data in extreme conditions
5G is more flexible than Wi-Fi and can support a wider range of devices, sensors, and wearables
HEALTHCARE
Telemedicine is projected to grow to an $86B market by 2025.
Wearable devices are already being used to track everything from sleep to blood glucose levels to physical activity, among other things. 5G’s faster speeds and greater network reliability will allow for the development of more complex devices, including those implanted directly into a human body rather than worn externally.
MANUFACTURING
One major potential improvement with 5G will be augmented reality for manufacturing. Ericsson began testing augmented reality troubleshooting in its Tallinn, Estonia factory in January 2018. With an AR app, technicians can observe a part that needs maintenance and pull up the relevant schematics and instructions within their field of vision, drastically shortening the time it takes to complete the repair.
A technician repairs a circuit board using an augmented reality overlay at Ericsson’s Tallinn factory. (Source: Ericsson)
Other industrial use cases for 5G (according to AT&T) include:
Continuously monitoring equipment performance
Robotic visual recognition that autonomously performs quality assurance on products
Enabling predictive analytics to tell when a part is going to fail
AUTOMOTIVE
5G Automotive Association (5GAA), began work on “cellular-vehicle-to-everything” or C-V2X technology in 2016. Rather than cars determining individually how to act, in the C-V2X system, driverless vehicles communicate with one another and with parts of the physical environment like traffic lights and construction signs in order to coordinate movements safely and efficiently.
RETAIL
From in-store analytics to visual recognition-driven shelf monitoring, all depend on or benefit from the ability to transmit large amounts of data and access high-throughput connections, which is why 5G technology stands to have such a large impact on the way retailers operate.
Current “smart shelves” incorporating RFID technology, for example, can tell a business owner the ratio of item pick-ups to sales and display dynamic prices. With 5G technology, shelves equipped with sensors could determine low stock on a product, ping a distribution center to restock its inventory, and dynamically monitor the progress of that shipment.Today, companies like Sephora use virtual try-on technology to help in-store customers see what a particular makeup would look like on them before they buy, but the product is constricted by data streaming limits. 5G technology eliminates such limits. 5G also has the potential to create entirely new types of shopping experiences that would be unthinkable with today’s technology.
ENTERTAINMENT
Download speeds will decrease dramatically over 5G, making movie, game, and TV downloads possible in seconds rather than minutes. This could propel a shift away from streaming and towards mobile downloads.
5G could have an even more transformative effect on augmented reality (AR) and virtual reality (VR). VR and AR applications have a higher field of view, resolution, and frame rate than conventional media, and as such require a significantly higher level of bandwidth and lower level of latency in order to transmit a consistent experience to the viewer.Faster connectivity through 5G will also be revolutionary for the e-sports and gaming industry, where quick response times can often determine a player’s success. Mobile 5G gaming revenue is expected to be worth $100B by 2028, according to the Intel/Ovum report.
ENERGY
5G could help enable more cost-effective energy transmission. Faster connection speeds could result in energy grids being more efficiently managed, which, in turn, could lead to less downtime.
Streetlights connected with 5G technology and equipped with sensors could switch off if there aren’t any people or vehicles on the road, thus saving energy. This approach could lead to savings of up to $1B annually in the US, according to a report from Accenture.Verizon believes that the energy industry will be a key demonstration of 5G’s potential, with the company stating that the sector will be one of the “most significant test cases” for 5G technology.
AGRICULTURE
5G will offer farmers the opportunity to get faster, more accurate information in the field. Companies such as SlantRange are already providing drone-services for farmers to gain insight into their crops. Autonomous tractors, for example, may eventually use 5G to pair with drones to guide their work, like identifying which parts of a field needs fertilizer.
FINANCIAL SERVICES
Mobile payments could happen much faster and more reliably as multiple processes could be executed in parallel. 5G could also allow mobile apps to keep less data on devices — instead quickly recalling it from the cloud — resulting in lighter and more responsive apps.
AT&T, for example, is reportedly developing mobile branches for banks in the US, which will be connected using 5G technology. These mobile branches are envisioned as serving scenarios like music festivals, pop-up shops, and remote areas with low banking needs.
SUPPLY CHAIN MANAGEMENT
In a warehouse, for example, 5G-connected devices coupled with sensors would allow quicker communication, collection of a larger amount of data, and faster responses to breakdowns. One application of 5G tech in supply chains is tracking and tracing packaging or parts in real time. This ability to better track individual packages could also streamline insurance claims for damaged shipments. With 5G-enabled sensors attached to packages, it would be easier to monitor their status — including variables like temperature, moisture, and location — information that would help stakeholders identify where things went wrong and claim insurance accordingly.Autonomous delivery, which is already being tested by companies like DHL, is another area that could receive a boost from 5G connectivity.
WHAT’S NEEDED TO IMPLEMENT 5G?
Fibre-optics
Data travels through wires the majority of the time, with wireless antennas typically completing the last few miles of delivery. In this way, fibre functions as the nervous system to the mobile network. Fibre-optic infrastructure is prevalent today and used by current 4G systems, but more will be required to support widespread 5G.
Small Cell deployment
Much of today’s wireless data is delivered through macrocells, known more commonly as cell towers. They provide the foundation for wireless connectivity and can serve thousands of mobile users within a radius of up to 40 miles. Macrocells are difficult to deploy and maintain. The costs of regulatory approval, construction, power, and maintenance make traditional macrocell towers a necessary burden for wireless connectivity. Small cells (or microcells) are growing contributors to wireless connectivity, supporting the wireless systems of the present and future. They are much easier to install and maintain. They’re also cheaper, more energy efficient, and require less red tape than macrocells.
Some of the newest small-cell technology is hidden in plain sight. In Los Angeles, small cells have been deployed as part of smart streetlights to strengthen 4G networks.
High-frequency Spectrum Availability
5G speeds also require radio waves with extremely high frequencies. Increasing demand for wireless coverage, speed, and consumption requires the use of new bands within the radio wave spectrum. Higher frequencies allow for faster data transmission, they’re unable to pass through certain structures. For example, satellite TV, which typically uses frequencies between 13-18 GHz, requires a direct line-of-sight to prevent disruptions. Heavy rainfall or an overgrown tree could impact viewing quality. For most 5G networks, the super high (3-30 GHz) and extremely high (30-300 GHz) bands will be used to deliver the Gbps speeds promised by wireless carriers. Frequencies between 24 GHz and 86 GHz will be particularly popular.
Fixed Wireless
High frequencies of 5G require a direct line-of-sight, “fixed wireless” will allow for cellular coverage within buildings and homes, without the use of cables or lines. Fixed wireless antennas are placed on top of homes and buildings to communicate with nearby small cells or macrocell towers. These fixed wireless antennas must maintain line-of-sight with the nearby cells, they are able to extend cellular coverage into homes and buildings. These antennas may be connected by fibre to internal picocells or femtocells, which are used to relay wireless coverage to a small number of mobile users indoors. The wireless signal can also be converted to conventional Wi-Fi with the use of specially designed modems and wifi routers.
Verizon, rolled out fixed 5G wireless services in a handful of cities in 2018. These services will provide an alternative to internet access delivered via fibre while maintaining comparable speeds. The company is partnering with Samsung for its fixed wireless 5G routers, which will convert wireless 5G signals and enable Wi-Fi compatibility.
BLOCKERS
Cost. Providers will need to install a lot of new, and expensive infrastructure.
Range. 5G often relies on high frequency waves to gain its speed advantages over 4G, but this also entails shorter wavelengths — reducing the distance that 5G can carry a useful signal. With 5G signals tending to travel relatively short distances, network providers will need to deploy more antennas and base stations to ensure broad coverage.
Security and Privacy. Security researchers found shortcomings in 2018 in a 5G security protocol known as Authentication and Key Agreement (AKA) that in some cases could be used to steal sensitive information.
You have already noticed that the gas prices went down. Significantly! The first drop started on February 21st (Friday). Nothing critical, a slight fall down which had stopped on February 28th (Friday), exactly in a week. We are witnessing the Oil War – an epic battle between Russia and Saudi Arabia.
Why did the fall stop?
Why did it rise back up? Briefly, but it id
Did someone regulate it?
Was there events that caused the stall?
Is there an economic mechanism for oil price regulation?
Who controls the oil prices? OPEC or the Organization of the Petroleum Exporting Countries was formed to negotiate matters concerning oil prices and production.
How does OPEC do it? OPEC controls oil prices through its pricing-over-volume strategy. … Thus, when there is a glut of oil in the world, OPEC cuts back on its production quotas. When there is less oil, it increases oil prices to maintain stable levels of production.
Why do oil prices fall? Factories have been idled and thousands of flights canceled around the world as the coronavirus outbreak. People work from home – they drive less. Shrinking demand for jet fuel, gasoline and diesel. And now – the travel ban between the United States and Europe. It’s a nightmare scenario for the oil market.
What cheap oil means?
You will benefit from lower oil prices and the resulting decline in gas prices at the pump, especially in the United States where retail markets react more directly to supply and demand.
If you work on oil somewhere in the plant in Texas, Louisiana, Oklahoma, New Mexico or North Dakota, you will most likely lose your job.
People are being asked to isolate themselves. This is against human nature, therefore people will find other “safe” ways to socialize. Because people won’t socialize as much, they won’t buy a lot of jewelry and accessories. Apparel industry will also see a dip.
Up to this day I have not given too much of my attention to all the hype around COVID-19 virus. Up until now, however not because of the virus itself, but economical and social changes it caused directly or indirectly. The changes I witness are monumental. Right this moment we live in a really-really interesting moment. Nothing like this had happened before and we are at the front row of sets in theater of life.
Before I dive into the current state of economy and all the exciting things that’s happening, I need to refresh the memory on some of the basics. To make educated decisions and fair assumptions you have to understand how the economy works. This is the first time I actually went back to the knowledge I obtained at MBA school in my ECON class.
Low Interest Rates
As of March 13, interest rates are historically low. The last time we’ve seen such numbers was in 1991. What does it mean to you, economy and society?
Low interest rates are good for the economy: they stimulate people to buy more. Spending drives the economy. One person’s spending is another person’s income. The more people buy, the more is being produced. The more real estate a person owns, the more willing a bank is to grant the mortgage to that person. (coladerall)
Because interest rates are low, people will start to borrow more money. Borrowing will set us into the short-term debt cycle. This cycle works in phases, and typically lasts 5-8 years.
The phases are:
Interest Rates are low.
Spending increases. People buy more stuff. Economy expands
Income Increases. One person’s spending is another person’s income.
Prices go up. Especially its noticeable in the real estate market. Because production of goods could not keep up with the growing demand, prices on existing houses go up. Now more people have money and are wanting to spend them, however it takes time to build the house.
Inflation goes up. This is where the problems begin.
Interest rates go up.
People borrow less. Fewer people are now able to borrow.
With the new knowledge in mind we can assume and expect house prices to rise. Everything happens in cycles and the short-term debt cycle is just a building block of the long-term debt cycle. Each time The Bank lowers interest rates to stimulate the economy and get back on track, we leave more and more debt behind. Debt burden slowly grows until it’s not. Economic collapse is inevitable in countries with credit. People are not good at spotting long-term patterns and it makes it hard for them to spot, even harder to predict when the next crash comes. It all eventually leads to depression…
Key Takeaways:
House prices will rise
People will buy more
Interest rates will remain low for some time (no need to rush)
The questions are:
Why does the government stimulate the economy by lowering IR?
What will be the lowest interest rate in this cycle and when will it occur?
How long will housing prices be rising for, until we reach the ceiling?