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Today’s top stories…
Robinhood's 5% savings rate hike has investors wondering if it's the best place to stash their cash
The housing market's "perfect storm" is keeping prices sky-high
Trump's NYC real estate "empire" is looking more like a house of cards
🔥 Deal of the Day! 🔥: 3 bd | 3 ba | Ben Lomond, CA
Today’s mortgage rate (30 Yr. Fixed): 6.91%
Robinhood's Savings Rate Hike: Is 5% APY for Gold Members a Golden Opportunity?
Robinhood's recent rate hike to 5% APY on uninvested cash for Gold members might seem appealing, but savvy investors should look beyond the shiny veneer. While the 5% rate is competitive, it comes with a catch: a $5 monthly subscription fee. For non-Gold members, the cash APY is a paltry 1.50%.
But, how does it stack up with real estate?
Robinhood (5% APY with Robinhood Gold Membership):
Pros:
High Interest Rate: The 5% APY is significantly higher than traditional savings accounts and competitive with some high-yield savings accounts.
Liquidity: Your cash is easily accessible for investing or spending.
Cons:
Market Risk: While Robinhood uses FDIC-insured banks for its cash sweep program, the value of your investment itself can fluctuate depending on the interest rates offered by the program banks.
Subscription Fee: The 5% APY requires a Robinhood Gold subscription which costs $5 per month.
Real Estate:
Pros:
Potential for Appreciation: Over time, real estate values tend to increase, offering the potential for significant returns.
Rental Income: You can earn rental income from your property, providing a steady cash flow.
Cons:
Lower Liquidity: Selling real estate can take time and involve fees.
Higher Upfront Investment: Requires a significant down payment and ongoing costs like maintenance and property taxes.
Management: Being a landlord requires time and effort to manage the property and tenants.
Here are some additional factors to consider:
Your investment goals: Are you looking for short-term gains or long-term growth?
Your risk tolerance: Are you comfortable with the potential for fluctuations in value?
Your financial situation: Do you have the capital for a down payment on real estate?
Generally:
If you are looking for a safe and accessible place to park your cash with a high return compared to traditional savings accounts, Robinhood (with Robinhood Gold) could be a good option.
If you are looking for a long-term investment with the potential for appreciation and rental income, real estate could be a good option, but be prepared for the higher upfront costs and ongoing management responsibilities.
You may also want to consider a combination of both. You could keep some cash in Robinhood for short-term goals and invest in real estate for long-term wealth building.
Housing Market's "Perfect Storm" Keeps Prices Afloat
Market Watch: Demand Outpaces Supply, Keeping Housing Prices Elevated
Despite recent softening in the rental market, housing costs remain significantly higher than pre-pandemic levels. Rents are up 21% since early 2020, according to Rent.com, and home prices have soared nearly 50%, as reported by Capital Economics.
Dallas Tanner, CEO of Invitation Homes, attributes the persistent price pressure to a perfect storm of factors:
• A decade of cheap money and low interest rates fueled demand
• Regulatory hurdles at local and state levels have constrained new development
• The nation faces a housing shortage of 2-7 million units
This supply-demand imbalance has kept prices elevated even as the market enters a slower growth cycle. Higher mortgage rates, which reached 8% last year, have further tightened supply as homeowners hold onto their properties, unwilling to sell. Existing home sales fell to a nearly 30-year low in 2023 as a result.
Invitation Homes, the second-largest single-family home portfolio owner with over 100,000 properties across 16 major markets, has seen its business thrive in this environment. The company's revenue grew 8.6% last year to $2.43 billion, driven by higher average monthly rents and increased occupancy.
Tanner believes the strong performance of the for-lease segment is due to a "missing segment" of renters who desire single-family homes with yards, garages, and access to better schools, without the burden of a substantial down payment.
As the housing market continues to grapple with limited supply and strong demand, prices are likely to remain high in the near term. Addressing the housing shortage through increased construction and more streamlined regulations could help alleviate the pressure on both renters and potential buyers.
The Donald's Dwindling Domain: Trump's NYC Real Estate Reality Check
Donald Trump's golden façade has been crumbling for years, but the full extent of his real estate grift came into sharper focus after New York Attorney General Letitia James's civil lawsuit in late September.
While Trump has appealed the ruling, the question remains: what does he actually own in New York City? A deep dive into his portfolio reveals a so-called "empire" far smaller than his brand suggests.
Trump Tower (725 Fifth Avenue): The Trump Organization owns the retail and commercial portion of the 58-story building, as well as Trump's triplex apartment. James alleges that Trump significantly inflated the square footage of his apartment, claiming it spanned as much as 33,000 feet when it was just over 10,000 feet.
40 Wall Street: Trump owns the ground lease to this 72-story building, which means he pays rent to the landowners, the Hinneberg family of Germany. James accused Trump of valuing the building as high as $530 million in 2013, despite a bank-ordered appraisal putting its worth at $220 million the previous year.
1290 Sixth Avenue: Trump owns a 30 percent stake in this midtown office building, which he acquired almost by accident. The stake is locked up until 2044, meaning he can't sell it until then (when he'll be 97 years old). James accuses Trump of omitting these restrictions in his financial statements, falsely portraying the amount as "cash" that he controlled.
Other properties: Trump's ownership in other NYC buildings appears to be limited to a handful of apartments, ground leases, or retail spaces. In many cases, such as Trump Place on Riverside Boulevard and Trump SoHo, he never invested money in the building but merely licensed his name or managed the property.
As the legal battles continue, it's clear that Trump's footprint in New York has been shrinking for years. The Attorney General's lawsuit has laid bare the reality behind the Trump brand, revealing a far less impressive real estate portfolio than the former president would have the public believe.
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Airdna data:
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Estimated monthly revenue: $5,416/month
Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.
See you tomorrow!
✍️ Brett