Recession Proof Your Portfolio: Lessons from 40 years in the San Francisco Commercial Real Estate Market

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Newsletter Rundown:

• Financial Discipline in Practice: Real Life Stories

• Recession Proof Your Portfolio: Lessons from 40 years in the San Francisco Commercial Real Estate Market

• Final Word

Financial Discipline in Practice

Yesterday on Twitter, I shared my personal story of financial discipline in practice which has “gone viral” with nearly 3 million views:

Darin Tuttle @Darin_T80

When I moved back to California 5 years ago, my wife and I shared a car with 2 kids to save money. I rode a bike to work for 9 months. I told people I did it for the exercise, but really it was the best financial solution I could come up with at the time. My boss was… https://t.co/ezf4D8RmcP

I’m not sure exactly why my particular story made the rounds and resonated with so many people.

I feel like maybe sharing my story about biking to work to save money allows others the space to share financial decisions that are not easy but sometimes necessary to achieve long term goals.

Personal real life stories — not platitudes.

The response has been incredible.

For hours I’ve sat glued to my phone —reading hundreds of similar inspiring stories of people willing to budget, save, and achieve long term financial goals.

Sean Khatibi @Sean_khatibi

This is the “real”lesson in finance. All that 1000% option gains are garbage if one doesn’t understand and appreciate this story and apply to one’s life. Thank you for sharing this @Darin_T80 and all the very best of luck to you and your family. 🙏🏼 #fintwit https://t.co/jDG31VeaxS

Darin Tuttle @Darin_T80

When I moved back to California 5 years ago, my wife and I shared a car with 2 kids to save money. I rode a bike to work for 9 months. I told people I did it for the exercise, but really it was the best financial solution I could come up with at the time. My boss was… https://t.co/ezf4D8RmcP https://t.co/rOA8qbHjjW

Ben Lamson @BenBSP

Love this story,so true. I graduated college, drove my HS truck for years, lived in a 1bd apt, horded cash from engineering job and bought real estate...while many friends move to the OC, bought BMWs and saved nothing. I retired at 55 and they mostly are working and in debt

Darin Tuttle @Darin_T80

When I moved back to California 5 years ago, my wife and I shared a car with 2 kids to save money. I rode a bike to work for 9 months. I told people I did it for the exercise, but really it was the best financial solution I could come up with at the time. My boss was… https://t.co/ezf4D8RmcP https://t.co/rOA8qbHjjW

Utkarsh Nagar @Utkarsh1010101

@Darin_T80 Discipline, hard work, perseverance and patience do work wonders. What's hard is to incorporate them in your daily life. But once you do that then you become unstoppable.

KLA 👽 @klaapy

I drove a 2007 cobalt making over 100K a year. A couple guys roasted me for it. Meanwhile I was paying off student debt, buying myself a house, travelling, and saving money. Do what is right for you. Don’t be embarrassed. Temporary pain long term gain. https://t.co/kRu7UarKDo

Darin Tuttle @Darin_T80

When I moved back to California 5 years ago, my wife and I shared a car with 2 kids to save money. I rode a bike to work for 9 months. I told people I did it for the exercise, but really it was the best financial solution I could come up with at the time. My boss was… https://t.co/ezf4D8RmcP https://t.co/rOA8qbHjjW

People are awesome.

While creating financial plans for others I’ve heard many real life stories of financial discipline in practice just like these that won’t show up in a Google Search.

I get that talking about budgeting, saving, and having an emergency fund are never going to be front page news— but sometimes its nice to share and find support from others.

Based on the overwhelming response, I plan to continue to share what has worked for our clients to achieve their financial goals with similar stories.

If you are interested in being a part of what we are building- you can always schedule a meeting with me using the link below:

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Recession Proof Your Portfolio: Lessons from 40 years in the San Francisco Commercial Real Estate Market

Some people choose not to participate in economic recessions.

But what does this actually mean?

Remember, I’m focused on real life stories— not just platitudes.

The process I went through researching the Bay Area office real estate market was a lightbulb moment for me as an investor.

Learning from a longtime vet and local commercial real estate expert Hans Hansson— I gained a new perspective.

His article San Francisco’s Office Market. What our Past tells us about our Future totally changed my view with a detailed history of the industry boom and bust cycle and what could lie ahead.

If you want the TLDR version:

To find real value in the middle of uncertainty it takes a unique perspective and a willingness to be resourceful and adapt.

For the past few months, I’ve casually analyzed the office real estate market and thought to myself, “This could be headed for a correction.”

I am by no means a real estate expert.

That being said, the case against office real estate is not hard to put together…

If you consider:

• The fallout of cities from Covid-19

• The growing work from home movement

• The net migration of companies out of California

• A big selloff in large technology stocks

  …A city like San Francisco sounds like an office market ripe for disruption.

  I put on my short cap and looked at the numbers.

Last year the City of San Francisco reported 24% Vacancy Rate in Office Real Estate... What do you think it is today?

Data provided from the City Scorecard.

Mayor London Breed recently said the City is anticipating a budget gap deficit of $728 million over the next two fiscal years with business taxes expected to decline by $179.3 million.

Who doesn’t love higher taxes?

Starboard CRE, a company which knows the SF market better than anyone else, recently compared the financial outlook of the City to “The Titanic”.

The cherry on top is the wide disparity between public and private real estate valuations:

Marking-to-Market might have a slight delay in pricing…

In the face of all this negative information— I stumbled upon Hans Hasson’s article.

This is a masterclass for those who choose not to participate in recessions.

Hans details the history of the boom and bust cycles of CRE from the 80’s, 90’s, 00’s, 10’s and now the 2020’s.

Across the decades what created recoveries were firms who took advantage of lower rates—adding more space in better locations.

Now, despite all the data, I’m willing to bet on SF real estate over the next decade.

After the history lesson, Hans explains:

See a pattern? Next year is going to be a boom for firms seeking to take advantage of low rental rates. They will move to better locations and take more space, not less. The tech tenants will not be leading this recovery; existing conventional tenants will.

And there is the lightbulb moment.

Brokerage firms that are willing to be resourceful and adapt are not only going to come out on top- but come out stronger and more profitable than ever before.

Diamonds are forged under pressure.

Hans continues:

Brokerage fees will be higher, terms will be longer, this will be our time to make a lot of money.

Don't miss out on the chance to get ahead of your competition. While others are running away from office real estate— smart investors will be able to snap up potentially discounted assets and use them as a way to make their portfolio stand apart.

No one can ever perfectly time the market but I think it would be wise to look at these particular areas full of opportunity for growth and differentiation.

Final Word

Thank you for reading. I am grateful and humbled to be able to learn, grow and invest alongside you at Tuttle Ventures.

Vision, Courage and Patience leads to successful investing.

Important Disclosures Here

Best,

Darin Tuttle, CFA

This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

Unless there is a signed Investment Management or Financial Planning Agreement by both parties, Tuttle Ventures is not acting as your financial advisor or in any fiduciary capacity.