BMD Invest: 2023 Lessons Learned and 2024 Opportunities

2023 was a wonderful year in a few surprising ways. I can’t help but have a sense of immense gratitude that I never thought possible. My favorite part of writing these newsletters is the exercise of combining lessons learned from the year and applying them to the principles and books that have cataloged the lessons of others.

Here is a quick summary of the 2023 highlights:

1.      Through an amazing partnership, we opened our first Residential Assisted Living and grew our revenue by 50K per month.

2.     BMD Invest actively participated in two communities: The Real Estate Guys Syndication Mentoring Club and Codie Sanchez’s Unconventional Acquisitions

We worked with investors to underwrite, analyze, and acquire a portfolio of workforce housing. Investors purchased 5x more properties than any previous year on record.

We applied the lessons from 2022 and this led to the development of 5 fundamental investor skills:

1.      Clearly defining the benefits of an investment.

2.     Playbook for deal development.

3.     Defining what a successful entry and exit strategy with risk mitigation strategies.

4.     Manage the time from investment to revenue generation.

5.     Cultivation of a positive environment that empowers team execution.

These lessons came from reflecting on the ups and downs of 2023. While they may seem simple it doesn’t mean that simple is easy. In 2023 we saw interest rates continue to rise and inflation stabilize. While inflation has slowed families are not getting their purchasing power back. The homes that used to cost $300,000 are still $400,000. Labor rates are staying high. This is why inflation is considered a monetary issue. It's simply the government reducing the amount of goods and services your dollar can buy. The more direct way of saying it is that the government is stealing your purchasing power for control. They simply take the dollars that you earn and create more reducing the amount of goods and services you can afford.

This magnifies the importance of building income streams. As Robert Kiyosaki explains in his first 3 books it’s not only important to buy assets that generate income, but also incredibly important how you structure your income. For 2024 we will continue to support investors with projects that protect principal and generate tax-efficient income.

Why is this important? We are seeing more and more costs due to regulations. 2023 brought us the Inflation Reduction Act, which has continued to push inflation higher and higher. We now have the Corporate Transparency Act which continues to put more costs and burden on businesses.

There will continue to be opportunities in 2024. The areas we are watching the closest are:

1.      Artificial Intelligence (AI)

2.     Energy

3.     Bitcoin

4.     Senior Living 

AI – Image source: https://chatai.com/how-to-create-ai-art-with-chatai/

I started using CHATGPT extensively in 2023. ChatGPT and Bard are just the tip of the iceberg. In 2023 I used ChatGPT and Bard to answer countless questions, curate ideas for content, and build content calendars. AI proves to be the technology that will enable us to create and organize information in ways that resonate with people. It is already transforming the marketing industry, and it will revolutionize business intelligence. We will have access to growing and growing data sets that organize and curate information in ways never thought possible. These technologies will enable us to automate programming for appliances and business applications in ways and at speeds never thought possible.

These AI investments will also transform manufacturing and I believe will lead a growth in US manufacturing by automating the assembly of products. The need to manufacture locally will be accelerated by the deterioration of globalization that Peter Zeihan discusses in his book The End of the World is Just the Beginning.

Energy – While we observe more and more destabilization across the globe, we see Congress and the Biden administration continue to fund Ukraine and Israel leading to escalations. This has caused shipping to almost stop across the Red Sea which is one of the most important shipping markets in the world. This instability could limit the amount of Oil imports available to the US from OPEC. This is only one factor. AI, Bitcoin (becoming an ETF), and an increase in the electrification of our economy are all creating a rising electricity demand. This increased demand for electricity will require:

1.      Continued investments into our infrastructure consequently increasing diesel and commodity usage.

2.     Increased electricity from homes and electric cars. There have been proposed laws in certain states to outlaw gas stoves, which seems dumb, however, supports the possibility that we will have more electrical usage by appliances.

3.     Increased demand for computing data centers (ex. cloud, AI, Bitcoin).

All the above lead to an increase in electricity used and consequently will require power companies to use more natural gas for electricity creation. This evolution of modern manufacturing will drive the need for diesel and commodities, but also increase the base load of power created needed from natural gas. We will also see other countries that will require clean natural gas which is likely to increase LNG exports. Long term we may see progress with Nuclear but those shifts will take 5-15 years to monitor.

Why Bitcoin? Well, it’s less to do with its rising popularity and more the nature of what it is. Bitcoin is a new network. It’s borderless and permissionless. The value lies in the ability to freely exchange with other individuals and businesses. New technology always provides solutions to old problems. Bitcoin while controversial offers several benefits that many are excited about. The first is that it’s not able to be controlled by a government (at least to date). It offers a way to trust and settle transactions between parties without any intermediary. This has countless opportunities however it can help enable exchange across borders in a very efficient way. While I think the US dollar will remain the world's reserve currency for the remainder of my lifetime, Bitcoin provides a digital solution that enables people to exchange rapidly over the internet. Most notably it’s the only cryptocurrency that is not a security. It is simply an item that can be exchanged. I expect the exchange will grow as more and more people develop the infrastructure. Right now the government taxes transactions even if they are completed in Bitcoin and this means there will need to be accounting software and many other investments to support legitimate businesses who want to use a currency the government cannot devalue or manipulate. The biggest headwind that Bitcoin will see is the control of the US banking system by the federal government. Not only is Bitcoin a potential competitor for banks, but banks also currently control the creation of dollars and hold most of the dollars across the US. To have a meaningful exchange of Bitcoin there will have to be increased adoption and to me it’s unclear how that will play out.

Senior Housing – Around 2017 there was a dramatic demographic shift starting to happen in the United States. The oldest Baby Boomers are around 78 years of age, which is causing a dramatic shift in the US economy. We are now seeing many of our entitlement programs like Medicare and Social Security facing more withdrawals than deposits. These individuals are all living longer lives than their parents and are facing challenges, especially with dementia. The need for 24/7 care continues to far outpace supply. Most importantly the existing options are outdated large facilities whose care is not meeting expectations. To date one of the fastest-growing industries are companies that support aging safely in homes. I expect we will see a dramatic rise in homes that offer fall detection, caregiver management, and technologies that support families with aging loved ones.

How can you to take advantage of these opportunities? No matter where you are on your investing journey we are here to help. We will publish market-specific updates on Energy and Senior Housing. If you are interested in learning more about how energy projects can help reduce your yearly taxes. Or how to generate tax efficient cashflow from a senior living project, then please email us at info@BMDInvest.com. We would love to have you join us at a future meetup.

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