Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: What $27 Trillion In Debt Looks Like!

Visual Capitalist has released another analysis filled with their usual nifty visuals that puts the sheer quantity of the government’s rapidly increasing debt into perspective. What $27 Trillion In Debt Looks Like!

The rapidly climbing chart actually looks better than it is because, as you can see, 2020 is broken out into quarters and doesn’t even go all the way until the end of the year. Indeed, the chart appears to be exponential, which is not a good thing when it comes to debt. After all, what can’t go on forever, doesn’t.

At least regarding the deficit, however, things are projected to improve and get back to a more “normal” deficit. Unfortunately, it is still not projected to get anywhere near a balanced budget anytime soon. Indeed, over the past 35 years, we only had a positive surplus for a very short while in the late ’90s.

The debt, on the other hand, has grown enormously both in real terms and as a percentage of GDP. And Visual Capitalist notes:

“U.S. debt was relatively moderate between 1994 to 2007, averaging 60% of GDP over the timeframe. This took a drastic turn during the Global Financial Crisis, with debt climbing to 95% of GDP by 2012.

“Since then, America’s debt has only increased in relative size. In April 2020, with the COVID-19 pandemic in full force, it reached a record 122% of GDP. This may sound troubling at first, but there are a few caveats.”

The government debt has effectively doubled over the past 15 years.

And of course, as every borrower knows all too well, this amount of debt comes with very large interest payments that continue year in and year out as the debt grows larger. “For FY2019, this was approximately $327 billion,” per Visual Capitalist.

Components of the federal debt

The piece by Visual Capitalist also notes where all of this spending goes. A full 62.2% of spending, or $2.735 trillion, goes to mandatory spending, including things like health programs ($1.1 billion), social security ($1 billion), and income security ($301 billion).

30.4%, or $1.338 billion, goes to discretionary spending, which includes things like transportation ($100 billion) and education ($72 billion). But by far the most goes to the military, at $677 billion (which accounts for 37% of the entire world’s military spending). And again, there’s that pesky $327 billion that goes toward debt service.

I should note that this doesn’t include state and municipal government spending, which is where most of the spending for things like education comes from. What $27 Trillion In Debt Looks Like!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

 Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Hidden Value of Distressed Properties!

 Are you sick and tired of being outbid for investment real estate in this overheated market? Or even worse, are you overpaying for real estate just to deploy capital and get in the game? Hidden Value of Distressed Properties!

If you’re on the first path, you may be settling for dismal returns and missing out on real estate’s amazing tax benefits and appreciation. And you may be subjecting yourself to the whipsawing stock market or dismal yields in bonds. Or enjoying a lumpy mattress stuffed with cash.

If you’re on the second path, you might be on the tracks of an oncoming freight train. It may work out. I hope it does. But hope isn’t a sustainable business strategy for most of us, at least in my experience.

I’m writing today to propose a better path. A powerful path that could…

* give you access to deals others miss.

* protect you from downside risk.

* provide income and growth others only dream of.

* pave a path forward for your success in any market or economy.

Notice I didn’t say it was easy. Nothing good is easy. At least that’s what the old-timers say.

Also, notice I didn’t say it would work in every asset class. I believe the principles apply to every asset class, but certain types of real estate lend themselves to this type of thinking and action. Others, not so much.

Intrinsic vs. extrinsic value

Warren Buffett told us that price is what we pay, but value is what we get. Discerning the difference is the key to what I’m about to lay out.

The price of an asset reflects its extrinsic value. The intrinsic value is the often overlooked and typically unknown value locked within the asset. It takes a skilled eye to spot the latent potential in that asset and a skilled hand to extract that value.

Thousands of real estate assets are performing “fine.” They are operating exactly as designed, and their owners are quite satisfied with them. And these owners are elated that the rising tide of an overheated market can fetch them top dollar when they sell.

Now, if you are a savvy buyer with an eye for intrinsic value, you may be able to see the potential of the asset that is being completely overlooked by the seller who’s done things his way for decades.

You can’t change the cap rate, and you probably won’t talk this owner down to a lower price. And you can’t get this property from a bank that repossessed it.

In this overheated market, you will probably pay full price. But if you can see the hidden value and know how to extract it, you can make a fortune for yourself and your investors. Yes, even after paying full price.

An ancient Rabbi told the story of a valuable treasure hidden in a field. A man discovered this treasure and buried it again. Then he went and sold everything he had and bought that field. This is what I’m talking about in this post.

The extrinsic value changed dramatically. But the intrinsic value remained the same. It took our operating partner to see this value and extract it on behalf of investors.

I believe this strategy can work well for all types of real estate. But after being involved in many asset classes over 20+ years, I see a few issues that stand out.

First, I believe this works especially well for commercial real estate assets. Why? Because appreciation can be forced. The value is based on a math formula. The value can be raised by increasing the numerator and compressing the denominator (when possible). Often dramatically, as we’ve seen.

The commercial real estate value formula: Value = net operating income / cap rate.

Secondly, I recommend you choose an asset class with a fragmented ownership base. One that has a large percentage of unsophisticated owners and operators who don’t have the knowledge, resources, or desire to increase income and maximize revenue.

These owners have greatly profited from the rising tide that raised all boats in the past decade and never dreamed of the price they could now receive for their run-of-the-mill asset.

Third, I recommend you seek off-market deals. This certainly isn’t necessary for the strategy to work, as we see in case study #1 above, but it sure helps. And finding off-market deals is a game for the obsessively passionate, full-time real estate strategist, for the most part.

So, what if you’re not full-time in real estate? Can you still get these benefits? Certainly. I have never run a self-storage facility and never managed a mobile home park. As a professional passive investor, I make good money from passively investing in these assets through professional syndicators.

This may be the era of overheated real estate. But if you know how to find deals like this or know someone who does, it’s a fabulous time to invest. As it always is. Hidden Value of Distressed Properties!

The inspiration for today’s edition came from this original article:

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit: