6/26/11: Cash Flow with Confidence Using Guaranteed Leases

Why do people put up with jobs they hate?  Or limit their upside opportunity and use only a fraction of their potential in their careers?  They want security – the certainty of someone else being responsible for making sure that paycheck shows up.

But there aren’t any guaranteed paychecks in real estate investing… or are there?

One of the many wonderful things about a crappy economy is that sellers become motivated to make concessions that would otherwise be off the table.  Just like an employer will take the risk of promising a paycheck to get you to work for less than you produce (think about it…employers don’t hire you to lose money), would a builder guarantee your rent to get you to buy so he can make a profit on the sale?

To find out, we invited a real estate broker friend of ours back into the studio to tell us about just such a program.

Camped out around the microphones, somewhere deep in the heart of Texas:

• Your host and primary promise maker, Robert Helms
• Co-host and chief promise keeper, Russell Gray
• Special guest and purveyor of cash flow promises sure to delight every investor, Ron Black

If you’re a long time listener of the show, you know Ron Black has a knack for finding creative ways to help real estate developers and investors get together for everyone’s benefit.  Back when houses were selling like hotcakes, builders needed to get model homes up and open.  But that tied up a lot of cash in houses that couldn’t be sold until the very end.

So Ron set up a program where a builder would sell, then lease back, the model home to an investor at a very attractive price, which freed up cash to go build and sell more houses.  It’s the same reason a business would rather rent than buy the building they occupy.  They want more money in the business and less in the real estate.  They make more money in the business.  See?

Of course, those heady days of a happy housing market are but a dim memory.  Today, developers aren’t building houses “on spec” (build it and they will come), but instead they wait until it’s sold, then build it.  Except that even as safe as that sounds, the banks are still too afraid to provide construction funding.   Sounds like a problem.

Well it is a problem for the builder, but the builder’s problem is Ron Black’s (and his investors’) opportunity.

Ron’s creative solution is to organize private money to provide high-yield interim construction loans.  Builders can afford to pay a nice return because they only have the money for a short period of time.  Investors can get high yields without transaction costs and be in and out in six months or less.  They can even do it in their self-directed IRA and rollover 401k’s.  We did an entire episode on this topic, which turned out to be one of our most popular.  If you missed it, click here for immediate transport into The Real Estate Guys™ archives.

So what’s Ron’s latest creative solution?  Well, we don’t want to steal his thunder from the show, so you’ll have to listen in to find out.

Let’s just say if you like the idea of buying a brand new property (no deferred maintenance!) and having your rental income guaranteed for the early years, you’re going to LOVE this episode.  And if you’re a really good student and listen all the way through, you’ll find out how to access a free follow up webinar Ron created which provides even more information.  Enjoy!

3/27/11: Turnkey Rental Property Solutions for Busy Investors

Sometimes people confuse real estate investing with running a real estate business – especially when everyone says you’re supposed to run your investments like a business.  Confusing isn’t it?  That’s why many people simply turn their money over to Wall Street.  It’s painless and easy.  Like a scalpel.  It’s all fun and games until someone loses their net worth.

Real estate attracts people who want to be closer to real tangible investments they can understand and have more direct control over.  But not everyone has the time, talent or temperament to find, fix up and rent out properties.  So before you pick up a hammer and plunger, you may want to look at turnkey rental property solutions as a great way to get in on all the amazing bargain inventory available today.

What is a turnkey property solution you ask? We wanted to know too, so after our wives had us scour the sink, they let us out to scour the country – and we found a guy who’s been in the turnkey rental property business for nearly 10 years.  He called in and our crack engineering crew patched him into the broadcast.

Lending their voices to this sparkling edition of The Real Estate Guys™ Radio Show:

• Your host and shining star, Robert Helms
• Co-host and chief scrub, Russell Gray
• Turnkey Rental Property Purveyor, Practitioner and Pontificator, Terry Kerr

With all the talk about unemployment and real estate entrepreneurship, what if you’re one of the throwback investors who actually have a good job with good income and some investment capital you want to put to work?  That’s where a turnkey provider comes in real handy.  They’re in the business of buying, fixing up, renting out and handing over to you a plug n’ play cash flowing property – complete with long term property management in place.  Now doesn’t that just sound groovy?

But (and as always it’s a big one), not all “turnkey” providers are the real deal.  With all the distressed inventory in the market, banks are dumping it wholesale.  That can be good, but just having a property flipped to you doesn’t mean it’s plug ‘n play.  It end up as “pull the plug”.  Not fun.

To help you avoid this terrible fate, Terry Kerr shares his tips for turnkey property investing – and gives us some local knowledge on a low cost, high cash flow market that you’ve probably heard of, but may not know that well.  And pay attention, because we persuaded Terry to produce a special report on this tantalizing topic so you don’t have to take too many notes.

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2/6/11: Ask The Guys – Who, What, Where, When, Why and How

There’s no such thing as a stupid question.

Well okay, there actually are some pretty stupid questions, but that’s why we take questions by email and not call in.  That way we can filter out the bad ones and just bring you the really good ones!  We really aren’t qualified to advise you on what color to do dye your hair or what style of nose ring to purchase.  But if you have a real estate related question, we’re your Guys!

In the studio to provide powerful pontifications in response to several of the great questions we receive each week:

• Your host and hero, Robert Helms
• His trusty sidekick, Russell Gray
• Wise sage of all things real estate, The Godfather of Real Estate, Bob Helms

For this episode of Ask the Guys we reached into the email grab bag and pulled out some gems:

From a listener in Australia (who understandably thinks we’re amazing), who just bought two properties (good job!), and wants to know should he buy more – in his wife’s name with “negative gearing”.  Hmmmm…. you need to be careful about anything negative when your spouse is involved – and what type of gear you use with your wife…well, that’s really none of our business.

For our next question, Simon says he put in a deposit on a pre-construction property, but undisclosed costs have made him nervous.  Now Simon says he wants out of the deal and his deposit back.  But what does the contract say?

From Philadelphia, the city of brotherly love, Kevin and his siblings have inherited dad’s duplex and are debating what to do.  One sibling says keep it, the other two want out.  What’s a brother to do?

Rasean has aspirations to become a real estate syndicator (what a good idea!) and is trying to track down the bible of syndication, written by our friend Sam Freshman.  Hint: The Real Estate Guys™ have a Recommended Reading bookstore on our website under our RESOURCES tab.

And Martin, who lives in Smallville, wants to know if he should invest in his own backyard or seek super returns in Metropolis.  So we ducked into the nearest phone booth (hard to find these days!) and fired up our x-ray vision to look for the answer.

If YOU have a question for The Real Estate Guys™, just click on Ask the Guys to send us your query.  Then, Walter in the mail room will throw it in the mail bin, where we’ll dive in later to pluck questions for some future show.  Maybe we’ll pull yours out, so keep those cards and letters coming!

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10/24/10: Big Profits without Wall Street or Tenants – How Private Investors are Making Money from the Financial Crisis

When an economy burns down, the landscape is charred and the financial food chain is disrupted.  Viable businesses starve for funding, while investors hunger for return.  The normal eco-system has broken down and sources of capital and investment opportunities aren’t where they’re supposed to be.  Everything is in disarray and the ensuing uncertainty breeds fear.

But it also brings opportunity.

Sadly, after an economic forest fire, most people focus on what’s burned.  They hang around the old Wall Street and banking feeding grounds, waiting for things to grow back and settling for low returns or grubbing for hard to find funding.

But others are able to find new pastures simply by looking past the beaten path and seeing where the new opportunities are growing green in more fertile soil.

We found a guy who’s doing something so brilliant that we decided to dedicate this episode to cultivating our understanding of his model.

Plowing through the conversation in the studio for this adventure in broadcast excellence:

• Your show host and real estate Yogi, Robert Helms
• Co-host and Boo-Boo bear, Russell Gray
• The man with the Smokey voice, the Godfather of Real Estate, Bob Helms
• Special guest, investor and real estate entrepreneur, Ron Black

A few episodes back, Ron Black called in and seeded our minds with the awareness that in today’s charred economy, conventional banking is failing to feed the needs of both savers and borrowers.  Interest rates paid to savers are too low.  Access to loans for consumers and business is too tight.  Even well qualified borrowers are having a hard time finding the funding needed to grow the economy.

For investors in the past, long term appreciation has proven to provide plenty of financial timber for building a strong retirement.  Just buy stocks and real estate, water them faithfully, and in time they grow into mighty oaks of equity.  But today, the economic forest has burned down – and while those who plant now will likely have some big trees in 20 or 30 years, what if you don’t have that much time?

For baby boomers, the last 10 years of buy and hold stock investing has been disappointing at best. The Dow hasn’t grown.  It’s even worse for retired folks trying to live on interest income when yields are low single digits.  When you’re living on interest, if rates go from 4% to 2%, you just suffered a 50% pruning.  Ouch.

When it comes to personal finance, conventional financial planning models are struggling to adapt. The whole system is designed to sell stocks and bonds through the Wall Street machinery and to park money in the banking system.  Then these “experts” take your money and (as we’ve all now sadly discovered) they do all kinds of risky things, most of which the average person doesn’t understand, can’t control and probably wouldn’t approve of.

Conservative individual investors have been gravitating more towards dividend paying stocks. These stocks are typically issued by big companies with solid profits (or at least as solid as they can be in a fragile economy).  With yields of 6-8% and the opportunity for long term capital gains, we understand that this looks “good” compared to whatever green shoots are peeking out of the charred landscape of traditional Wall Street offerings.

Of course, if times get tough for the dividend paying company, they may choose to reduce or eliminate the dividends.  Or, perhaps they’ll incur debt or distribute vital reserves to continue to pay dividends when they really can’t afford it.  If this happens, you can bet the stock price will drop, which makes an exit in favor of a better offering potentially expensive.  Buy high and sell low is not a winning formula.

What about high yield bonds? Money for top quality corporate borrowers is pretty cheap right now.  The best companies are sitting on piles of cash waiting for the economy to stabilize.  They hardly need to borrow and wouldn’t pay much to do so.  So high yield bonds are likely to carry substantial risk.  Plus, are you ready to trust the Wall Street credit rating agencies again?  You know, the ones that gave sub-prime mortgage backed securities a trip A rating?  We’d rather go for things that we can see and understand.

Then there’s high interest savings accounts and high yield CD’s.  But remember, today’s definition of “high interest” is maybe 3-4%. Whoopee.  Plus, the better rates mean locking the money up for years.

So the conventional investing trees are pretty bare right now.

The problem with the Wall Street model is that investors are too far removed from the actual investment and have so little security if something goes bad (does that really happen?), that even in the good times, it’s still risky.  The only reason it doesn’t feel risky is because Wall Street insulates you.  Plus, all the slick marketing is intended to make you feel like giving your money Wall Street and the banks is not only normal, but your only choice.

With so much retirement planning marketing built on the Wall Street model, most people don’t have any idea where to find another option – or even what it would look like.  And when they do, those Wall Street paradigms pop up and prevent people from seeing that low risk, high yield, short term, cash flow investments are possible in today’s market – specifically because the Wall Street systems have broken down.

In this episode of The Real Estate Guys™ Radio Show, our special guest Ron Black describes how he identified a void left by the breakdown of the traditional mechanisms for matching investors with yields.  Best of all, his model cuts out Wall Street and the banks (after all, they’re really just high priced middlemen) and gets the investor very close to their actual investment.

The bottom line is that double-digit high yields are currently available on short term, secured investments which are easy to access and understand. It’s something anyone can do in today’s market to supercharge their portfolios, whether seeking current income or long term growth of principal.  Think of it as Miracle Gro for your portfolio.

You’re gonna like this show!

The Real Estate Guys™ Radio Show podcast provides education, information and training to help investors make money with their real estate investments.

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9/19/10: High Yields in a Low Rate World – Growing Your Interest in Real Estate

Low interest rates might stimulate the economy, but if you’re an income investor low rates are depressing. There’s a BIG difference between 4% or 1% on your savings when you’re trying to live off the income.  But with so much uncertainty in the economy, how can investors SUBSTANTIALLY IMPROVE YIELD without dramatically increasing risk?

Joining the conversation for this very interesting topic:

• Your high-yield host, Robert Helms
• The cut rate co-host, Russell Gray
• Special call in guest, Ron Black

Whether you’re sitting on piles of savings and trying to pump up your income without turning to junk bonds or junior liens, or you’re looking for creative ways to invest for current income to grow your portfolio, or you’re looking for ideas on how to borrow low and invest high to cash flow the spread – this show has ideas for you!

Special guest Ron Black will share what he’s doing to generate high yield, low risk cash flows in a low rate world. We’re sure this episode will “peak” your interest too!

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Dallas Jobs are Up and Vacancy is Down

According to the latest monthly review of the Texas economy from the Real Estate Center at Texas A&M University, Texas is leading the United States in economic recovery.    The Texas economy experienced its second month of positive annual employment growth up 0.9 percent from June 2009 to June 2010 compared with a negative rate of 0.1 percent for the nation.

Over the past 12 months the Dallas metro added 27,300 more jobs than it cut.  That is enough job growth to warrant the development of a mid sized city!!!   If a city needs 3 jobs to support every 5 people, 27,300 new jobs justifies a population increase of 45,500 people.  Kids and retired people don’t work but they need places to live. Assuming 2.5 people per household, 45,500 new people need 18,200 additional housing units.

Is the supply of Dallas housing keeping up with the demand?

In the past 12 months Dallas County added 5,351 apartment units and absorbed 7,596.  The numbers show people are absorbing apartments faster than they are being built.  The demand for housing is strong but apartment construction has dwindled because of the lack of construction financing.  This positive absorption is lowering vacancy rate substantially, however rental rates have remained steady.

Dallas hasn’t experienced a boom in rental rates because while demographics are headed in the right direction, Dallas is still burning off a small amount of excess housing that was built during the easy credit building boom from 2001-2007.   Current apartment vacancy rates are around 9%, however if you look at the rate of vacancy for properties that are less than 15 years old and the residential occupancy rate is MUCH better.

Many people forecast a housing boom in Dallas because the job market is forecasted to bring more people to Dallas than the housing market can keep up with.  Land near Dallas job centers is scarce and people are starting to pay substantial rental premiums to live closer to work. Dallas commute times are increasing as people are choosing to live farther into the affordable suburbs rather than pay the higher cost of living associated with living near the city center.  While Texas still has amazing expanses of inexpensive land, none of that land is close to jobs.

Get ready for a Texas sized real estate boom!!!

The Dallas population is growing rapidly as a result of relative economic prosperity while developable land near job centers is scarce.  As traffic commute times increase over the next decade, it will become more desirable and more economical to pay a larger and larger housing premium to live closer to your job.

Statistics for this blog were taken from the real estate research center at Texas A&M University http://recenter.tamu.edu/mreports/

David Campbell is a real estate developer, investor, author, educator and a regular contributor to The Real Estate Guys™ Radio Show.
To contact David, click here.

4/25/10: LIVE! from the 8th Annual Investor Summit at Sea

Most of the time when we do a show, our producer keeps us locked up in the cold, lonely studio with our headphones on.  And even though we have each other, we have to use our imaginations to see our listeners.  But this week, we get to do the show in front of a LIVE STUDIO AUDIENCE! Better yet, we’re aboard a cruise ship sailing through the Caribbean!  Best of all, we’re hanging out with some the brightest, most committed real estate investors on the planet.  Toss in our SPECIAL GUESTS and the whole experience is over the top awesome!

On board and behind (and in front) of the microphones on the beautiful Carnival Triumph for this week’s show:

•    Your Captain and a mighty sailing man, host Robert “Skipper” Helms
•    Your brave and sure first mate, co-host Russell “Gilligan” Gray
•    The Godfather of Real Estate, Bob Helms
•    Rich Dad’s Asset Protection Advisor, Garrett Sutton
•    Rich Dad’s Real Estate Advisor, Ken McElroy
•    Rich Dad’s Creative Finance Advisor, Wayne Palmer
•    International Real Estate Developer, Beth Clifford
•    International Entity Planner, Attorney Mauricio Rauld
•    Special guest from Puglia’s restaurant in Little Italy, New York; featured entertainer in Adam Sandler’s Big Daddy, the one and only Jorge Buccio
•    Fine passengers that sailed that day, a cast of thousands (okay, maybe a few dozen), our live Summit at Sea audience!

As we’re stuffing the faculty and studio audience into the Big Easy Piano Bar for this live taping, we quickly that discover fitting everyone in (physically into the room, but also getting their comments into a one hour broadcast) is anything but easy!  However, the Skipper quickly takes control and before we know it, we’re off and running.

After some brief opening remarks, the Skipper asks each of the Summit Faculty to share their insights and reflections on the remarkable week we’ve all had together.  For the Rich Dad Advisors, this was their first (but hopefully not last!) Summit with The Real Estate Guys™.   They’ve all heard Robert Kiyosaki call us wild and crazy, but now they had a chance to observe it first hand.  Of course, none of that stuff makes it into the show because Summit Rule #1 is “what happens at sea stays at sea”.  Sorry!  Join us next year and then you can be a Summit Insider too!

For today’s show, each Faculty Member shares some of the highlights from their Summit presentations.

Ken McElroy taught on how he approaches real estate in today’s economy.  This is a guys who has over 10,000 doors under his control and is actively acquiring more…in spite of the “bad” real estate market.

Garrett Sutton spoke on state-of-the-art asset protection structures for real estate investors.  He also did a class on how to properly structure deals using investors and partners.  Many well meaning people end up in trouble when they raise money to buy real estate – simply because they don’t know what they don’t know.  Considering that syndicating is arguably the fastest path to big deals and big bucks, a small investment in knowing how to do it right is time and money well spent!

Wayne Palmer comments about his extensive series of classes on the creative use of private notes.  Wayne uses notes for putting together real estate deals which might not otherwise happen.  He also uses them to create equity and cash flow from next to nothing!  It seems like magic, but during the Summit he revealed some of his trade secrets.   Also, he shared the guidelines he follows to mitigate risk and optimize return.  His classes were among the most demanding, but also the most popular.  Powerful and practical principles for profiting from paper (say that fast 10 times).

Beth Clifford wowed the group with her amazing presentation on the how and why of going offshore with some of your investments and business ventures.  Hers was one of the most popular topics at the Summit, even with the faculty!  Wayne Palmer said Beth’s presentation stretched his brain and was his favorite of the Summit.  Now THAT’S saying something!

Mauricio Rauld expanded on the concept of international investment and business structures – and how to avoid the dangerous schemes which land so many novices in trouble.  There are many valid, legal and ethical structures which can be used to better protect assets, protect privacy and mitigate taxes.

There’s a lot more that happened on the Summit which just can’t fit into the radio show – even in a summary – including the Apartment Investors Panel, the Ask the Attorneys Panel and the Investor Roundtables.  Plus the fun in the sun real estate shore excursion in Belize, the more fun in the sun beach party in Cozumel and all the private shipboard parties.  Alumni will never look at a napkin the same way again!

Going into the Summit, we weren’t sure what the Rich Dad Advisors would think by the end of the week.  After all, they get to hang out with Robert Kiyosaki and talk in front of crowds of thousands!  But when it was all said and done, they had a great time.  Don’t take our word for it.  Listen to the show and you can hear it for yourself!

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To get in on the EARLY BIRD deals for the 2011 Investor Summit at Sea, use the Feedback page to send us your request.   You’ll be given an opportunity to sign up at the lowest public price.  And after listening to this show, why wouldn’t you want to be with us on the 9th Annual Summit at Sea?

Seven Lessons from the Summit at Sea

The Real Estate Guys™ 8th Annual Summit at Sea was a huge success! We feel sorry for everyone that wasn’t with us this year.   All the energy, education, experiences and relationships are hard to put into words, but we have 7 lessons we believe will help you.

We kicked off the 2010 Summit in the French Quarter of New Orleans. Many Summit attendees wisely came in a day early and made plans to stay a day or two later in order to enjoy the hospitality of this amazing city.  Those who got the most out of their trip had invested the time to research the city beforehand.  When they arrived they had geographical context and some idea about what they wanted to see and do.  One of our attendees had plans to attend a certain restaurant he’d heard good things about.  The food of the French Quarter was certainly one of the highlights of this trip. Russ took the opportunity to try turtle soup and fried alligator.  Both were great and he’d order them again!

Summit Lesson #1:  Life’s best surprises go to the curious and adventurous. Invest time to visit new places, meet new people, try new things and discover new ideas.  You’ll be the richer for it.  If you’re not that way naturally (like Russ) – hang out with people who are (like Robert).  Some of our best real estate deals and business relationships have come from simply exploring.  Deal hunting is as much art as science.  You can’t always script it.

Back to our attendee. So this guy is heading out according to his plan.  But when he steps into the hotel elevator, he runs into Rich Dad Advisor® Wayne Palmer and his family.  The short of it is our guy ends up going to dinner with Wayne!  We’ve been at Rich Dad events with hundreds and thousands of people in attendance, many of whom wait in line for a long time just to get two minutes with an Advisor.  Can you imagine being able to enjoy a long casual dinner with Wayne Palmer?

Summit Lesson #2:  Great opportunities to meet interesting people and learn new things won’t happen to those who stay home, arrive late, leave early or aren’t flexible. If you want to build strategic relationships, you must go to where the right people are and put yourself in a position to get lucky (speaking purely in terms of business).

As real estate investors, it’s important to practice exploring markets. There’s so much more you learn from actually being there.  The internet can’t capture the spirit of a market.  From cab drivers, to hotel and restaurant workers, to local shop keepers and business owners, to the people on the street, there is a lot you will discover about what’s REALLY happening in a local economy when you’re physically in it.  People living in a community know what’s happening right now with rents, prices, migration trends, demographics and job creation.  Only when you add this anecdotal information to your own real life observations can you begin to put statistics into useful perspective.  Remember: stats reports things that have already happened – not what’s happening now.

We noticed that New Orleans is a very entrepreneurial city. Perhaps in the wake of Katrina (the effects of which were still apparent) the bravest, most resilient and dedicated people have returned first.  In any case, these folks weren’t asking for handouts.  They were happy for the opportunity to earn our business – and very thankful for it when they got it.  As our nation and world continues to work through the effects of the financial crisis, the people of New Orleans gave us hope.  If people all over the world dedicate themselves to working their way out of a mess like these people are, our world is going to come out of this Great Recession just fine.

Summit Lesson #3:  Entrepreneurship and hard work (not handouts) are the keys to personal and societal recovery. Everyone who’s struggling in this economy should take a trip to New Orleans and see how winners react to adversity.  No wonder the Saints won the Super Bowl.  If we all take the spirit of New Orleans back to our businesses, this recession will quickly fade into the rear view mirror.

After a great session in the hotel, the group headed to the pier and boarded the ship.  We sailed on the Carnival Triumph, which was SOLD OUT!  Cruise lines are actually weathering the financial storm pretty well.  Why? Perhaps people realize that a cruise is a great value, meets a basic human need (to refresh themselves) and attracts financially capable people from all over the world (a broad market).  Do these principles apply to real estate investing?  It’s obvious that real estate meets a basic human need, but we’re reminded of the importance of having a large, financially capable target market.  No matter how badly someone wants something, if they can’t afford it (or don’t think they can) they won’t buy.

Summit Lesson #4:  Pick markets and properties that appeal to a large demographic of financially capable people and you will weather difficult times more easily.

The next lesson came later, but is an extension of lesson #4.  Rich Dad’s Real Estate Advisor Ken McElroy talked about the markets and properties he targets:  B-Class apartments (meets a basic human need – housing) with affordable rents (provides a great value) that appeal to working class people (a large, financially capable demographic) in markets with good mid-to-long term job creation (he focuses on areas with fundamental and growing industries such as energy).

What was very interesting is that on the real estate shore excursion to Belize, we saw a very different variation on the same themes.

In Belize, we visited a piece of beautiful waterfront land and listened as the developer shared her vision for the property.  She plans to build high quality, moderately priced residential units suitable for resort, retirement or ex-pat full time occupancy.  While the country of Belize is sparsely populated and very poor, it is a land of breathtaking natural beauty and terrific year round warm weather.

Like the cruise ship, the project in Belize provides great value, satisfies a basic human need and desire, and appeals to a worldwide, financially capable demographic.  In other words, the project’s success isn’t dependent on the local population to be successful.  It attracts people from all over the world.  And because there will be so few units available relative to the size of the market, it’s hard to imagine the project won’t be successful.  It’s very different than B-class apartments, but like the cruise line, follows a similar fundamental formula.

Summit Lesson #5: Essential principles of successful investing don’t vary much, even though markets, properties and target customers might. Or as the old adage says, there’s more than one way to skin a cat (though we have no idea why anyone would want to do that – it’s cruel).

Even though this was our 8th Summit, there is no doubt it was our most compelling line up of speakers. We were very fortunate to have not one, but THREE of Robert Kiyosaki’s Rich Dad Advisors® teaching at our Summit.  Creative real estate genius Wayne Palmer taught a powerful and practical series on how to create capital, produce profits and generate cash flow with the creative use of private notes.  Even though people had to ice their brains after each session, Wayne was gracious to make himself available during non-class times.  He answered questions and even did some individual personal consultations.  These opportunities weren’t part of the official program, but some people at the event got lucky (see Summit Lesson #2).  People left the event believing they could use the education they got to do at least one deal which would more than pay for the cost of the entire Summit – and next year’s too!

To quote Robert Kiyosaki, “Savers are Losers”.  Though we agree with his premise (and highly recommend you read his latest mega bestseller Conspiracy of the Rich), we’re saying it for a completely different reason.  We think people who “saved money” by not coming on the Summit actually lost money.  We know.  That sounds like sales pitch.  But anyone who’s ever tried to do an event like this knows that no one is getting rich by promoting it.  More, if you saw the surveys of the people who came, you’d realize that we still haven’t figured out how to over-promote the Summit.  Everyone felt it was easily worth the time and money.

When you’re around people who know how to make money in a tough economy; who are optimistic about the future; who are resourceful and busy taking advantage of all the opportunities they see in the market, you quickly realize those who lost out were those who wanted to attend and chose not to because they told themselves “I can’t afford it”.  This paradigm looks at the Summit (or similar events) as an expense and not an investment.  The difference is that an expense pays for something that is consumed and doesn’t produce a profit.  An investment pays for itself and returns a profit.  The paradigm should have been, “I can’t afford not to” and “How can I afford it?”  Most people believe a college education is worth the price, yet hesitate to invest in non-institutional education.  Could it be they believe the degree is more important than the knowledge?  What do you believe?

Summit Lesson #6:  Paradigms affect potential and profits, so pick your paradigms carefully. The Summit was full of winners and after living with these amazing people for a week we found ourselves picking up new paradigms and making commitments to shed some bad ones.  One of the great challenges is to manage the influences to our thinking.  We look for every opportunity to hang around top performers.

One common theme we noticed in the presentations of nearly all the speakers was “control”.  Wayne Palmer talked about his rules for risk.  He follows strict (but flexible) guidelines for collateral, loan-to-values, target returns and cash flows in order to control the risks he takes in any deal.  Rich Dad’s Asset Protection Advisor, attorney Garrett Sutton, talked about entity planning and how to structure your affairs in order to control liability and tax risk.  Attorney Mauricio Rauld spoke on international entity structures which further control liability and tax risk when investing outside of the US.

Ken McElroy talked about his guidelines for market and property due diligence, as well as his dogged attention to cash flow.  He uses these disciplines to control market risk.  He says this control is why his real estate investments aren’t in trouble even though he’s going through the same challenging market conditions that are wiping out so many others.  He doesn’t rely upon the market to do the work for him.  He looks for deals with upside and works to improve the cash flow, which in turn increases the equity.  Then he uses prudent leverage to release the new equity and return his seed capital so he can move forward with positive cash flow – all on no money invested.  This produces what Robert Kiyosaki calls “infinite returns”.  Meanwhile, he recycles the seed capital to do the next deal!

Robert Helms stressed the importance of controlling one’s mindset when investing in the wake of an unprecedented drop in values (see Summit Lesson #6).  Each had a different angle, but again, all variations on a theme: control.

Summit Lesson #7:  Pay careful attention to the things you can control so you’re able to withstand the challenges caused by the things you can’t (inflation, taxes, market cycles, interest rates, etc).  When it comes to investing, most people are out of control.  Fear overrides common sense and they buy high and sell low.  They turn their money over to bankers and Wall Street and hope for the best (hope is not a strategy).  They manage cash flow by feel rather than budgets and bookkeeping.  Worst of all, they wait for external circumstances to get better rather than investing in making themselves better with education, relationships, strategies, disciplines, systems and a willingness to take action in the face of uncertainty.

We could go on and on!  There are SO many great lessons to glean from the Summit.  Of course, the only way to really get them is to actually be there.  The Real Estate Guys™ Summit isn’t the only event of its type, but after reading the surveys of the attendees, and even more, hearing the feedback of the Rich Dad Advisors®, we think it’s one of the best.  And we’re already making plans to make next year’s Summit even better!

We encourage you to make it your goal to be with us in 2011. Without exception, every survey we received said the event exceeded expectations and was well worth the time and money invested.  Over one third of this year’s group has already signed up for next year!

To make sure YOU get the upcoming announcement about The Real Estate Guys™ 9th Annual Summit at Sea in 2011, be sure to sign up for our newsletter. To be extra sure you get the early bird deal, use our feedback page to let us know you’re interested and we’ll put you on our VIP notification list.

All the best!

Robert Helms and Russell Gray
Hosts
The Real Estate Guys™ Radio Show

In the Mood for Equity? – Part 2 of 2

Some people think we just sprinkle sunshine.  We think it’s more like singing in the rain.

Long time listeners know we were bullish on real estate from 2002 to 2005.  We still liked it going into 2006, but also started talking about hedging strategies.  We’d be lying to say we anticipated the mortgage meltdown and all of the resulting carnage to the economy and real estate values.  Even the really smart people we talked to, like Robert Kiyosaki and Walter Sanford, who’d started sounding the alarm in late 2005, couldn’t tell us why. They just knew the market would change. They had faith in the cycle (see Part 1).

Many consumers were attracted to real estate in the wake of the tech bubble.  Its strong history of stable appreciation, the fact it’s tangible and easy to understand, plus low interest rates, liberal loan programs and an international investment community eager to buy mortgage-backed securities (oh my, how things have changed!), all fed the fire.  Of course, standing here in 2010, we know the reality of cycles cannot be avoided – and in spite if its remarkable history, real estate was not immune.

The lesson?  Cycles are real and inevitable.  The good news is that cycles go both ways.  If the cycle down was inevitable, is it reasonable to think that a cycle up is also inevitable?  If the cycle down occurred with a reason that was only understood after it happened, then is it reasonable to think that the cycle up might also occur before we understand the reasons why?  If we wait until the reasons are obvious, the cycle may have passed the point of ideal opportunity.  Hmmm.  That’s a dilemma.

There’s no doubt it takes a certain amount of faith to invest.  This is certainly true if you’re seeking to optimize cycles.  By definition, you have to be willing to invest when most others aren’t.  That’s how you buy low.  Duh.  But should man invest by faith alone?  We don’t think so.

So in addition to faith in market cycles, there are some things to think about when investing in real estate.  And these things are fairly unique to real estate:

When properties produce enough income to pay a fully amortized mortgage, after allowing a reasonable amount for expenses and contingencies, then even if prices don’t increase over the long haul, you’ll build equity through amortization (the pay down of the loan with the tenant’s money).  What other investment can say that?

And even though you should never base an investment decision solely on the tax advantages (a revenue starved government can be fickle), investment real estate has a strong history of favorable tax treatment.  Few investments can claim this.  If you really pay attention and use strategies like cost-segregation and are careful to organize yourself (or your spouse) as a full time investor, the tax benefits of investment real estate can contribute substantially to your overall wealth building program. We could go on, but that’s not our main point.

Here’s where we think real estate gets exciting.  It doesn’t take much of a mood swing to affect real estate prices. That’s bad when the mood swings down as we’ve just seen.  But if you’re cash flowing as previously described, it’s not a train wreck.  You’ll get wealthy over time as the property gets paid off.  Even though it’s a much slower road, it keeps you safely in the game for the long haul.  Most people who got killed in this downturn (aside from losing their non-real estate sources of income), were carrying an unsustainable number of negative cash flow properties with no plan B.  We aren’t opposed to a little negative cash flow when a property has good upside, especially when you’re just getting started and prices are running away from you, but you need to be sure you can handle it if the market turns (as it did).  And just because it might make sense to buy one or two that way, don’t buy several unless you’re sure you can carry them if needed.

But when it comes to market appreciation (passive equity),  when consumer confidence begins to swing up, even small amounts of extra cash flow dedicated to real estate can have a dramatic affect on property values.  For example, when a buyer is willing pay an additional $300 per month on a 6% 30-year mortgage, the lender will provide an additional $50,000 in purchase loan.  That means that the buyer can afford to pay up to $50,000 more for the property even though they are only confident by $300 a month.  Of course, the property needs to appraise in order to justify the higher price to the lender.  This can be a challenge for the first properties sold in a market that is turning.  It’s another reason why real estate cycles more slowly.  You’d never have to wait for an appraisal to bid up the price of a stock.

But once the first property is sold, every comparable property in a 1 mile radius will have a better chance at appraising at the higher price – making it easier for each subsequent buyer to get the loans necessary to convert their $300 a month into $50,000 of equity for the seller.  If you didn’t get that, take a minute and think it through.

Once a few properties close at the higher price, IF there is the right supply and demand imbalance (big IF, but that’s what we look for when selecting areas to invest), the market will heat up, things will move faster and the up cycle will be in full swing.  If you wait for all that to happen before getting in, you’ll find it’s much harder to acquire properties that will cash flow.  Chasing trends is always dangerous – even in real estate.

Which brings us full cycle (pun intended).

If you believe in the resiliency of the American economy, the permanency of real estate in the lives of people, the probability of a growing population and the inevitability of real estate market cycles, then when do you want to be a buyer?  Real estate and loans are on sale today – at prices we haven’t seen in some time – and if the cycles are true, we may not see conditions like this again for awhile.  With as slow as real estate cycles are, it would be a shame to miss the next one.

We’re not telling you to buy.  We’re just saying don’t get lulled to sleep watching the glacier and then miss the opportunity.  Fortunately, with real estate, no matter what shape you’re in right now, you have time to expand your education and organize your resources to participate in the next cycle.  We encourage you to keep steadily advancing.

We’d love to hear what you think – and more importantly, what you’re doing.  If you’re stuck, let us know and we’ll work on a radio show or tutorial to help.  Just Ask the Guys or use the Feedback page.

In the Mood for Equity? – Part 1 of 2

It’s funny how when the economy stinks and all the news is doom and gloom, people suddenly become interested in economics and politics.

“It’s the economy, stupid.”

When everything’s good, people go about their business and don’t worry too much about what’s happening on Wall Street or in Washington.  The Real Estate Guys audience has actually grown over the last two years, even through real estate investing fell off the hot list of things to do.  We think it’s because people are concerned and many are downright scared.  They’re looking for insights to help them understand what’s happening – and what’s coming.

One of the things the talking heads say is very important is consumer confidence.  The theory is that when people are confident, they spend money.  When people spend money, businesses make profits, hire more people; they buy more equipment, supplies, etc – and even give out raises!  Then people become even more confident and spend more money and the cycle builds…until something comes along to burst the bubble.  Ahhhh, those pesky bubbles!

When the bubble bursts the consumer confidence cycle does a u-turn and the whole cycle works in reverse.  People stop spending; businesses lose sales and profits, and cut back on people, supplies and plans to expand.  No raises are given.  People become less confident, spend less money and the downward spiral continues…until something comes along to turn that cycle around.

Don’t you wish you knew what those “somethings” that break the cycles are?  Us too.  But we don’t.  We’re not sure anyone does.  Even though “experts” like to talk all about the reasons behind the phenomenon (and all have different opinions, so don’t be shocked if you can’t find a consensus), the smartest investors we’ve met have simply accepted that these “mood swings” which drive business cycles are one of life’s great mysteries.  They happen.  Just accept it and act accordingly.  Our observation is that faith in the certainty of the cycle is one of the keys to investor confidence.

Important distinction: “investor” confidence is different than “consumer” confidence.  Investors are confident in the certainly of the cycles.  Consumers are confident in results once they’re reported.  Investors get in ahead of the next wave up.  Consumers wait until the results are in and then get in.  Investors get out ahead of the next wave down.  Consumers wait until the results are in and then get out.  You don’t have to be a rocket scientist to figure out how it works out for each.  One buys low and sells high.  The other buys high and sells low.  It takes substantial emotional fortitude to “buy the dips” – especially in a market as fickle as publicly traded stocks.  It also takes courage to stop buying or to diligently shop for the right deal, especially when everyone around is racing to buy anything because all they see is sunshine!  Seasons change and so do markets.

Right now, the world is fixated on the economic cycle.  Underneath that, stock investors watch stock market cycles.  Some on a daily basis!  Others watch currencies and commodities like gold and oil.  Those are all exciting.  They move pretty fast, there’s lots of data and opinions readily available, and they’re easy to trade.   That’s why those markets move fast.

Real estate is more boring.  The most meaningful data is highly localized, so there isn’t as much information easily accessible.  And we all know how challenging a real estate transaction can be, so “easy to trade” will never apply to real estate except when talking about publicly traded REITs.  Over the last 8 years, we’ve witnessed one of the most dramatic and extreme cycles in the modern history of real estate.  From 2001 to 2006 we saw a substantial and rapid (by real estate standards) run-up in values as prices went far over the trend line.  Over the last 3 years we’ve watched arguably the most precipitous fall off in values since the Great Depression.  But that process took 8 years!  That’s a very slow cycle when you compare it to almost every other type of asset class.  In fact, the cycle is so long that many people don’t even think about it as a cycle.  It’s like watching a glacier and trying to think of it as landslide. It is, but it doesn’t seem like it.

Nonetheless, when you think it through, it’s most logical to conclude that real estate isn’t dead.  Real estate isn’t going out of style.  More people, not less, are coming in the future.  People’s need for real estate to live in, work in, farm on and recreate to isn’t going anywhere.  There will always be demand for real estate.  And if there’s money in the economy, sooner or later it will find it’s way into real estate -when the mood is right.  So logic dictates that this current price suppression is part of a cycle even though it doesn’t feel like it.  The glacier doesn’t appear to be moving.

So the question is:  Are you an investor or a consumer?  Do you have faith in the cycle or are you waiting for results?  Is your mantra “think and do” or “wait and see”? The answers to those questions will affect the actions you take and where you are in 10 or 20 years relative to the cycle.  If the cycle is real, then real estate could easily be worth much more in 20 years than it is right now.  Will you?

Tomorrow in Part 2, we’ll take a look at why income property is one of the safest ways to buy “dips” and maximize your upside, while substantially reducing your downside.

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