8/22/10: What is Your Risk Paradigm? A Life or Debt Decision
Protecting your money in today’s highly uncertain economy is surely very challenging. Remember when real estate equity and bank accounts were considered among the SAFEST places to keep your savings? Today, real estate equity has disappeared – and for many people even getting access to whatever equity they still have is next to impossible. Boy, do we miss those equity lines of credit with their checkbooks and debit cards!
And even though you can still write checks on your cash deposits at a bank, with record bank failures even that old saying “sure as money in the bank” seems a little outdated. Add horribly low interest rates and, to compound the injury, taxes on your meager interest earnings, it’s enough to make you wonder what this financial world is coming to.
Well, we have good news. There’s a new way to look at an old product – one that is time tested and has survived its fair share of economic turmoil. And we got such a positive response to our first foray into this topic, we decided to re-visit it with a new guest.
In the radio lifeboat for another voyage into broadcasting brilliance:
- Host and head lifeguard, Robert Helms
- Co-host and lifeboat inflater, Russell Gray
- Seasoned sailer of stormy economic seas, the Godfather of Real Estate, Bob Helms
- Special guest, “infinite banking” expert, Patrick Donohoe
Right out of the gate we need to set the table, which is no small task with the lifeboat bobbing on the waves: what does life insurance have to do with real estate investing? Think about what a bank account has to do with real estate investing and you’re on the right track. But unlike a bank account, our guest explains that certain types of life insurance – thought greatly misunderstood – offer far greater flexibility than bank accounts. And though they aren’t FDIC insured, insurance companies are arguably more stable and conservatively run. Unlike banks right now, you don’t hear a lot about record number of life insurance companies failing.
We also address why so many CONSUMER financial gurus are down on cash value life insurance, yet corporations like Wells Fargo and Wal-Mart buy tons of it. Could it be there are BUSINESS purposes that make it very useful for BUSINESS people? We say all the time that real estate investing is a business, so it makes good sense to see how businesses are using this financial tool. For example, how’d you like you to take a tax deduction for making a deposit in your bank account? Hmmm….that’s an interesting concept! What about getting a loan against your equity without having to qualify? Try doing that with a property! And unlike property, the value isn’t determined by market forces, so your equity doesn’t disappear in a market downturn.
The point of this episode is that insurance can do a lot more than manage risk and pay a benefit. Our job is to expose you to some of the possibilities. Your mission, should you choose to accept it, is to explore those possibilities, learn how to use this powerful tool, and decide when and where to use it to advance your real estate investing program. It seems the economic storm isn’t over yet, so it might be a good idea to know how to operate the lifeboat. It’s a matter of life and debt.
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12/27/09: A Glimpse into the New Year with Ken McElroy and Kim Kiyosaki
In our continuing quest for real estate wisdom, The Real Estate Guys catch up with two of the most active real estate investors around. As 2009 closes and we look forward to the new decade, what do the experts think?
Gazing into their crystal balls for this episode:
- Your senior seer, host Robert Helms
- Chief ball polisher, co-host Russell Gray
- Rich Dad’s Real Estate Advisor, best selling author and real estate entrepreneur, Ken McElroy
- Best selling author, prolific real estate investor and entrepreneur, Kim Kiyosaki
We like to talk to people who know what they’re talking about. Not just because they’re smart, but because they have wisdom that only comes from experience. We kick off with an honorary member of The Real Estate Guys, Ken McElroy. This is a show worth listening to with a note pad because he gives us some great pearls of real estate wisdom!
Ken starts out telling us what he’s excited about as we enter the new year. While many people are licking their wounds, Ken says 2009 was his best year ever! Then he goes on to explain why the unraveling of the mortgage industry has provided extraordinary opportunity. He also discusses his strategies for market selection, tells us what NOT to do, and then reveals some of the markets and product types he’s most interested in right now. Plus, he gives us the one key item he looks for to find markets that are more likely to provide lower marketing and turnover costs, and a bigger pool of quality tenants.
Ken wraps up his appearance by sharing what he sees coming in 2010 in terms of interest rates, foreclosures, rents, inflation, the dollar and more! Really good stuff!
The second half of the show features a conversation with Kim Kiyosaki, Rich Woman author and big time real estate investor. She gives us her take on the prospects for 2010, which includes both bad news and good news. Then Kim shares some details on a huge real estate deal she just closed which exemplifies her forecast. She reminded us that she started in 1989 in the middle of the last real estate “meltdown” with no money and no credit. Unable to obtain conventional loans for the first 8 years, she explains how she had to be creative to get her deals done. When you hear the size of her latest deal, you’ll realize how much can change in 20 years! As we said in Equity Happens, 20 years from now it’s going to be 20 years from now. The difference will be what you choose to do between now and then.
We’re going to continue checking in with the biggest brains in real estate to see what they’re going to be doing in the new decade. Stay tuned to The Real Estate Guys - and tell a friend!
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12/20/09: Using Creativity to Get Deals Done with Wayne Palmer
If you are one of the many investors who jumped on the real estate bandwagon at the peak, then you might be feeling a little beat up entering 2010. But as famous broadcaster Paul Harvey said, “In times like these, it helps to recall that there have always been times like these.” In other words, you’re not alone. Even better, there are people who have not just survived similar difficulties, but have come out huge winners! Wouldn’t it be great to have one of these successful veterans of past real estate wars take time to explain to you how they did it – and how you can do it, too?
What a great idea! That’s why we invited one of biggest brains we know back to The Real Estate Guys Radio Show for a special session on creativity. This is one show you don’t want to miss!
The braintrust behind the microphones for today’s show are:
- Your right-brained host, Robert Helms
- The recovering left-brained co-host, Russell Gray
- The always-in-his-right-mind (when we remembers where he left it), The Godfather of Real Estate, Bob Helms
- Creative genius, the man Robert Kiyosaki calls the “Wayniac” – Wayne Palmer
We kick off the show dissecting the “I can’t” mindset that is all too common when times are tough. How do you see past the doom and gloom and unleash your inner creative genius?
Wayne Palmer joins in the conversation and shares his personal rags to riches story – and how creativity saved his financial life. After hearing his story, you’ll understand why phrases like “necessity is the mother of invention” and “when the student is ready, the teacher appears” got to be cliches. They’re true!
Wayne explains why No Money doesn’t mean No Deal; and how to use underutilized assets as down payments. There’s a lot more to doing a deal than cash and a loan!
The gang also talks about the crucial difference between Dollars and Benefits when it comes to real estate deal making. This is where creativity really shines!
Wayne goes on to highlight the concept of “creating” your way out of debt as a far more effective and preferable alternative to “earning” your way out. One can wipe out debt and create wealth very quickly. The other is painfully slow.
The show wraps up with a discussion of the amazing power of real estate “paper” both as a tool and as an investment vehicle.
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Robert Kiyosaki Presents The Art of a Deal – How to Put Deals Together Without Money
The Real Estate Guys are headed to Scottsdale Arizona to attend Robert Kiyosaki’s latest event The Art of a Deal. After attending Rich Dad’s Real Estate Summit with Ken McElroy last September we’ve been eagerly looking forward to this event. We hear the event is nearly sold out, so if you want to go be sure to sign up NOW!
On the off chance you don’t know who Robert Kiyosaki is, just go check out The New York Times Best Seller’s List. We understand that Mr. Kiyosaki has taken up residence there with two books on the list, including the perennial placement of Rich Dad Poor Dad and his latest work Conspiracy of the Rich.
Needless to say, we’re big fans so off we go to Scottsdale! We’ll post our report as soon as we get back. If you’re there, make to look for us – we’ll be the guys taking pages of notes.
Here’s a personal invitation from Mr. K himself:
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We hope you decide to join us in Scottsdale! Meanwhile, here are a couple exclusive interviews you’ll want to listen to.
The first one is an exclusive Backstage interview we did with Robert Kiyosaki and Wayne Palmer at the Rich Dad offices in Scottsdale. This is something you didn’t get even if you’re one of our podcast subscribers. We’re working on a lot more Members Only goodies for Backstage Pass Members.
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The next one is our recent radio interview with event speaker and Rich Dad Advisor Wayne Palmer on the topic of Creative Exchanges. This show originally broadcast on 10/18/09.
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Reality or Mirage?
Today’s Wall Street Journal reports that MGM Mirage is cutting the price of the condominiums in its spectacular City Center project in Las Vegas, Nevada. How big a cut? Thirty percent! We’re not sure what their margin is, but that’s probably all of it and then some. Ouch.
Worse, it’s probably still not enough. But only time will tell. The cuts are a little surprising to us, but clearly they’re the result of a major reality check for MGM Mirage. And this post isn’t really about Las Vegas, MGM or City Center. It’s about the LESSONS available in this situation for all of us.
Lesson #1 – The market sets the price. Whatever MGM needs to cover its cost is interesting, but only to MGM. The market decides what its willing to pay. In this case, MGM is hoping it’s just 30% off. Before it’s all done the market may want more.
Lesson #2 – The market is fickle. Three years ago people were willing to pay more. That’s why MGM sold so many. People had equity, unemployment was half what it is today, financing was readily available for almost anything related to real estate – even condo-hotels. But a funny thing happened on the way to the closing table. Okay, not so funny. But the stream of foreign money through Wall Street into mortgage backed securities got shut off almost over night, taking with it equity and working capital. A market heavily driven by momentum did an abrupt 180. Whether you’re rehabbing a fixer upper or building a skyscraper, if your success requires you to find a ready,willing and able buyer (or in MGM’s case, thousands of them), you better get to market fast – because things can change.
Lesson #3 – Have a Plan B. Donald Trump’s Plan A was to sell the condos in his Las Vegas project, just like MGM and every other developer participating in the Las Vegas rush for real estate gold. When Plan A bit the dust, he converted the project into a hotel. Still a tough gig, but the goal is to get some cash flow to hold the property until things improve. Rich Dad Advisor and Robert & Kim Kiyosaki’s investment partner Ken McElroy says they only do deals they can afford to stay in for 10 years. Plan A may be to build or fix up for quick sale, but Plan B is to structure the deal so it still makes sense if they have to hold. Plan A is a win and so is Plan B.
Lesson #4 – Understand the other party’s needs, wants and desires. When you’re in a deal that’s going sideways, whether for reasons under your control or those not (certainly MGM could not predict, much less control the mortgage meltdown), it’s easy to fixate on your own pain. If buyers aren’t willing to close on City Center, should it be assumed they are unwilling because of the price? Could they be unable because of lack of financing? Could they be afraid of reduced rents on their units due to the soft economy? Until you know what the issue are for the other party (again, in MGM’s case, thousands of them), you might give up or give away profit unnecessarily.
Lesson #5 – Use Creativity to Protect Profits (or minimize losses). Certainly we don’t know all the considerations for MGM, and presumably these are extremely smart people, but we know many investors who are in contract for units in City Center and we haven’t heard any discussion of owner financing. We know that condo-hotel pricing has all but disappeared. For many buyers getting a conventional third party loan is an impossibility. But what if City Center carried back the financing? It doesn’t get cash, but it gets an asset (a mortgage). For those buyers who need income to service the mortgage, couldn’t MGM as the hotel operator, steer more guests into the unit? After all, they still get their operator’s share of revenue, plus they get the mortgage payment. The owner may need to kick in a little cash flow to feed the mortgage, but better than losing one’s deposit. After all, it’s still one of the premier properties in the country. Where do you think values will be in 20 years?
You may not be a Big Time Operator like MGM. But real estate is real estate and when you watch what’s happening for the BTO’s, many of the lessons will apply to you.
(Side note: For more information on using private notes, check out our interview with creative finance guru Wayne Palmer called The Power of Pen: Using Private Notes to Get the Deal Done. )
