10/17/10: Avoiding PMS – The Single Most Important Element for Healthy Cash Flow
When your real estate investments are properly managed, money flows in each month like clock work. But when the monthly flow is accompanied by pain, it could be a sign of Property Management Stupidity or PMS.
When PMS sets in, it can severely cramp cash flow and may be accompanied by heavy bleeding. Investors suffering from PMS are often very irritable. PMS is known to play a role in the break up of marriages and partnerships. Left unattended, PMS causes balance sheet anemia and can lead to embarrassing stains on a previously lily white credit score.
To help you avoid getting your undies in a bunch when dealing with this sometimes messy and often unspoken topic, The Real Estate Guys™ sit down with a second generation property manager and past President of a local chapter of the National Association of Residential Property Managers. We discuss the causes and cures of Property Management Stupidity and how to keep your monthly cash flow safe and sanitary.
In studio for today’s real estate radio show podcast for this absorbing conversation:
- The best darn real estate radio talk show host in the world, period! Robert Helms
- Your sometimes bloated and sensitive co-host, Russell Gray
- A man who has avoided PMS throughout seven decades of investing, The Godfather of Real Estate, Bob Helms
- Special expert guest and seasoned property manager, Jay Hartley
A comfortable monthly flow of cash is the life-blood of financial success for households and businesses. Cash flow is what a professional investor buys when purchasing either stocks or real estate. Fundamental price appreciation (not that which is merely caused by inflation) is a reflection of cash flow and the market’s willingness to pay for it.
So when it comes to real estate investment, it seems investors would pay close attention to finding the best property management company available. But sadly, most landlords don’t focus on property management until they’re in pain and are trying to stop the bleeding. Then they impatiently hand their new property manager a big mess to clean up.
But there’s a better way!
Listen to this podcast and discover:
- How to find the best property management company
- Stop the bleeding on your rental house and other rental property
- Avoid loss to your real estate investment and make money as a property owner and landlord
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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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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8/1/10: Economics, Politics and Real Estate – Interviews from Freedom Fest 2010
If you’re one of those who take The Real Estate Guys™ to the gym, make sure you carbo load first! This one’s a whopper! Our radio audience only got an hour, but the podcast audience gets the whole enchilada. That way whether you like American or Mexican, there’s something for everyone.
A few weeks back, we went to Las Vegas for the 7th Annual Freedom Fest conference. This was our first time and we weren’t sure what to expect. But after our previous interview with event founder, economist Mark Skousen, we thought it would be worthwhile. It turned out even better than we thought!
After being near the epicenter of the financial earthquake which rocked the real estate portfolios of even the most experienced investors, we’ve put a big emphasis on studying economics. Who cares if you’re expert at fixing up properties, managing tenants or putting together syndications if property values are crashing, tenants don’t have jobs, loans aren’t available, and people are too scared to act?
So we started looking for people who saw it coming, put their predictions in writing and got it right for the right reasons. Hindsight’s often 20/20, but seeing the storm coming 
while there’s still time to shutter the windows is better. You might not be able to avoid bad economic weather, but with advance notice at least you can prepare!
We looked at the lineup of speakers at Freedom Fest and decided this would surely be an eye-opening experience. We were especially excited about Peter Schiff, author of Crash Proof 2.0 (a highly recommended read!). Schiff called the crisis for the right reasons – and way ahead of time. We’re happy to say we got a lengthy interview with Mr. Schiff to see what he’s thinking now – which is the feature of our next show.
While we’re boasting about awesome interviews, we also had a chance to talk with billionaire CEO of Forbes Magazine and former Presidential candidate, Steve Forbes. That interview is coming up in a couple of weeks, so stay tuned! The best way to be sure you don’t miss any of our exciting episodes is to subscribe to our podcast via iTunes (shameless plug). 
Today’s episode is about talking to LOTS of people! It was like one of those speed dating sessions. Robert sat at the microphone from early morning to late at night, and Russ rounded up a long line of interesting people to interview.
Featured in this episode of The Real Estate Guys™ Radio Show:
- Your host, Robert Helms
- Co-host and cat herder, Russell Gray
And a long parade of very special guests (in order of appearance):
Jeffrey Verdon, Attorney, talks about estate planning and asset protection strategies utilized by wealthy individuals; including off-shore entities and a very interesting technique for funding life insurance.
Dave Fessler, Energy & Infrastructure Expert for the Oxford Club. Dave discusses his views on the future of energy and infrastructure and their impact on jobs and the economy. He also comments on “the paradox of thrift” – how consumer savings is actually fueling the recession. He tells us how long he thinks it’s going to last, and where he believes America’s best chance for job creation are right now.
Bob Bauman, Attorney, Former U.S. Congressman, Founder of The Sovereign Society; shares his thoughts on offshore investment, asset protection, second citizenship and the growing interest many people have in diversifying globally.
Vernon Jacobs, CPA, is an expert in international taxation. Vern tells us what to consider when investing or employing asset protection strategies offshore.
Robert Barnes, Attorney, is part one of two back to back interviews with lawyers from a premier tax and investment fraud law firm that went 3 for 3 (that’s pretty good!) in three of the top four high profile tax cases in the U.S. (you’d recognize the names). Mr. Barnes reveals the worst thing you can do when contacted by the IRS.
Robert Bernhoft, Attorney, is part two of our tax and investment fraud attorney interviews. Mr. Bernhoft describes what you can do to proactively avoid problems with both your investors and regulators; and shares how his firm uses specialized “non-litigation” techniques to recover misappropriated funds without going to court.
Steve Hochberg, Chief Market Analyst for Elliott Wave, works closely with Robert Prechter. Prechter’s 2002 NY Times best seller, Conquer the Crash, accurately predicted the current financial crisis. While everyone is running scared of inflation, Steve says DEFLATION is actually the big near term threat. He believes we are “on the precipice of the greatest stock market decline of our lifetime.”
Patri Friedman, Executive Director and Chairman of the Board of The Seasteading Institute. A city on the sea? Really??? Before you write it off as Looney Tunes, go to their website and look at their management team. These guys are all brilliant. We’re talking Stanford, Harvard, Yale. Wow. Have you heard of Pay Pal? Yeah,the founder is on their board. And why were they at Freedom Fest? Take a listen!
Leon Louw, Executive Director of the Free Market Foundation, all the way from South Africa! Why? To raise money to advance property ownership rights for blacks in South Africa. For what it’s worth, we didn’t see any evidence of racism at Freedom Fest, though it was full of “tea baggers”. Obviously, Leon felt people at the event would be supportive of his cause. From our observations he was right. But this isn’t a political interview. any more than our show is political. We just want to understand what people are thinking and doing, and how it creates or undermines real estate opportunities. Think about the ramifications on demand in a market where a large part of the population, formerly locked out, suddenly has access to buy property. Very interesting stuff.
Terry Coxon, author of Unleash Your IRA, shares a powerful concept for maximizing your Individual Retirement Account. We thought we knew all about this topic, but Terry shares a strategy we hadn’t considered. Now we’re hyped to read his book. With the demise of home equity, and a growing number of people predicting a tough stock market (at best); and lending getting even tighter from financial reform, we think IRA’s and rollover 401k’s are one of the BEST sources of private investment capital. That makes this a topic worth exploring!
Ron Holland, editor of two financial newsletters and 30 year financial industry veteran, has something to say on the topic of IRA’s. And it’s concerning. He shares what he thinks is the greatest threat to your retirement account.
Terry Easton, author of Refounding America and contributor to Human Events. Terry is uber-conservative / Libertarian and has a lot to say on the topics of economics, politics and real estate. We came to hear a lot of opinions and it just so happens that Terry has a lot of opinions. But since they come from a long history of study and involvement, we think they’re worth listening to.
All in all, Freedom Fest was a great experience and we’re very likely to attend next year’s event. We met great people, got valuable insights, and had our paradigms stretched (we’ve been icing them since we got back). Most of all, we see the economy and real estate from a much broader perspective. As we continue to seek out markets, opportunities and product niches to invest in, we are convinced a bigger perspective will pay huge dividends.
Remember – our next two episodes feature our interviews with Peter Schiff and Steve Forbes!
The Real Estate Guys™ Radio Show provides ideas, perspectives and resources to help real estate investors succeed.
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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.
The French Quarter in New Orleans - what a fun place!
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?
Rich Dad Advisor Garrett Sutton at Dinner. Notice Ken McElroy on the other side of one very fortunate Summit student!
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.
International real estate developer Beth Clifford explains her vision for a beautiful waterfront development in Belize
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.
The stunningly beautiful Cayes of Belize from our airplane at about 1,000 feet.
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?
This couple came all the way from Papua New Guinea to hang out with Ken McElroy and the rest of the Summit faculty and guests!
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.
Nearly 50 real estate investors hard at work doing due diligence on a new real estate market during this year's Summit. It's just one of the many sacrifices investors have to make.
All the best!
Robert Helms and Russell Gray
Hosts
The Real Estate Guys™ Radio Show
3/14/10: Hedging Your Real Estate Bets with Life Insurance
Are you kidding?!? Life insurance? What does life insurance have to do with real estate - and how can it help a real estate investor succeed? Good questions! So we turned to one of the foremost experts on the creative uses of life insurance and learned how to add another powerful financial tool to our investor’s tool box. Check it out!
Backing the hearse up to the studio doors:
• Chief Undertaker and Show Host, Robert Helms
• Pallbearer for Hire and Co-Host, Russell Gray
• Hearse Driver and “The Godfather of Real Estate”, Bob Helms
• Non-traditional Financial Planner, Kim Butler
Let’s face it. Most people would cross the street to avoid a life insurance salesman. Who wants to spend a bunch of time talking about dying? Worse, who wants to spend money on a product you hope you never use – and when you do, all the benefits go to someone else? Yuck!
That’s what we thought until we met Kim Butler. Kim calls herself a “non-traditional” financial planner, which had us liking her right away. If “traditional” means 
turning your money over to the Wall Street Wizards to play with, we’re not fans. So we’re very interested in what Kim has to say.
Kim teaches what she calls “Prosperity Economics” and what it means to real estate investors. Sitting here wallowing in the Great Recession, “Prosperity Economics” sounds pretty good!
The first thing Kim tells us is that life insurance “done right” means benefits to the LIVING! What a great concept! She says rather than waiting to die to “enjoy” (we use the term loosely) the benefits of life insurance, she explains how life insurance is a powerful financial tool in the here and now. We like it.
One of our FAVORITE parts of the discussion is when Kim reveals how one particular type of life insurance has amazing similarities to real estate as a financial tool. Even better, she tells us how savvy investors actually use life insurance not as an investment, but as a cash management tool. Very interesting!
We came away with pages of notes – and are still hungry for more! Look for a follow up show on this intriguing topic in the near future.
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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.
The Biggest Scam Ever Could Be Your Biggest Opportunity!
No, we aren’t advocating becoming the next Bernie Madoff. We just read Robert Kiyosaki’s article on Yahoo Finance called The Biggest Scam Ever. It’s about 401k plans and he’s commenting on the cover story Time Magazine recently published on the subject.
Time says their sources estimate that 44 percent of Americans (a chunk of which are baby boomers) are in danger of going broke in their retirement years. That’s bad news. But it’s great for real estate entrepreneurs!
Once again, as we watch the horizon, we see waves of opportunity forming. Do YOU see them?
Think about it. Tens of millions of people in danger of going broke in their retirement years. These will be seniors with social security checks. It isn’t much income, but it’s consistent. At least that’s the promise from Uncle Sam.
So their lifestyle will be taking a substantial dip. Some are sitting in homes that are paid for. Some are sitting on big fat mortgages. Some are renting in nice areas. All will need to do something to decrease expenses and increase their income.
Can you help them?
A few weeks back we did a radio show on reverse mortgages. This is one of the few remaining tools available to reposition idle equity and put it to work. The cash flow arbitrage is easy because there’s no payment required. Better yet, there’s no danger of foreclosure. Seniors with equity could make great investment partners to acquire cash flow real estate, which, conveniently, is readily available into today’s low price, low interest rate market – an attractive, but historically rare combination!
(By the way, we’re writing a free report on reverse mortgages, so if you haven’t already requested it, just go the feedback page and send us your request.)
We also recently blogged about the notion of buying homes via short sale from homeowners who are facing foreclosure because they can’t afford to make the high payments. If you missed it, look it up. Couldn’t similar strategies be employed with seniors? We think so. When you can help someone stay in their home for a lower payment, that’s a good thing!
Now hold on because our brains are flying around at light speed. And rather than write a manual on how to do all this, we’ll just ask some questions to guide your thought processes.
If you think that several million seniors will be looking to cash out of their homes and rent, what areas and neighborhoods would they be interested in? Think about weather, taxes, and proximity to medical care and airports (so they can easily go back home to visit friends and family). What major population centers will they be moving from? What are their options for more affordable areas nearby?
What about property types? Think about floor plans. Do they need lots of bedrooms or just a couple? Do they need storage for all the stuff they’ve collected over their lifetimes? What about stairs?
Here’s our recurring theme: Problems are opportunities when you look at them in light of available resources. Most people get brain lock when facing problems, even though there are all kinds of resources available to turn problems into profits. Don’t let this happen to you! You won’t want to look back on this time in history and say, “I missed it. If I only knew then what I know now!” Trust us, you don’t want to “shoulda” all over yourself! It stinks.
Lastly, we don’t understand why so many people cap on Kiyosaki when he posts his articles. We’re betting these people have never spent any time with the guy. Or they work for the people he rips. In any case, if you haven’t figured it out already, we think he’s brilliant more often than not. We look for every opportunity to spend time with him and the people he surrounds himself with. You don’t have to agree with everything, but it will sure stimulate your thinking! Which is the same reason we do our radio shows and post these blogs.
The key to turning this economy around is for people to be informed, think, make good decisions and take bold action. The people who do it first will win the biggest. Why not you?
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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. )
