4/18/10: Does It Still Make Sense to Own Your Own Home?

Home ownership is the American Dream.  Or is it? For many, home ownership has turned out to be a nightmare.  So we decided to examine the pros and cons of owning the roof over your head.

In the house for today’s show:
•    Your Host, Robert Helms
•    Co-House and Chief Housekeeper, Russell Gray
•    The “Godfather of Real Estate”, Bob Helms

You know the world is changing when the sacred and indisputable wisdom of owning your own home is called into question – especially by guys like us who LOVE real estate!  So what gives?

As investors, we look at real estate as a financial vehicle.  We buy it to produce a particular financial outcome.

However, many people also look at their home as “investments”, but a home is so much more.  Robert Kiyosaki says your home is a liability because it takes money out of your pocket.  Others argue that if your house is going up in value faster than you’re putting money into it, that it’s actually an investment.  Both are valid perspectives.  So we start this broadcast by posing the question:  If the house is NOT going up in value, does it still make sense to own your home?

On its face, this seems like a financial question.  So the next topic of discussion revolves around doing the math and comparing the value proposition of owning versus renting.  It’s hard to do the math on the radio, but if you listen really hard, you can do it.  Or as Led Zeppelin says, “The tune will come to you at last.”

But there’s more to the analysis than just comparing rent to a mortgage payment, so we delve into fun topics like liability, financial responsibility, privacy and more.  Hey, no one said thinking was easy!

While every investor knows not to get emotionally involved with a property, it’s much harder to maintain such a discipline when home is involved.  Bob and Robert sold residential real estate for many years.  They understand very well the emotional attachments people can have to a piece of real estate and how they affect financial decisions.  To make a good decision, do you need to leave your emotional baggage at the curb?  Or do you place a financial value on intangible considerations and then factor them into your equation?

The show wraps up with talk about the emotional considerations beyond the finances.  If you’re an investor dealing with residential property, it’s important to understand how emotional attachments can affect you, a seller, a buyer or a tenant in terms of the financial price one is willing to pay in order to own, dispose of or enjoy a piece of property. Every person, situation and property is different and the human element is what makes real estate so very interesting and potentially profitable.

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Maverick or Mouse?

Would you rather be aggressively conservative or conservatively aggressive? Many investors who are still in the game through the mortgage meltdown and the Great Recession are facing this question – whether they realize it or not.

In a recent show (Old School Real Estate – Debt Free Investing) we talk about the pros and cons of the old school approach of investing for cash.   However, the discussion raised another consideration that we didn’t talk about: how has the Great Recession affected your inner investor? Whether you’re aware of it or not, you’re probably forming new paradigms as you observe and experience the current real estate market.  We suggest that you form your new paradigms thoughtfully and purposefully, rather than simply absorbing the attitudes of whatever group of people you happen to associate with today.

So again:  would you rather be aggressively conservative or conservatively aggressive?

Some people will respond to the pain of unforeseen setbacks by elevating risk avoidance above profit generation.  If you’re old enough to remember the Tom Cruise film Top Gun, Cruise’s character, Pete “Maverick” Mitchell was a reckless, but very talented fighter pilot.  After Maverick’s beloved flying mate “Goose” (played by Anthony Edwards) was killed during a practice session that Maverick piloted,  Maverick became hyper-conservative.  He lost all of the swag that contributed to making him a great fighter pilot.  Though he remained talented and capable, he became ineffective when it mattered most.

Later in the movie, the now timid Maverick is pressed into live combat, but actually endangers his team because he is too conservative to engage the enemy.  The safety of his own plane had become his paramount priority.  He was more interested in risk avoidance than winning the battle.  His paradigm shift had changed his priorities.

Thankfully, in the middle of the battle, he snaps out of it and re-engages.  The irony is that the formerly reckless, undisciplined Maverick doggedly follows procedure, placing his own plane in jeopardy by refusing to “leave his wingman”.  But all the skills and instincts that made him great when he was reckless still remained, and he was able to outflank and outsmart the enemy.  He saves the day with his now conservative aggression.

So Maverick started out highly skilled, but arrogant and reckless.  Then he experienced a tremendous setback and withdrew into an aggressive conservativeness which neutralized his amazing skill.  When he applied the lesson of his setback to his aggression rather than to his fear of failure, he became conservatively aggressive and highly effective – perhaps even more so than before his failure.  In other words, his failure actually made him stronger when he got the right lesson from it.

If you’re just starting out, try to look at the pain some of the old timers are facing (we know it’s hard) and ask yourself what lessons you should apply to your ambition.

If you’re among the walking wounded, look at your attitude towards investing today. Are you looking for reasons to engage – or for reasons to disengage? Have you become aggressively conservative?  If so, did you do it purposefully – or have you simply absorbed negativity from the naysayers in your life?

The great news is that you don’t have to have lightening fast reflexes, eagle sharp vision or marathon runner stamina to be successful as real estate investor.  But like Maverick, you have to manage your inner fighter pilot and make sure you can effectively engage when the battles of investing call you into action.  You may be safe sitting in the hangar watching, but you won’t win any medals.  This economy needs heroes right now.

But not everyone has what it takes to be an investor in the real world.  It’s hard work, it can be scary at times; and if you engage early and often, there is a high probability you will get shot at – and perhaps even shot down.  But if you keep your wits about you, pack your chute, and follow procedures developed through the trials and errors of those who have come before you, you have a legitimate chance to win.

Is it worth the risk?  That’s up to you.  But financial freedom, like any other kind of freedom, isn’t free. It comes at a price.  If you do nothing, then not winning is a certainty.  You may be safe, but you won’t be victorious.  You have to decide if you want to soar like Maverick in an iron eagle or be safe like a church mouse hiding in a hole in the wall hoping to live your life unnoticed.

You know where we’ll be: right here on the radio and our website bringing you news, views, information, inspiration and resources to help the fighters succeed.  When one of our listeners succeeds, they become another contributor to a successful society.  That’s good for them, it’s good for us – and it’s good for the church mice, too.

4/11/10: Old School Real Estate -Debt Free Investing

Does debt free mean no leverage?  Or are there other ways to optimize return that don’t include mortgages?  The Real Estate Guys™ look take a fresh look at an old school concept: investing for cash – even when you don’t have any!

In the old schoolhouse for today’s lesson:
•    Your Professor of Profit, Head Teacher and Host, Robert Helms
•    Teacher’s Aide and Co-Host, Russell Gray
•    Old School Principal and the Godfather of Real Estate, Bob Helms

It’s been said, “There’s no school like the old school.”  This is just another way of saying that there’s often great wisdom in fundamental concepts which have stood the test of time.  When traumatic events like mortgage meltdowns and Great Recessions occur, they shake the structure of conventional wisdom.  What is often left standing are “old school” principals (like Bob!).

So we decided to brush the dust off of some old school ideas and talk about the pros and cons of investing for CASH.  Wait! If you love leverage or have no cash, stick with us because there’s something in this show for you too!

Class starts with a Health & Safety lesson on the double-edged nature of financial leverage.  Magnified gains are awesome, but magnified losses can leave you cut and bleeding.  Don’t ever run with leverage or swing it around wildly.

Our next lesson is in Current Events and begins with the when, how and why purchasing for cash is the best (and sometimes only) option for many opportunities in today’s market.  However, our Science book says the caterpillar of cash today can metamorphosis into a butterfly of leverage in the future.

After recess, our Economics class features a discussion of why “cash is trash”.  Although it’s fallen out of vogue for bandwagon real estate “investors”, many experts consider real estate a desirable commodity for hedging against inflation.

In Shop class, we discuss how to work with tools to create leverage that doesn’t involve borrowing.  Wow! Debt free leverage.  Maybe this should be a Physics class?

For Phys Ed,  we learn how to play and stay in the game – even if we don’t have any cash of our own.  Fun, but sweaty.

Before we know it, the school day is over and it’s time to head home for supper.  We guess we’re a little nerdy – because we sure had fun in school today!

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4/4/10: The Brave New World of Finance – How to Master Your Debt with Jordan Goodman

We’ve heard estimates that every man, woman and child in the US is currently saddled with $40,000 to $170,000 in debt – just for the Federal government!  Then tack on state and local government debt, and before you even get your first credit card, debt has a dominating hold on your finances.  As we boldly go where no one has gone before, it’s more important than ever to be strategic in managing your debt.  To help us explore the galaxy of information on this topic, we beamed a best selling author into The Real Estate Guys’™ studios.

On the bridge of our radio starship:
•    Captain, Chief “Helmsman” and Host, Robert Helms
•    Pointy-eared Co-Host, Russell “Mr. Spock” Gray
•    Ship’s Financial Doctor and Godfather of Real Estate, Bob Helms
•    Best selling author, the Money Answer Man and ship’s Financial Engineer, Jordan “Don’t call me Scotty” Goodman

“Debt, the endless frontier.  These are the continuing escapades of a spendthrift society.  It’s apparent mission: to encumber itself beyond any hope of repayment; to seek out new debt ceilings and then monetize that debt; to boldly go where no one is sure we should.”  Da ta daaa, ta da ta da DAAAA!!!! Swoosh!!!!

Sorry.  We got carried away.  All this may sound like a tee up for political commentary (we are soooo tempted), but it isn’t.  Our point is that debt, both public and private is a major part of every person’s financial future.  And as we attempt to break free from the gravitational pull of the Great Recession, we find ourselves looking at a brave new world of finance – one with new rules that it behooves each of us to learn.

At its core, debt involves getting other people’s money (which we like!) and paying them interest (we like that less).  The motivation of the lender is, like a drug dealer, to get you hooked on debt and forever paying interest.  The motivation of the addict…we mean borrower, is to enjoy now and pay later (or never).  So where does an investor fit in?

As investors, we want to borrow cheap and invest high – just like the banks.  But since there are no bailout programs for us, we need to be more careful.  The first step is to understand the rules – and then to implement effective strategies.  Sound easy, but when the rules change, we need to examine our strategies.

We launch the show talking about the new realities of debt in the post meltdown economy.  For the older folks, we’re getting back to “normal”.  For younger people, free and easy credit was “normal” and the current environment is no fun at all.  We talk about where things are now and where they might be headed.

With the new Credit Card Act of 2010, the rules of credit cards have changed.  Credit cards, like light sabers (we know we’re mixing sci-fi metaphors), are powerful tools in the right hands – while they can be equally dangerous when used by the untrained.  Since the rules are changing, investors and consumers alike need a little training on the state of the art.  Our special guest and prolific author Jordan “Mr. Money Answers” Goodman, brings us up to speed on some of the need to know items.

As the US and the world is coming out of their bunkers and beginning to explore the economic wasteland, governments, industry and individuals are all making adjustments.  For many individuals with unsustainable levels of debt, professional help may be the best answer.  Jordan shares with us his insights about the important differences between Debt Settlement and Credit Counseling Services.  You’ll want to hear what he has to say.

For some people, the aftermath of the meltdown means foreclosure and perhaps even bankruptcy.  Does that mean game-over or is there life after debt?  Once again, Jordan brings in great practical information and insights to help you chart your personal course.

For the two of you who are facing the brave new world with good credit scores and equity, Jordan reveals an AWESOME strategy for accelerating your mortgage.  Long time listeners – and especially readers of Equity Happens –  know The Real Estate Guys™ have never been big fans of mortgage acceleration.  But Jordan shows us how to use the power of cash flow to accelerate the pay off of a mortgage without amortization.  We know it sounds like science fiction, but it’s real.  Check it out!

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