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!

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.

6/19/11: Be Your Own Bank – Cash Management Strategies for Real Estate Investors

Being a real estate investor means handling a lot of cash. It may not seem that way, especially at first, but think about it.  There’s the float on the cash flowing through your bank account.  Then there’s the cash you maintain and build up to handle contingencies and long term maintenance.  You have deposits you collect and hold for tenants.  Let’s not forget about the growing “Opportunity Fund” you’re stockpiling until the next great deal comes long.  And when you sell or refinance, there may be a BIG pile of cash flowing through your account on it’s way to its next mission.

Oh yeah.  You’re rolling in the dough.

“But,” you say, “all that money’s spoken for.  I just have to sit on it until I’m ready to use it – even though it isn’t earning squat.  I can’t afford to do anything risky with it!”

We feel your frustration.  But what if we told you there’s a way to have your cake and eat it too?  Would you be interested?  We thought so.

In the studio to cook up some new cash management recipes to tantalize your taste buds:

  • Host and Chief Taste Tester, Robert Helms
  • Co-host and Spoon Licking Specialist, Russell Gray
  • Special Guest, Master Financial Chef, Patrick Donohoe

Okay, after a tease like that, you might be worried this episode is all cake and no ice cream, but you’d be wrong.  We have cake, icing, ice cream and sprinkles.  You get it all.  Maybe even a candle or two to light a fire under you.

So what’s the deal?

Simply put, our guest Patrick Donohoe has opened up our eyes and minds to a completely unorthodox way to manage cash.  Only it isn’t some wacko unproven idea.  It’s something that the biggest cash managers on the planet, like Bank of America, Wells Fargo and J.P. Morgan Chase have been doing for years.  And it’s something we would have never thought of without Patrick’s help.

Without giving away the story, here’s the idea:  There’s a financial vehicle out there that enjoys very favorable tax treatment by virtue of being attached to another very old and time tested financial vehicle (hint: it’s not a bank account).

It works kind of like a line of credit secured by a property.  Remember those?  You could borrow against your equity at a low rate, use the money for whatever you wanted, then put it back whenever you wanted.  And then you could take it back out again, anytime you wanted, without prior approval.  Ahhh, those were the good old days!  (hint: it’s not a mortgage).

But as much as we liked those old HELOC (Home Equity Lines of Credit), they had some pesky side effects we just thought we had to live with:

  • You had to qualify to get them set up.  If you had bad credit and no income, you couldn’t get one.  How unfair.
  • The credit line could be shut off at any time for any reason.  Even if something minor happened, (you know, like the market crashing and all the equity disappearing), the bank would simply reduce or completely cancel the line of credit.  How rude!
  • You had to make payments.  What?!  That’s so inconvenient.
  • If you didn’t make the payments, the lender might actually foreclose on your property – even if you were still living in it.  Now that’s REALLY inconvenient. And rude.

Enough about those old crappy HELOCS.  Who needs them anyway?

Wouldn't it be nice to have you cake and eat it too?

What if you could have a system, where you took all the cash you’re sitting on for various purposes, and you dumped it (neatly) into an “account” where you could earn a much better return than at the local bank (like 3 or 4 times more); AND you could immediately borrow it back out and pay LESS than what it’s earning.

Yes, you heard right (if you verbalize words when you read).  You can get POSITIVE arbitrage when getting a secured loan.  Then you could take the loan proceeds and use the funds for their intended purpose, leaving the positive arbitrage working for you.  That’s like having your cake and eating it too.

Suffering from a little brain freeze?  That’s what happens when you try to gulp the ice cream.  You need to take it slowly.

Here’s a suggestion:  Listen to this episode, maybe 3 or 4 times.  With a notebook.  Make a list of questions.  Think of all the really cool things you could do with an account like this.  Then, if (when) you still have questions, contract Patrick.  He has additional educational resources to help you loosen your brain belt.  That’s what you need to do when you eat a lot of cake.

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.

6/12/11: The Checkbook IRA – Real Estate Investing Using Your Retirement Account

Bargains, bargains everywhere, but it’s hard to get a loan. Even in the good old days of fast and easy Fannie and Freddie money, it’s always been hard to move quickly or get approved for distressed property.  Of course, you could never get conventional loans for foreclosures, tax liens or discount notes – let alone private placements, precious metals or private loans.  So with the stock market down (again) and conventional money still tight (low interest rates notwithstanding), investors are turning to their self-directed individual retirement accounts and rollover 401ks as a source for funding.

However, if you’ve used your self-directed IRA to invest, you know the process can sometimes be a little clunky.  Your well meaning custodian often has an approval process that can take more time and money than you’re willing to invest.  Sometimes the delays can cost you the deal.

Fortunately, there’s an exciting alternative called a Checkbook IRA.  To learn more, we invited our favorite attorney to grab a microphone and tell us all about it.

In the studio for this compelling foray into the concept of Checkbook IRAs:

  • Host and Senior Vice-President of the First National Bank of Broadcasting, Robert Helms
  • Co-host and Third Fifth Assistant to the Junior Teller’s Assistant, Russell Gray
  • Special Guest, Attorney and Investor Summit at Sea™ Faculty Member, Mauricio Rauld

The Checkbook IRA allows you to act quickly when you see a great deal.  No more paperwork and waiting while your custodian reviews and approves your transaction.  The Checkbook IRA takes a lot of the hassle out of the whole process.

How does it work?  Glad you asked!  That’s the topic of this episode.  The Cliff’s Notes version is that your IRA purchases an LLC that you manage.  Once that’s approved, every subsequent deal is just a matter of writing a check, hence the extremely clever name “Checkbook IRA”.

However, without your friendly neighborhood custodian looking over your shoulder, it’s now your job to know what you can and can’t do.  But not to worry!  If you set it up properly, once you master a few essential concepts (and have your trusty advisory team on speed dial), you can whip out your new tool and stroke a check to jump on that hot deal.

Tune in as attorney Mauricio Rauld explains the ins and outs of the Checkbook IRA!

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.

6/5/11: Ask The Guys – Answering Your Real Estate Questions About Tax, Legal, Foreign, IRA and more!

One of the best parts of learning in a classroom is hearing the questions asked by other students.  Sometimes they ask things you would never think of!  And even if the question isn’t directly applicable to your current situation, who knows what tomorrow may bring?

That’s why every few weeks we dedicate an episode to reaching into the email grab bag and pulling out several of the many great questions we receive from our listeners each week.

In the radio schoolhouse for today’s Q&A:

  • Your host and headmaster, Robert Helms
  • Co-host and teacher’s aide, Russell Gray
  • Special guest and attorney, Mauricio Rauld

Not only do we get questions on a variety of topics, but through the power of podcasting, we get questions from a variety of locations – many outside the U.S.!

The collection of questions for this episode have us discussing what to do when you can’t find a good deal in your target market, how to get started with little or no money down, what to do when a property is underwater and you want to move, and how to find a great agent in a foreign country.  Plus we talk about landlording in tenant friendly states, profiting from distress without kicking people out of their home, and ideas for creating quick cash when you have the short term use of OPM (other people’s money).  Enjoy!

To submit your question to The Real Estate Guys™, visit our Ask The Guys page.

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.