8/26/12: Finding Your Inspiration – Your Next Billion Dollar Idea with Mark Victor Hansen

Success in anything, including real estate investing, requires energy, enthusiasm and creativity – especially when working through challenging times.  And it all starts with great ideas.

In our travels, we have the great fortune to run into some of the most exciting and interesting people in the world.  And because we cleverly carry our mobile microphones (which drives the TSA agents crazy), we’re able to capture these amazing conversations to share them with our listeners.  Cool.

Recently, we caught up with one of the most energetic, creative and prolific authors in history.  Now that’s a business (like radio) where great ideas rule.

So this episode is about unleashing your creative genius and getting excited about your possibilities – no matter what business you’re in, including real estate investing.

Behind the microphones energetically sharing thoughts to help you find your next big idea:

  • Your always energetic host, Robert Helms
  • Your sometimes thoughtful co-host, Russell Gray
  • Mega best-selling author and world renowned motivational speaker, Mark Victor Hansen

If you’ve never heard of Mark Victor Hansen, you’ve probably heard of his work.

The Chicken Soup for the Soul book series has been described by Time Magazine as “the publishing phenomenon of the decade” with over $1 billion in global sales.  And that’s just one of dozens of best selling books Mark’s been a part of, including The One Minute Millionaire and Cracking the Millionaire Code (both with well know real estate guru Robert Allen).

What’s interesting to us is how one little idea can pick up momentum and become a world wide sensation, touching millions of lives.

It’s surprising and inspiring when tells us how Chicken Soup of the Soul came about, and how many professional publishers told them it was a dumb idea.  It reminds us of how Fred Smith, the founder and creator of Fed Ex, got a poor grade in college for a business plan that changed an industry.

In real estate, we can think of successful projects, both large and small, which were considered crazy when they were first proposed.

Think about Las Vegas.  Many decades ago, southern Nevada was a desolate desert in the middle of nowhere. Not a great location for mega real estate development.

Then some Southern California “businessmen” start building hotels.  Like anyone would ever want to go the desert for entertainment.  How dumb is that?  Of course, today Las Vegas is the iconic entertainment capital of the Western United States.

In Silicon Valley, there’s a little mixed-use development where shops, restaurants, offices and residential units are all densely packed onto a small parcel on a busy corner just off the freeway.  Now if you’re from New York or Europe, that seems normal.  But the “experts” didn’t think a project like this would be accepted in the sprawled out suburbia of California.

Nonetheless, the “clueless” developer ignored the critics and naysayers and built Santana Row anyway.  Today, it’s one of the most successful real estate projects in Silicon Valley.

Can one idea be worth a billion dollars?  Mark Victor Hansen proved it can be.  And every day around the world, “crazy” dreamers are pushing through internal and external resistance to test their dreams in the marketplace.  Not every one will succeed.  But you can be sure that people who lack ideas or the courage to act on them will never succeed.

So dream big and then step out.  You never know if your billion dollar pot of gold is waiting for you at the end of your leap of faith.  Mark Victor Hansen found his.  Tune in, get inspired and learn to unleash the creative genius inside of you!

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8/19/12: Surviving the Fiscal Cliff – Ramifications for Real Estate Investors

What do the ancient Mayans and today’s financial pundits have in common?

They both predict doomsday at the end of 2012.

Perhaps you’ve heard about “taxmageddon” and the “fiscal cliff” the U.S. economy is headed toward? It’s when the expiration of Bush-era tax cuts converge with across the board spending cuts effective January 1st, 2013.

As you may recall, during “The Great Debt Ceiling Debate” last summer, Congress and the Obama Administration couldn’t agree on how to reduce the deficit (much less balance the budget). But they needed to raise the debt ceiling or (gasp!) Uncle Sam’s checks might bounce.

So, they raised the debt ceiling anway (shocker) and agreed to form a committee (great…we were just running low on committees) to come up with a deficit reduction plan.  Funny, we thought it was Congress’s job (not some 12 person council) to come up with a budget, but maybe their budget building muscles have atrophied.

Anyway, the deal was that if the commitee / Congress / Obama Administration didn’t get a it done by December 31, 2012 then the Bush
era tax cuts would expire. This is a defacto tax increase heaped upon the Affordable Healthcare program (“Obamacare”), which was deemed a tax by the Supreme Court.   In short, more taxes and more money going to the government.

So that’s the revenue side.

On the spending side, there’s an across the board cut which indiscriminately reduces discretionary government spending. While we’re tempted to comment on this, it isn’t the topic of this episode, so we’ll bite out tongues (ouch!).

So what in the world does all this mean? And most specifically, what does it mean to real estate investors?

To find out, we take our mobile microphones to Scottsdale, Arizona.  Sharing perspectives on the impending end of the financial world:

  • Your main Mayan, host Robert Helms
  • Your sheer drop off in talent, co-host Russell Gray
  • Special guest, CPA and Rich Dad Advisor, Tom Wheelwright

The topic for this episode came up while we were attending a Rich Dad Advisor retreat.  Now, we’re not Rich Dad Advisors…more like
groupies…but our friend Robert Kiyosaki is kind enough to let us hang out with his team from time to time, so we found ourselves in
Scottsdale in August.  But don’t worry, we packed our parkas.

Our most burning …get it? Scottsdale in August…burning…?  Okay, that’s dumb.  So, our hottest question for Tom is: with only 4 months to go until the end of the world, what final preparations should real estate investors be making?

Tom cools us down by assuring us these tax increases largely apply only to those who actually have a tax liability. Then he
reminds us that real estate investors who are properly set up should have next to no liability.

Huh?

That is, Tom says that the tax rates mostly apply to TAXABLE income, not ALL income.  So if you use all of the great deductions available to real estate investors you can actually conform to the IRS code and still largely avoid any personal exposure to the tax increases.  Cool.

He goes on to say that most real estate investors shouldn’t be paying any income tax at all.  (But don’t worry, we make up for it with lots of property taxes!).

Of course, there are still the concerns about the overall impact of more money being sucked out of the private sector and into the public sector.

Just like running a business, if you pull resources away from the departments that generate revenue (marketing, sales and production) and spend it on those that don’t (accounting, legal, administration, etc), your business grows slowly.  Too much and it shrinks.  Keep it up long term and you’re out of business.

Now some argue that the spending cuts offset the tax increases, so the net affect on the private sector is minor.  In other words, even though businesses and individuals have less money to invest and spend,  government is using less.

But that doesn’t make sense to us.

Think about it.  If you’re spending more than you earn (which Uncle Sam does by over a trillion dollars per year), and you cut your
spending (which is good), but only by a fraction of your deficit, then you’re only going further into debt more slowly.

It’s like bailing water in a sinking ship. Unless you can bail it out faster than it’s coming in, you’re still sinking. Not that you shouldn’t try, because thinking slowly is better than sinking fast.  But it’s foolish to think that you’ve solved the problem.  You’re still sinking.

More importantly, if the government is taking more away from the private sector (tax increase) and recycling less to the private sector (spending cuts), then it’s a double whammy on the private sector while the public debt continues to grow.

So what’s the answer?  We don’t know.  We’ll leave that to the politicians and bankers (feel safe now?) since we can’t directly control it anyway.

The point is that for the forseeable future, the American economy is likely to struggle.

But you don’t have to.

Using effective tax planning, Tom says you can substantially reduce your taxes.  Then (we say) you can use the money you save on taxes to invest in helping heal America one property at a time – all the while improving your own financial strength.

Abraham Lincoln said, “The best way to help the poor is to not become one of them.” Brilliant!

As people in American get poorer, they will need affordable housing. Right now, there’s a ton of inventory in disrepair in the wake of the foreclosure crisis.

But investors can step in and purchase these properties well below replacement cost and the outstanding loan balances. This gets the bad debt out of the way, and allows the property to be re-habbed and put back into service. That ‘s good for the the tenant, the community, the economy and the investor.

Plus, with each property you acquire, you also pick up a fresh depreciation schedule to mitigate your tax liability.  You get more properties, more income and less tax!

Very cool.

So listen in to CPA Tom Wheelwright as we talk taxes on The Real Estate Guys™ radio show!

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8/12/12: In Search of Goldilocks – Bearing with Politics When Investing

Is government too big, too small or just right?  And what does this have to do with real estate investing?  Guests Steve Forbes and Tom Woods visit to help us consider the controversial subject of the “just right” role of government in the marketplace.

As real estate investors, we care about how rules, regulations and even political rhetoric affect our investing.

Property taxes, zoning, rent control, fair housing, truth-in-lending, eminent domain, environmental controls; Fannie, Freddie and FHA (lions and tigers and bears, oh my!)  affect landlords, tenants, markets, neighborhoods, jobs, loans, etc.

Wow.  That’s a lot to think about.  We just want to collect the rent and have a beer.

But, as we learned (the hard way) in late 2008, if you don’t keep your eyes open, a big macroeconomic wave can come wash away all your hard earned investments.  And because sometimes it’s hard to see the forest for the trees, we get some big brains to help us see the big picture.

Behind The Real Estate Guys™  white-gold plated microphones:

  • Your big huggy-bear of a host, Robert Helms
  • Your too small but furry co-host, Russell Gray
  • Our billionbear guest (back for his second appearance on the show), Steve Forbes
  • Our don’t-get-lost-in-his-last name beary special guest, Tom Woods

So…when you’re Editor-in-Chief of one of the best known business publications on earth, you have TEN digits in your net worth, and you’ve been a serious candidate for the presidency of the United States, we’re guessing you’re pretty well informed and connected.

Of course, all that doesn’t make you 100% right (whatever ‘right” is), but you’re certainly qualified to have an opinion.

So we ask Steve Forbes where he thinks the U.S. economy is, where it’s headed, and what he thinks needs to happen to make it better.

His answer?  Get government out of the way so capitalists can do what they do best: start and grow businesses.

Great!  More businesses mean more tenants for our office and retail properties, jobs for our residential renters, and overall prosperity for everyone.  Sounds wonderful.

Of course, there are lots of details to be worked out which we don’t have time to discuss… like WHERE those businesses are most likely to happen.

But’ it’s certainly a subject we’ll continue to monitor for… pretty much forever.

After all, when you distill real estate investing macro-economics down to its essence, it’s really about the cost and availability of capital to acquire properties (the financial markets) and finding tenants, both businesses and individuals, to provide the income. Capital and the cash flow on the capital.

So Steve Forbes says smaller government is a step in the right direction.  For now we’ll watch what actually happens and see if he’s right or wrong.

Next, we visit with a newcomer to The Real Estate Guys™ radio show,  Tom Woods.

Tom is a best-selling author, a senior fellow at an economic think tank, and he’s a prolific pundit having appeared on CNBC, MSNBC, FOX News Channel, FOX Business Network, C-SPAN, and Bloomberg Television, among other outlets, and has been a guest on hundreds of radio programs, including National Public Radio, the Dennis Miller Show, the Michael Reagan Show, the Dennis Prager Show, the G. Gordon Liddy Show, and the Michael Medved Show.  (And now The Real Estate Guys™ radio show!)

Tom is also a regular fill-in host on Peter Schiff’s radio show.  And since Peter is joining the faculty of our 2013 Investor Summit at Sea, we figured Tom was a guy we’d like to meet.

It turns out that Tom is working on a film called The Bubble.  Interesting!

Tom tells us the film is about a cast of characters who accurately predicted the mortgage meltdown which kicked off The Great Recession we’ve all been enjoying so much these last few years.

He says the reason these economic gurus knew the problem was coming wasn’t based on complicated or highly secret formulas, but rather basic economic principles anyone can learn.  Do tell.

The key, he says, was to pay more attention to what the politicians and bankers actually DID, then all the reassurances they SAID.  In other words, government and Fed actions were painting a picture – and it’s not always the same as the story they tell.

It’s indisputable that the mortgage meltdown and resulting recession had a PROFOUND impact on the fortunes of real estate investors in EVERY market.

So it seems to us that understanding why the meltdown occurred and more importantly what is likely to happen to going forward, should be of HUGE interest to every real estate investor.

Now, if you’ve been listening to the show for the last three years, you know the meltdown and its underlying causes has been one of our major themes.

We’ve sought out many experts on economics  -specifically of the Austrian school (like Tom) since most of the people we know of that were the most accurate in predicting the bubble subscribe to the Austrian philosophies.

Of course, a lot of these Austrian guys disagree strongly with most of the bankers and politicians running the show right now, and they aren’t afraid to say so.

To us, it’s kind of like watching a movie.  It’s really hard to find a movie that doesn’t have some violence, profanity and/or sexuality.  Some people are offended by it.  Some people really like it.  But if you want enjoy the story the movie tells, you’re likely to get some things that rub you’re the wrong way.

Like Steve Forbes, Tom Woods thinks the answer is less government and more free market.  We know people who are anarchists and think the government should be completely eliminated.  Then there’s the crowd who think government needs to own and control everything to make sure it’s all distributed amongst the people “fairly”.

So too big, too small or the ever elusive “just right”?

We think it will be a never ending tug-of-war between differing agendas.  And no matter what you or we think “just right” conceptually, in the real world (where all our money and investments are), it’s a constantly moving platform.

As a real estate investor, your mission (if you choose to accept it) is to look through all the noise and decide what you think is most likely to happen and why, then invest accordingly.

We may not like the rain.  But we watch the weather report anyway, then we dress accordingly.  And yes, we know the weatherman is wrong some (if not most of the time), but it’s better than not watching at all.

So take a listen to Steve Forbes and Tom Woods, then watch the political weather vane to decide how you want to dress your investing in the coming months and years.

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed. Visit our Feedback page and tell us what you think!

8/5/12: The Real Deal – Digging Beneath the Headlines to Exploit Opportunity

“Rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think.” – Martin Luther King, Jr.

Of course, if you’re reading this, then you’re probably a person who is working hard looking for new ideas.  Good job!  We hope to reward your diligence with this episode of The Real Estate Guys™ radio show.

We’re big fans of looking for clues in the news. It helps us gauge the mood of the market, track trends and recognize opportunities.  Best of all, there are thousands of reporters in the world all dutifully watching various aspects of our wonderful world and whipping up headlines to catch our attention.  And thanks to the internet, search engines and mobile computing, we have access to virtually all of it in the palm of our hands. Amazing.

The challenge is that sometimes those sensational headlines don’t always tell the whole story.  In fact, sometimes the headlines are more like head fakes.

Case in point: Recent reports about the Memphis (and Atlanta) real estate markets make it seem like real estate investment opportunity there is in free fall.  But having been to both places, those gloomy headlines don’t quite line up with our first hand observations.  This gave us an idea for this episode, so we decided to compare mainstream media headlines to main street real estate reality and see what the real deal is.  More, we wanted to see where the opportunities might lie.

Troweling into today’s topic:

  • Your host and a man we all dig, Robert Helms
  • Your sometimes dirty co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms
  • Our gem of a guest and our main man in Memphis, Terry Kerr

After a few weeks of having our heads in the macroeconomic clouds, we come back to earth for a reality check with our good friend Terry Kerr.

Terry is a very successful real estate investor and entrepreneur in Memphis, Tennessee.  Whenever we want to know what’s happening in Memphis residential income property, Terry is on our short list of people to call.  So when we saw a few “gloomy” headlines cross our desks, we thought it would be fun to call Terry and say “Whussuuup?”

Since we needed a new episode, we called Terry from the studio and broadcast the whole thing.  Now you get to listen in too!  And even though we talk about Memphis, there are lessons for all investors, no matter what market or markets you’re mesmerized by.

So we start out talking about what we’re reading in the mainstream press.  Falling prices, increasing vacancies, more foreclosures.  Eeeeek!

“Whoa!” says Terry.  “Those mainstream headlines are not my main street reality.”

Hmmmm….really?

Terry tells us that his occupancy “has never been higher” and confides in us his secret to occupancy success: below market rent for an above market property.  Brilliant!  And in a market that is “plagued with vacancy” according to the news, this tactic is working beautifully for Terry.  And because the cash flows are SO strong in Memphis, his properties are still very profitable.

In fact, we take some time to talk about how accepting slightly less than market rent can actually IMPROVE PROFITABILITY by minimizing vacancy and turnover expenses.  Yes, it’s common sense.  But you’d be amazed at how many investors push the rents in their quest for profitability.  We call it jumping over dollars to save pennies.

This takes us down the path of taking a market weakness and turning it into a competitive edge.

Terry’s properties are cheap.  Er, we mean, inexpensive.  Actually, his properties are quite nice.  When we visited and toured several properties and neighborhoods we were very pleasantly surprised at how nice they are.  Not what we expected in the $60,000 and less price range.

The problem with these “appetizer” properties is that it can be hard to find lenders who want to do loans for them.  We investors, we get excited about a $12,000 down payment.  But the too big to fail banks aren’t falling all over themselves to make $48,000 loans.

But while lack of conventional funding might hinder the success of lesser investors,  Terry turned it into an advantage.

Leveraging his successful track record, Terry made a deal with some local banks.  He guarantees the loans and the banks finance his buyers.  Then, Terry’s team manages the property for the investor so he actually controls the condition and cash flow of the property.

We don’t know about you, but that’s the kind of motivation we want our property manager to have!

And, as you might guess, having financed over 300 properties this way, he’s never had a loan go bad.  Very impressive.

What’s even better, Terry is now able to help people – like foreign nationals and others – who are locked out of conventional financing to start or expand their investment real estate portfolio.

So while some people may glance at the headlines and think there’s no money to be made in a place like Memphis, creative investors like Terry Kerr are finding ingenious ways to not merely survive, but thrive.  These are great lessons for all real estate entrepreneurs everywhere.

Listen Now:

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed. Visit our Feedback page and tell us what you think!