5/19/13: The Rise of Nimble Money – Fast Moving Investors Find Great Deals

Real estate is getting hot again, which means more competition for the best deals.  To complicate matters, big hedge funds are coming into the market and grabbing big chunks of available properties.

What’s a little investor to do?  That’s what we discuss during this episode of The Real Estate Guys™ radio show!

Behind the microphones in the American Airlines conference center at the Dallas / Fort Worth airport:

  • Your nimble host, Robert Helms
  • His numbskull co-host, Russell Gray

When you travel the world like we do, looking at real estate, meeting industry thought leaders, attending mind (and network) expanding conferences, and sampling the wares of a variety of micro-breweries, you never know where you’ll be when it’s time to broadcast a radio show.

For this episode, we found ourselves between flights in the DFW airport.  No worries!  We just whip out the microphones, set up our mobile studio, and voila!  Instant radio show!

So in the spirit of being light on your feet, we decided to discuss the why and how of being nimble in a competitive market place.

It’s actually strange to be talking about this.  It seems like such a long time ago when great deals were being bid up in multiple offers.  But those days are back in many markets, so being able to respond to opportunity quickly is the renewed name of the game.

The good news is that when an asset class gets hot, it attracts money.  More accurately, when money rushes in to snap up bargains in a particular asset class, that asset class gets hot.  The point is that money is pouring into real estate right now – mostly from investors.

However, “investors” are moving into real estate on both the equity and debt side.

What does that mean?

Simply that some investors want to OWN the real estate, while others want to own the DEBT on the real estate.  In other words, lenders are coming back into real estate too!  This is great news for the nimble real estate investor, because unless you’re flush with cash you want to tie up for the long haul, you’ll probably want to use financing of some kind.

Think about where we are in the market cycle.  Ten years ago real estate was red hot and on the upswing as Fed-induced low interest rates and gobs of liquidity poured into the markets to save us from the tech bust and 9/11.  All this loose money set off a feeding frenzy in real estate.  And we all know what happened a few years later.  Prices came crashing down and one of the biggest financial disasters in modern history ensued.

It was a painful transition with a lot of great lessons learned.  But that’s all it was: a transition.  And while there will certainly be more financial ups and downs ahead, once the real estate market put in a bottom, investors realized the world was still spinning and people still needed real estate.  The only difference is that many former homeowners are now renters.

That’s the beautiful thing about real estate.  Even when financial markets implode, the properties continue to exist.  Businesses may fail.  The financials of a property owner may fail.  But the actual real estate survives.  And so does the basic human need for real estate.  This is why there’s always opportunity in real estate.

So where are we today?

Prices have stopped falling and our now rising.  Inventories are shrinking.  In some markets, new construction is beginning.

BUT, home ownership is still very low relative to recent history.  So WHO is buying these properties?

Investors.  And not just Mom & Pop investors.  Big investors, like hedge funds.

And who is funding these purchases?  You guessed it.  Investors.

All this to say that investors are putting money into real estate, which is heating things up.  So the key for little guys is to be nimble.

Relationships and positioning will always be the first and best way to get in on the action.  After all, when a great deal comes to market, someone close to it knows early.  If you’re in a relationship with that someone and have good positioning, then you have a shot at finding out about the deal before it hits the street.  Insider trading is perfectly legal in real estate!

Of course, you need to be able to make a decision and bring your money to the table quickly, which is a big part of being nimble.

This is where private money loans can be a huge advantage.  Conventional lending guidelines, though improving, are still restrictive. And the approval process can be time-consuming.  Private money can bypass a lot of that.  But “private money” doesn’t have to be “hard”.

It could be friends and family.  Maybe someone’s self-directed IRA.  Remember, you only have one chance to buy the property.  But once you have it, you can always refinance it later with more favorable terms as they’re available.  And the tea leaves are showing a gradual loosening in lending guidelines as banks, the government, the Fed and private investors are all seeing improving stability in real estate.

Another part of being nimble is just being organized.  Any lender, private or institutional, is going to want to see your financials.  So keep yours up to date and ready to present quickly upon demand.

If you do decide to use conventional lending, you can speed things up by being pre-qualified.  A great way to burn up a relationship is to get into a contract you can’t close.  If you’ve been stringently pre-qualified, and have a back up plan (a private lender or cash), you can make an offer without a financing contingency.  In a competitive market, that’s an edge.

What about bigger deals?

If you’re dealing with your own money, it’s basically the same.  Just have your stuff together, which includes your team.  You don’t want to be shopping for a real estate attorney or lender during escrow.  Everyone should be all lined up BEFORE you get into contract.

Now if you’re syndicating your big deal, then it’s really important to have “you ducks lined up”.  You should have your offering documents largely prepared, so all you have to do is put in the specifics of the deal itself.  You should have your investors all lined up.  Ideally, you have money in an escrow account so you’re certain of your funding.  Next best is a list of pledges from investors who are ready to wire funds when you call them.  In this case, be sure to have more lined up than you really need because Murphy’s law says someone will have a personal situation which precludes them from fulfilling their promise.

Side note (and shameless promotion): If the idea of putting together a syndication interests you, consider attending our Secrets of Successful Syndication seminar.

Of course, the foundation of being nimble is having a clear investment philosophy and strategy in place.  It’s essential to know what financial result you’re trying to produce, then look for markets, properties and deal structure that will fit your model.  It doesn’t have to be complicated.  It just needs to be clear.  That way, you’ll recognize a good deal when you see it and be emotionally ready to move quickly.  Because all the organization in the world won’t help you if you’re unwilling to pull the trigger.

So listen in as we discuss the why and how of being nimble in a competitive market!

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5/12/13: No Financial Limits – The Keys to Raising Capital

What do you do when you have more deals coming across your desk than you have money in your checkbook?

Well, some people look for ways to increase their income and decrease their expenses (both good ideas) in order to save up enough money to do the next deal.  But unless you have superstar earning power or an overly lavish lifestyle, you’ll probably find that saving money to get to the next deal is pretty slow sledding.

So what’s an investor to do? That’s the topic of this episode of The Real Estate Guys™ radio show!

Steering the conversing on the compelling keys to corralling capital:

  • Your 5 gallon (beer mug, not hat) host, Robert Helms
  • Your pint sized co-host, Russell Gray

So if you’re looking at your financials and saying, “Where’s the beef?” it might be time to think about rustling up some OPM (Other People’s Money).   And coveting your neighbor’s capital doesn’t necessarily make you a contestant for a future episode of American Greed.  Quite the contrary!

Right now, savers are getting killed by the artificially low interest rates designed to re-inflate asset values.  And if you look at the stock market and rising housing prices, you’d have to say it’s working.  At least as long as Helicopter Ben keeps the printing presses rolling.

But we digress.

Savers lose when interest rates are low and prices are rising.  Essentially, they money that isn’t working for them.  In fact, in most cases, prices are rising at a greater rate than savers are earning in interest, so savers are falling behind.  Naturally, this forces savers to put money into the stock market…or other investment vehicles they hope are likely to rise along with or faster than inflation.

That’s great for you as a real estate investor.  Because the right real estate can provide a combination of income, tax breaks, equity build up and an inflation hedge all at once!  But you probably already know that.  That’s why you don’t have any cash left.

But savers don’t think like you do, and even if they did, they don’t want to get their hands dirty,  so if you’re willing to hustle (in a good way), you can help savers while helping yourself.  And it doesn’t mean you have to have partners.  You can set up limited partners, or just borrow money privately.  Many people don’t know they can use their rollover 401ks and Individual Retirement Accounts to make loans to private parties…like you.

Then there’s the banks.  Every depositor’s savings is a liability to the bank.  So banks need to create an asset (a loan to someone) to offset the liabiity.  And in spite of all it’s issues, real estate is still a preferred form of collateral.  So banks actually are looking to make good real estate loans.  Loosening guidelines and rising prices seem to verify this.

The point is that there are lots of resources out there.  And there are lots of deals.  That means there’s lots of opportunity for resourceful investors like you to use OPM, whether you borrow it, or find partners.

Best of all, when you help move capital to where it can do the most good, you’re playing an important role in the healing of the economy.  That’s not greedy, it’s good.  So…(ready?) go ahead and milk the situation.

Tune in to this episode and get ready to raise your sights (and some capital!) and take your investing to a whole new level!

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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!

5/5/13: Doing the Thing – How Real Life Investors are Thriving in Today’s Real Estate Market

If you’re a regular listener, you know we’ve had Donald Trump, Robert Kiyosaki, Steve Forbes, Herman Cain, Ken McElroy, Peter Schiff and a whole gaggle of famous investors and businesspeople on the show.

What can we say?  We’re awesome (and humble).

But if you’re an everyday guy or gal out there getting started in real estate investing – or maybe even have a few properties in your portfolio – maybe you don’t quite relate to these big time people.  After all, Trump and Forbes were both born into money.  Sure, they did a great job growing it, but it helps to start from a base of several million dollars (not to take ANYTHING away from their amazing accomplishments).

Then there’s guys like Ken McElroy and Peter Schiff, who are self-made multi-multimillionaires, which is perhaps awesome…er.  At least we can relate to starting out with nothing, but still…when you’re talking to guys at that level about what they’re up to today, your eyes roll a little bit.

So, to make it a whole lot more real in today’s market, we round up three real life, every day, doing-the-thing-right-now investors, and get put there nervous selves in behind The Real Estate Guys™ magical microphones and ask them to talk candidly about what they’re doing right now to build their real estate empires.

Lending their voices to the collective wisdom of the radio airwaves:

  • Your bigger than life host, Robert Helms
  • Your older than earth co-host, the Godfather of real estate, Bob Helms
  • Real life investor #1, from Los Angeles, “Action” Andrew Lanoie
  • Real life investor #2, from Silicon Valley, John “Just Do It” Kubel
  • Real life investor #3 (and professional property manager), from Arlington, Texas, Jay “Make It Happen” Hartley

You’ve probably heard the saying, “If it was easy, then everybody would do it.”   In the real world, most people only dream and hope.  A few actually make plans.  Then, there’s the very elite group of people who actually go out an take massive action.

Guess who has the best chance of success?  Of course, the folks that go for it.

But it isn’t always pretty and there are no guarantees.  That’s why being achievement is so special.

As we learn from contestant number 1, it’s possible to go from education to effective action pretty fast!  In less than two years, Andrew has acquired several single family properties in three diverse markets.

So what’s Andrew’s secret to success?

First, he started with education.  And he understands that education isn’t just in the classroom, but also in the real world application.  This is important because many people think they need to know everything before they move forward.  The reality is that what you need to know is enough to get in the game without getting killed.

Second, he developed a model and stayed focused.  We like to say “Get rich in a niche”.  The point is to find something that works and keeping working and perfecting it.

Third, he leverages partnerships to expand his model beyond his own resources with a focus on win-win deals.

Okay, so the secrets aren’t so “secret”.  They’re really common sense.  The big difference?  Andrew is actually DOING IT.  And of course, along the way he’s learned a lot.  Best of all, he’s happy to share it and we’re sure you’re going to enjoy his pearls of wisdom.

And now, on to contestant #2, John Kubel.

John’s a Silicon Valley guy so you know he’s smart.  But as we’ve discussed, there are lots of smart people who don’t do anything.  What’s great about John is he’s really doing the thing.

Like Andrew, John started with education first.  And like Andrew, he realizes that while education might start in the classroom, it’s perfected in the real world.

Today, in just a few years, he already owns properties in four states and two countries!

And, like Andrew (are you detecting a theme?), John is getting it done by leveraging the power of a team.  This is especially true when you’re holding down a day job.

However, after getting to know both John and Andrew, there are some differences.

Andrew is a very outgoing, social guy.  John is a typical Silicon Valley data-driven guy.  Neither is better or worse than the other, they’re simply different.

So John talks a little about how important getting moving is to converting education into results.  So it is possible to be analytical and action oriented!

And now to contestant #3, Jay Hartley…

If you’re a long-time regular listener to The Real Estate Guys™ radio show, then you probably recognize Jay.  He’s been on the show a couple of times in his capacity as a property manager in the Dallas / Fort Worth market.

But today, we’re focusing on Jay as an investor.  Remember, Ken McElroy started out as a humble property manager.  Then, employing the same essential strategies as our three guests today, went on to build a very successful portfolio of properties and businesses.  So we viewed talking with Jay as a chance to go back  in time to talk to a modern day Ken McElroy before he was a big time real estate guy.

Jay was born into a real estate family.  But it was when we was a renter and he realized he was paying more than enough every month to be the owner, so he took the leap.  And so his roller coaster ride as a real estate investor began.

Like many investors, Jay has made his share of mistakes.  And he wisely recognizes that these are where some of the best lessons are.

Of course, as a professional property manager, he’s also able to learn vicariously through the mistakes of others.  And he’s able to use this collective knowledge not just for his own benefit, but also for the benefit of his clients.

So listen in to these three real life investors and glean important lessons you can put into action to advance your own real estate investing dreams!

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!