6/23/13: Clues in the News – Students, Supply and Standards

Recent headlines proclaim that real estate is back!  While we’re happy to hear positive reports on real estate, the last run-up in response to Fed hyper-stimulation compels us to dig a little deeper.  Fortunately, there are lots of clues in the news that provide important insights into what’s happening in housing and what’s behind it.

In the studio to decipher the mysteries of the current headlines:

  • Your Sherlock Host, Robert Helms
  • His elementary Whassup co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

After several years in the dumper, single family home residential real estate is making a comeback.  Recent headlines declare that a housing recovery is well underway.  Fed chair Ben Bernanke is hinting that he may begin to “taper” off the unprecedented levels of quantitative easing pumped into the world’s financial system every month.

Sounds great!  But is it?

It depends on how you look at it and what you do in response.  Sometimes it’s easy to get lost in the trees, but don’t worry.  That’s why we’re here.  We’ll take a look at the market from a bird’s eye view.

First, let’s talk about rising home prices.  Where have we seen this movie before?  Oh yeah, after the Fed pumped a gajillion dollars into the economy to calm things down after the dot com bust and 9/11, real estate went crazy from 2002 to 2008.  Many people made a TON of money.  Very fun.

But then a not so funny thing happened on the road to riches.  The financial markets imploded when it was discovered that the “growth” everyone was so giddy about was based mostly on air.  That is, the underlying fundamentals were weak. So market values were much higher than incomes and affordability said they should be.  Ahhh…it all seems so clear now.  That’s what we love about hindsight…it’s 20/20.

The other great thing about hindsight is that it helps you recognize a mistake when you’re making it again.

So… is this housing recovery real?

Well, if you bought a property in the last few years and it’s gone up substantially, you might say, “Who cares?  I’ve got gobs of equity!  Just look at my balance sheet!  Isn’t it pretty?”

If you bought in the last boom and have been stuck with an underwater property that you’ve been keeping on life support, you’re probably thrilled all your sacrifice is now appears to have paid off.  We’re happy for you.

But just like last time, today’s run up in values begs the question: what is all this appreciation based on?  Is it sustainable?  Remember, when it comes to equity, the market giveth and market taketh away.

To figure all this out, we watch the news.  Hidden in the headlines are insights into what’s going on – along with lots of invitations to do more homework.  And when it comes to real estate investing, we love homework.

Understanding that real estate, like many markets, is driven by demographics, when we saw an article titled, “Here Comes a Millennial Housing Boom”, it caught our attention.  After all, look what a profound impact the baby boomer generation had.  And the millennial generation is even bigger!

But this isn’t your parent’s America.

We also discover that Gen Y’ers are facing a different set of challenges that some folks say will hinder those millennials from jumping on the housing bandwagon…even if they wanted to (more on that in a moment).

One of the biggest obstacles facing the next big wave of home buyers is student debt.  Today, many young adults are graduating with huge amounts of inescapable debt. This negatively impacts their ability and willingness to take on mortgage debt.  And without lots of entry level jobs being created, some graduates are doubting the value of that expensive diploma.

Speaking of expensive paper…

Millennials are looking at their parents’ recent experience in home ownership and are saying, “Really?  No, I don’t think I’m in a big hurry to take on a 30 year debt obligation on a property that might unexpectedly tank in value.”  And who can blame them?  Perhaps as home prices escalate, they’ll have a sense of urgency to get in before the market gets too out of reach.  OR…they may decide to move to a more affordable, lower taxed area (we think there will be much more of that in the future).

Now to entice Millenials (and anyone with a pulse and a paycheck) to take on more debt, lenders are starting to lower lending standards.  Remember, a deposit at a bank is a LIABILITY to the bank.  To offset this liability on their balance sheet, they need to create an asset.  From a banker’s perspective, your loan is an ASSET.  As the Fed pumps the system full of dollars, most of them end up in banks, which now need to make loans.

Again, where have we seen this before?  It seems eerily familiar.

Still, as borrowers, we love easy money.  But as we discovered in 2008, easy money can skew values to the upside.  And when the easy money goes away, so do the values.  So if all your investing is based on passive appreciation (no fix up or other increase in utility), it’s smart to pay CLOSE attention to where that appreciation is coming from.  And don’t ever bet the farm on it.

If supply is limited and demand is high, then competition for available product can push prices higher.  If demand is fueled by strong and growing incomes, then you can have greater confidence in the stability of the values.  That is, the fundamental under the values are more solid, therefore the values are more solid.

But if the price appreciation is based on a temporary shortage and/or a loosening of credit, the underlying value drivers can quickly change thereby quickly changing values.

So when we saw this headline: “Supply Crunch to Take Steam Out of Home Sales” it also caught our attention. What’s causing the supply crunch?  Will builders respond decisively and build more?

Builders want to build.  That’s how they make their money.  They’re like flippers on steroids.  But they won’t do it if there are no buyers or the market won’t give them a high enough price to make it worth the effort.  Because of the flood of foreclosures on the market for the last several years, homes in many areas have been selling below replacement costs.  In such conditions, builders can’t afford to build.

Now that some markets will allow builders to sell at replacement cost plus some profit, they’re coming out of the woodwork and starting to build.  No surprise, given the recent increase in home prices, that builder confidence has increased.  They see values reaching a point where they can begin adding to the supply.

Of course, from our perspective, the increases in new home building combined with the flushing of more foreclosures into the market puts a little downward pressure on prices by increasing supply.  Rising interest rates adds to the student debt issue and soft jobs market to further hinder affordability (demand).   But will looser lending offset this downward pressure?  Only time will tell.

Here’s the concern:  If the only thing propping up the housing market is easy money, then you can expect more price volatility.  So if you’re investing for short term capital gains without adding any utility to the property (i.e., pure speculation based on the rising home prices), be VERY CAREFUL.  Get in and out fast.

Of course, we don’t really consider that kind of activity “investing”.  It’s the real estate version of day trading.  It’s a business.  The IRS looks at it the same way, which is why your short term capital gains are taxed like ordinary income.

If you’re a long term investor, this market offers a lot of opportunity.  In many markets, prices are still relatively low based on rental income, in spite of the recent price run ups.  Looser lending just means easier access to loans, which if used responsibly, can magnify your equity growth rate, so we’re happy there.  Interest rates, though rising, are still ridiculously low compared to cap rates.  What’s not to like?

If you’re a real estate syndicator (building a portfolio with investors’ money), a little bull (as in positive sentiment) in real estate should make it easier to attract investment capital.  And if the stock market continues to gyrate in hyper-reaction to anything the Fed says, many investors will be ready to take their stock profits and find something less nauseating.  You can help them.  Check out our Secrets of Successful Syndication seminar for training on how to set up your own real estate investment fund.

In any case, it’s a good idea to watch the headlines for Clues in the News.  Staying aware and informed is a great way to recognize opportunities and challenges in time to take appropriate action.  Because at the end of the day, information with action is useless.  We’re much more into Education for Effective Action™. 🙂

Enjoy this edition of Clues in News!

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6/16/13: Rising Housing and a Weak Economy

Unless you’ve been under a rock for the last several months, you’ve probably noticed that lots of folks are excited about the housing recovery.  After all, prices and sales volume are up in a lot of markets.  Even home builder confidence has moved into positive territory for the first time in a very long time.

It’s all good, right?  Maybe.  That’s what we discuss in this uplifting episode of The Real Estate Guys™ radio show!

In the house and behind the microphones:

  • Your rising host, Robert Helms
  • The weak co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

An old business mentor of ours once said, “It’s never as bad as it seems and it’s never as good as it seems.  Just keep going.”

His point is that it’s very tempting to analyze something right into paralysis.  That’s why we’re not huge fans of trying to time the market.  When fear and greed are blended with market volatility and data overload, it’s really hard to make good decisions where success is based primarily on being on the right end of a market move.

With that said, we also believe that macro-awareness is essential to long term prosperity.  Sometimes forces bigger than your deal or local market can tumble all but the most carefully constructed portfolios.

Right now the U.S. housing market is saying “all systems go!”.  But the economic data doesn’t seem to support it.  So is this housing recovery the real deal?  Or are we looking at a housing head fake?

And why is this all so confusing?

Now THAT is a great question.  So let’s visit it quickly…or maybe not so quickly. 😉

We (not The Real Estate Guys™, but the “powers that be”) measure the U.S. economy in dollars.  Duh.  But it’s an important point because the value of the dollar keeps changing – and primarily to the down side.  This means it takes more dollars to purchase the same value.  A gallon of gas today is $4, but 5 years ago it was $2… for the same gallon of gas.

So, if you measure your economy in dollars and five years ago you cranked out 1,000 gallons of gas a month (yes, we know that’s a dinky economy, but this is just an illustration) at $2 per gallon, your economy is a $2,000 a month economy.

Now if the value of the dollar falls so it now takes $4 to buy that same gallon of gas (does that happen?), and you’re still producing the same 1,000 gallons a month, your economy is now $4,000 a month.  You’ve DOUBLED your economic output!  WOW!  Prosperity!

BUT (and it’s so big, it could be a bubble)…how productive are you in terms of gallons of gas?  You haven’t grown at all.  You’re still producing the same 1,000 gallons a month you were in the $2,000 a month economy.

Now let’s say you reduce gasoline output by 200 gallons, so you’re only producing 800 gallons at $4 a gallon.  That would be $3,200 a month, right?  So your economy “grew” from $2,000 a month to $3,200 a month.  But your gasoline production FELL by 20%.

So…did your economy grow or not?

If you think a bunch of pieces of green paper with dead presidents’ pictures on them make you rich, then maybe you could say your economy grew.  But in terms of producing utility (the benefit of the stuff that money can buy), your economy shrunk by a lot.

Think about it.  Forget about the price.  Would you rather have 1,000 gallons of gas or 800 gallons?  Which is more?  I bet if we sat a bunch of elementary school kids down at a table and asked them, “Which is better: less or more?”, they would choose more.  (Wait…didn’t somebody do that?)

It’s not complicated.  More is better.  Except when your uncertain about how to measure “more”.  More dollars or more product?

This is the problem when the unit of measurement becomes unstable.  In the case of the U.S. economy (and housing prices) the unit of measure is dollars.  And because the unit of measure is easily manipulated (just watch how the markets respond to whatever Ben Bernanke says or doesn’t say), so then are the statistics that measure the “success” of the recovery.

Whew.  Does all this make sense?

Stick with us.  After all, you’ve made it this far. And “good job” by the way.

So when it comes to the U.S. housing market, is home ownership rising or declining?  And if home owners aren’t buying these houses, who is?

When measuring the U.S. economy, are we creating more jobs or less?  Are incomes rising or declining?  And if incomes are “rising”, are they rising faster than living expenses?  That is, are people becoming richer so they can afford to save and buy a home?  Or are they earning “more”, but spending more than that, thereby making savings harder to accumulate (down payments) and mortgage payments less affordable?

What about interest rates?  Are they rising or declining?  Obviously, rising rates (even though the current rates are awesome, it’s all compared to where they’ve been) make housing LESS affordable.

Wow.  That’s a lot to think about.

But don’t get paralyzed.  Just be aware.  Then discuss these things with other informed and active real estate investors.  It helps keep you sharp. That’s why we like talking to you each week.  And we REALLY like it when the producer let’s us out of our cage, so we can visit you in person at a field trip, seminar or our annual Summit at Sea™.

Here’s our take:

This isn’t a home buyer or economy driven housing recovery.  The U.S. economy is not creating enough jobs to offset the number of new workers entering the market, much less enough to back fill all the jobs lost in the Great Recession.  And the jobs that are being created are not high paying, but mostly lower paying service jobs.

Interest rates have nowhere to go but up from here.  So while they may stay low for a long time, they aren’t falling dramatically so as to make housing way more affordable to home buyers.

Meanwhile, in its attempts to keep interest rates down and “stimulate” the economy, the Fed’s QE program causes life to become more expensive where it matters most to working people: at the gas pump and in the grocery store.  No wonder they don’t include food and energy in the CPI (Consumer Price Index – used to measure the official rate of inflation)!

So is this all doom and gloom?

No!  It’s actually good for investors, which is why hedge funds and individual investors are pouring into real estate and creating demand that’s driving up prices.

But as home builders see demand and prices increase, they will go back into construction mode and add to the supply.  In markets where supply can be increased, this extra inventory could put downward pressure on prices.  If it gets real bad (like last time), the Fed will probably crank up the QE to prop it up…again.

So what to do?

Be careful when investing purely for capital gains.  We love equity and it still happens (yes, we feel a little vindicated).  But it’s all about staying power.

As we said in Equity Happens, “cash flow controls mortgages and mortgages control property” while you’re waiting for the inevitable inflation drives up the price (as measured in dollars whose value is falling).  That is, long term real estate is a great hedge against inflation.

It’s like gold with benefits.  You get cash flow (assuming your wise enough to buy a property that pays for itself, and you lock in these amazingly low interest rates for the long term).  You get tax benefits that actually enhance your cash flow.  You get amortization (the pay down of your loan using the tenant’s rent), which is profit to you. And you get long term appreciation.

Pick markets where prices are low and cash flows are strong.  While high priced markets might lose renters and homeowners if the economy stays weak and net purchasing power declines, lower priced markets might actually see an increase demand as people migrate their to improve their financial position.

If you can do that in a market where it’s hard for home builders to increase supply, then you can be somewhat insulated from speculative building.

Do we think real estate will be worth more (in dollars) 10 or 20 years from now?  Probably.

Will we ever see interest rates this low again?  Maybe, but probably not. And they really can only go up from here, so even is about the best you could hope for.  In other words, OPM (Other People’s Money) is on SALE right now.  And it’s a great tool to short the dollar (but that would be the topic of another lengthy blog).

And speaking of lengthy blogs…thanks for sticking with us this far.  Even tough there’s more to say, we’ll wrap it up now so you can listen to the show.  And stay tuned to The Real Estate Guys™ as we watch this market evolve.

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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!

6/13/13: Ask The Guys – Mentoring, Math and Management

Real estate investing, like ogres (as Shrek explained to Donkey), is like an onion.  As you peel back one question with an answer, you find another question.

Not that we’re complaining.  It’s what’s kept us on the air for these 16+ years!

In the studio for this edition of The Real Estate Guys™ radio show:

  • Your jolly green giant of a host, Robert Helms
  • His little ass co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

We wooed Walter in from his cooing and had him fly into the email grab bag and pull out another amazing collection of listener questions.  After sorting through them, we picked out several we liked. And before we know it, we’re pontificating powerfully for an amazing hour of broadcast excellence!

First, we discuss picking a market when you’re just starting out. Is a new construction property in Houston better than an older, cheaper property in Memphis?

Survey says….

It depends.  (We’re sure you saw that one coming).

We maintain there is no one size fits all answer, so we grab our onion peeler (is there such a thing?  Hey, we’re real estate guys, not cooking guys) and start collecting more questions.

What are YOU trying to accomplish?  Do you want cash flow or a better chance for long term appreciation?

Each market will have it’s own supply / demand / capacity-to-pay personality.  Those local dynamics get thrown in the blender with macro-factors like interest rates, taxes and lending guidelines.

So when cash on hand is limited, sometimes it’s best to take the market and property you can best afford,  while still maintaining prudent cash reserves.  A new property will likely be less expensive to maintain, but costs more upfront, which means a bigger down payment and less reserves.  And while YOU might be okay with lighter reserves on a new property, what does your lender want?  That’s why it’s a good idea to include you mortgage advisor in these conversations from the beginning.

Now an older property could have great expenses (as in, low), but if it’s cheaper to get in to, you’ll have more reserves going forward.  And if the cash flow is better, you can potentially afford slightly higher expenses.  Assuming the older property is rehabbed, perhaps some of the more costly items were already upgraded by the seller or as part of your initial capitalization at acquisition.

Last, but not least, a more expensive property could mean more depreciation and passive activity losses on your taxes.  This is great…IF you can use them.  If not, then perhaps less great.

All this to say, if you like both markets and have good teams (primarily property management) in both places, then just “do the math and the math will tell you what to do”.  But you’ll probably need input from your mortgage and tax advisors to make sure your match includes accurate assumptions about interest rates, payments, cash reserves and tax benefits.

Hey, if it was really as easy as the infomercial guys say, then everyone would be doing it.  So just accept that you’ll have to do SOME work, right?

And speaking of working…

What do you do when your market heats up (yes, it’s happening again…amazing what a few trillion dollars in freshly printed money can do for asset values!), and cash flows are getting thin?  It’s a dilemma more investors will be facing as hedge funds, home buyers and Mom & Pop investors pour into real estate.

When (not if) cash flows get tight in hot markets, you have a some choices.  You can go look for new markets that cash flow better.  Or you could shift your tactics to take what the market is giving you (equity!) and focus on total return versus cash on cash.  You could “force equity” through re-hab and hope to get better rents for a better property.  Or you can do all of the above.

The point is that when markets shift, you may need to adapt.  The good news is that you can make money in any economy or market, but you need to be careful to not fight the market. It’s bigger than you and you will lose.  Go with the flow and your life will be better.

Not sure how to approach this changing market?  That’s where having an experienced mentor can be worth a fortune!  And speaking of mentoring…

Is it really necessary to pay many thousands of dollars for a mentoring program to learn the commercial apartment investing game?

Hmmmm….good question!

As we just said, having an experienced mentor can be worth a fortune.  Of course, if you’re inexperienced, how do you know if your mentor is the real deal or not?  And even if he or she is, does that make it a good investment?

Of course, the answer is (drum roll please)….it depends.  (You should know that by now.)

Don’t hung up on price.  Focus on VALUE.  If your mentor is teaching you things that work in the real world  AND you do what you need to do, then it’s way more expensive (in opportunity costs) if you don’t hire a mentor.

But if you pay a ton of money for a cookie cutter program that dishes our theory and busy work, or if you aren’t ready, willing and able to do whatever it takes to succeed, then save your money.

With all that said, there are practical ways for someone on a budget to get access to a street smart mentor.

First, you need to identify who you’d like to apprentice with.  It might be a commercial broker or an active investor.  The advantages of a broker are 1) they are easy to find, 2) they will often welcome slave labor (that’s how you “pay” for their time), and 3) many of their clients will be investors, so you you may end up finding other prospective mentors.

Word of caution:  when working in someone else’s network, tread lightly!  Be respectful.  Stay mindful of your role and whose relationships they are. Always expect to give more than you get.  Ironically, if you do this, you’ll often get far more than you expect!

And speaking of relationships…

Is it smart to share all of the financials on a deal with your prospective property manager?

Generally, we would say yes.  After all, your property manager is the best source of valuable anecdotal data about rents, trends, demographics, expenses, etc.  We think of them as virtual partners.

BUT (and it’s a big one)…if you don’t have the deal locked down, be sure to get a non-disclosure / non-compete agreement in place.  Even though most property managers are ethical pros, sometimes you get one that will cut your legs out from underneath you.  Bow just because you have an agreement, doesn’t mean you’re safe.  It just makes it easier to make your point if you decide to sue.

Well, this is only half the show, but we’re getting carpal tunnel typing this blog.  So do us (and yourself) an favor, and just kick back and listen in as we humbly dispense copious quantities of real estate investing wisdom on this episode of The Real Estate Guys™ radio show!

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!

6/30/13: How To Find Real Estate Investment Training That’s Right For You

As any insomniac can attest, there are lots of choices when it comes to real estate investment training.

Once the purview of late night TV infomercials, promises of real estate riches are now abundant on-line, in your email inbox, and even in your postal mailbox.

But how do you know which program is right for you?

In the studio to contemplate the considerations any aspiring real estate investor should cogitate on before committing to a real estate course, coach, curriculum or club:

  • The king of late night and your host, Robert Helms
  • Your still-using-training-wheels co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms

Okay, we’re the first to admit we’re suckers for any real estate seminar, book, video or training course.  After all, what’s the value of just ONE good idea?  We almost always find something useful in even the worst offerings.

Still, when it comes time to pick a program and commit your time and money, we think there are a few important things to consider.

First, what are YOU trying to accomplish?  Do you want to go full time fast?  Do you love your job, but want to build up a reliable stream of passive income?  Do you want to merge your investing and lifestyle, so you can travel and enjoy your properties when they’re not being rented to others?  Or maybe you don’t want go near a tenant and you’d rather be on the paper side?

Yes, there are lots of choices before you even think about a market, property type, price point or financial performance!

So, it’s easy to say, “I want to make a ton of money!” and take on whatever the next fast talking pitchman introduces you to.  Often the desire for money is rooted in the false notion that given enough money, you can live how you want to live.

While that may be true if the money comes in without you doing anything (including managing it), but unless you’re a trust fund baby, there will almost certainly be a lifestyle ramification on whatever type of vocation or investing you engage in.  Our point is that you want to think about how YOU want to spend your time, and then look for investment vehicles and strategies that will facilitate that best.

Once you figure YOU out, then you can go look around for a course, coach, curriculum or club to teach you how to build an investing lifestyle that suits you.

Another consideration is how YOU learn.  Are you a bookworm?  Can you sit and watch videos or presentations and absorb the information?  Are you a self-starter or do you need some accountability to stay on track?

Great content delivered in a format that doesn’t fit your learning style will be inefficient at best, and possibly ineffective.

What can you afford in terms of time and money?  As anyone who’s ever dated can attest, fast and easy can be tempting at first, but doesn’t necessarily make for the best long term situation.

Conversely, as many who are graduating with fancy degrees from expensive colleges can tell you, just because you spend a lot of time and money doesn’t mean you get an education that will make you a lot of money in the real world.

Maybe you need someone to show you.  You learn by watching, doing and asking questions in the middle of the action.  Many people learn best this way and this is often the most elusive and expensive of all training.

But don’t focus solely on price.  Focus on value.  And think of your investment in education the same as you would any other investment.  How long until you have a positive return on investment?  If you pay $10,000 for a course, and do a deal in 12 months that makes you $100,000,  is that worth it?  Sure! That program didn’t cost you money. It MADE you money.  Those who lost are the ones that passed it up.

Now, usually to turn those kind of profits quickly, you’ll need to be working for capital gains (flipping properties and/or notes) or syndicating a fund where your management fee and profit sharing (even on a cash flow portfolio) can earn you six-figures a year or more.  Long term cash flow investing can get you to the Holy Grail of more passive income coming in than you need to live on.  It just takes longer.

So what’s the difference between a teacher, a coach and a mentor?

A teacher is simply someone who imparts INFORMATION.  How to do something.  Technical details, strategies, etc.  You can get this information through books, recordings, webinars, seminars, etc.  It’ s often a one way delivery from their brain to yours.  A teacher provides HARD SKILLS.

A coach is someone who provides ENCOURAGEMENT and ACCOUNTABILITY.  You tell them what you want to do.  You talk through HOW to do it (your coach may also teach, or may support the work of another teacher), and then create an ACTION PLAN.  The coach will remind you of your goals and challenge you to keep progressing through regular touch points.  A coach provides DISCIPLINE.  He’ll keep you on track when you enthusiasm and focus dwindles.

A mentor is someone who MODELS for you.  You watch them.  You may work with them.  A mentor can help with both hard skills and SOFT SKILLS.  That is, they help YOU become better, so you produce better results.  Of course, a good mentor will also provide accountability, but mostly a mentor provides WISDOM based on their own experiences.  It’s very real life.

Which do you need?  It depends on you.

We often see people mistake teaching for coaching or mentoring.  While each has characteristics of the others, each has it’s own focus.

If you know what to do, but can’t seem to make yourself do it, then you probably need a coach or a mentor.  Maybe you’re easily distracted or lack confidence.  Coaches and mentors are great for pulling you through.

If you’re a self-starting, motivated and disciplined person in other areas of your life and want to apply those talents to real estate investing but just don’t know what to do, you might be fine with just a teacher (or two or three).  Ultimately, your professional advisors and service providers will be among your most important teachers.  So one of the most important things to learn early is how to work effectively with your advisors and service providers.

Joining a club can be a great way to find peer teachers and mentors.  And if you have a friendly group with some camaraderie, you might find all the accountability you need simply by sharing your plans with your club mates.  Friends won’t let friends slack off or stay down long.  And when your idea factory is running low, a brainstorming session with other investors can be invigorating!

If the club gets big enough, you can probably attract the attention of teachers, advisors and other subject matter experts to come and address the group.  Maybe there’s not a club that suits you in your area.  Don’t give up!  Why not start your own?  Visit our special reports section of our resource center and get a copy of 12 Questions To Ask When Starting Your Own Real Estate Club.

Again, there are lots of options when it comes to learning the game of real estate investing.  But don’t let picking the perfect program keep you thinking about things too long.  Better to pick the best one available to you now and get started, even if it isn’t perfect.  You’ll surely learn something, meet some great people, and you can take that knowledge and relationships forward into subsequent learning environments.

After all, when you’re a real estate investor, the learning never stops.  So keep advancing your education, starting with listening to our discussion on How To Find Real Estate Investment Training That’s Right For You!

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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!

Real Estate In Belize – A Beautiful Market on the Rise

Market Spotlight: Tourism, Retirement and Investment on the Rise

No matter where in the world you buy real estate (including real estate in Belize), you’re buying the market as much or more so than the property.  After all, a great property in a bad market has a hard time performing well compared to even an average property in a great market.  And you can always improve the property, but how do you improve a market?

So when we look for real estate, we always consider the market first.  Then, we look for a great team to help us find, acquire, finance and manage the right property.

real estate in belize dock on beach

In this edition of The Real Estate Guys™ radio show, we shine our market spotlight on beautiful Belize.  And to make sure we get a really good look, we pack our microphones (and shorts and sunscreen!) and travel south to bask in the beauty of Belize (and enjoy a Belikin beer).

Broadcasting in the breathtakingly beautiful Caribbean paradise of Belize:

  • Your bright light of broadcasting brilliance, Robert Helms
  • Your somewhat dim co-host, Russell Gray
  • Special guest, the shining star of a brokerage of real estate in Belize, John Turley
  • VIP guest, Minister of Tourism for Belize, the Honorable Manuel Heredia

What Makes Real Estate In Belize So Strong?

Whether you’re interested in Belize or not, this episode has some great info about what makes markets move.  And except for very rare circumstances, it’s PEOPLE.  That’s why real estate on the moon is still very cheap.  Lots of available land.  No people.

BUT, you might say, how can some little sparsely populated third world country and the real estate in Belize be an amazing opportunity? And that would be a very good question to ask.

Is Belize a great market because some guru or travel magazine says so?  Who’s vote REALLY matters when it comes to real estate in Belize?

It’s PEOPLE (not the magazine). Real people.  People… people who need people.  They’re the luckiest people in the world.  Sorry, bad joke.  And if you’re too young to remember Barbra Streisand, then forget we brought it up.

Now back to our regularly scheduled blogging…

Our point is that people are what make real estate valuable.  And not just any people.  People who vote with their pocketbooks.  So when enough people (and businesses) invest their hard-earned money into anything, that thing moves.  It’s economics 101: supply and demand (with capacity to pay).

That’s why the old real estate adage still holds true: the three most important considerations when purchasing real estate are Location, Location, Location.  When lots of people want to be in or on a property and there isn’t lots of it in the best location, then you have a great formula for financial success in terms of both cash flow and long term capital gains.  We like both.

Click here now for a Belize Market Overview video featuring Robert Helms.

 

Belize Was Named TripAdvisor’s What?

So when John Turley tells us that Ambergris Caye, Belize was named Trip Advisors’ #1 island in the world, it’s impressive.  Not because Trip Advisor said it.  But because people who travel said it.  It’s the TRAVELER’S Choice award and not the Editor’s Choice award.  If you’ve ever enjoyed a movie that some critic panned, you know what we mean.  It’s the movie-goer who buys the ticket.  They’re the one who’s opinion counts when measuring return on investment.

However, that’s just one, albeit important, point on the curve.

John also tells us that major airlines are adding flights to Belize.  That’s impressive all by itself.  After all, airlines aren’t like big governments with unlimited budgets to create flights to nowhere.  If they’re adding a flight, it’s because they expect to fill it.  Probably because their customers (people) are asking them for more access to Belize.

But what’s even more intriguing is the impact that even one extra flight a week can make on the tiny country and real estate in Belize.  In other words, all those extra passengers need places to stay.  And the average stay in Belize is a week (as in six night and seven days).  But the volume and pace of construction is no where near what’s needed to support the current demand, much less this growing demand for accommodations.

Now that’s VERY interesting!

But Big John is on a roll, so he shares some other very valuable information with us.  Now you’re getting an idea how fun it is to be us.  We get to hang out with all these important, knowledgeable and super-connected people and gather up all kinds of inside information.

Fortunately, we almost always carry our microphones with us (which is fun going when going through U.S. airport security), so we can capture these precious pearls of wisdom to share with you.

And while the TripAdvisor award and the additional flights is information that is readily visible to the general public (IF John Q. Public happens to be paying attention and knows what the data means in context), what John shares next is not.

Big John tells us that his real estate office, which happens to be the top volume brokerage in the county of Belize, and the 3rd highest non-U.S. RE.MAX office in the WORLD…all from a tiny little island in Belize (think about that for a minute) has seen it’s sales volume increase 300-400% year over year. 

Whoa.

So CLEARLY, people are using the power of their pocketbook to put real estate in Belize on the map.  Well, technically, Belize is already on the map.  But now people all over the world are discovering enchanting Belize, just like we did 7 years ago.

Yes, it’s very fun being on the leading edge.

 

What Happens When Markets Get Hot?

What’s amazing – and we’ve seen this happen time and again – when a market gets hot, the momentum just builds and feeds on itself.  That can be fun, but we’ve also seen overheated markets blow up, then implode.  So what makes that happen?

real estate in belize to buy hot beach

Usually, when a market gets hot, developers over-react to the demand and overbuild.  In other words, the supply and demand pendulum swings the other way and now there’s too much inventory relative to the demand.  If you’ve ever had milk and cereal for breakfast, you know what we’re talking about. 😉

 

How Is The Government Helping Real Estate In Belize?

Of course, Big John is just a smooth talking sales guy (who happens to be one of the world’s foremost authorities on the real estate in Belize market in Ambergris Caye), so even though he’s quoting all these great stats and providing anecdotal support, we decide to balance him out by talking to a lifelong resident and now Minister of Tourism for the country of Belize, the Honorable Manuel “Junior” Heredia.

What we find out from Junior is that the Belize government has taken lessons from the beautiful real estate markets which developed before them. Sometimes, allowing that development to undermine the very beauty and charm that made the market desirable to start with.  Of course, it’s really hard to screw up an ocean view, but when the beach is covered with 10 story highrises, it’s hard to see the water.

So Junior tells us that the Belize government was humble enough to get outside help, then they set up a 20 year Master Plan with a drive towards what creating what he calls “sustainable tourism”.

What does that mean?

Junior explains that Belize has reserved nearly 40% of it’s land to preserve the natural beauty that attracts tourists in the first place.  Of course, as a tourist, you’ll appreciate that.  The negative is that supply and demand will eventually push prices up.  Now if you’re a wealthy tourist, you’ll REALLY like that.  High prices keep the riff-raff out.

Of course, if you’re less wealthy, it might frustrate you.  But rather than be frustrated, just go to work on building wealth.

 

How Expensive Is the Real Estate In Belize?

Now right now, real estate in Belize isn’t ridiculously expensive.  And it will probably be several years before the equity enhancing effects of a big green belt will be seen in local real estate prices and nightly rental rates.

But as investors?  It’s AWESOME.

When you can go into a market and buy before the demand has arrived and prices have gone to the moon, you’ve locked in your cost.  And if the numbers make sense at acquisition, then it makes holding on for increasing cash flow and equity growth a profitable proposition.

Because eventually, as demand increases and supply can’t rise to match it, the natural progression is higher prices.  And when you consider that nightly rentals cash flow so much better than long term rentals, you’re starting from a very strong base.  And unlike those C class Section 8 apartments you might own, we’re guessing you’d actually enjoy staying in your Belize investment property if you’re lucky enough to have a vacancy!

 

Should I Invest In Belize Real Estate?

Is Belize a market that makes sense for everyone?  Of course not.  We’re just trying to make sure that those who should consider it are aware it exists…especially when there’s the opportunity to get in ahead of the wave – even if the swells are starting to rise up on the horizon.

 

How Can I Learn More?

So listen in to this especially exhilarating episode of The Real Estate Guys™ radio show and discover why we keep going back to Belize again and again.  And if you get inspired, make plans to join us for a fun filled 3 day weekend adventure in Ambergris Caye, Belize.

Listen now:

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