12/29/13: Thinking Outside the Buck – How Savers Can Avoid Being Losers

Robert Kiyosaki says, “Savers are losers”.   Does this mean you should consume more than you produce, or that saving is bad?  Of course not.

There are multiple meanings to the Savers are Losers concept.  In addition to drawing a distinction between working for money (saving) versus having money work for you (investing), there’s the problem of money versus currency.

As real estate investors, we put a lot of time and effort into “making money”.  And while it’s fun to consume, most of us create profits with the idea of accumulating and storing wealth…at least temporarily until the next great investment comes along.

The challenge comes when the vehicle we use to store the value of our profits (paper currency) is being consistently devalued by its issuer.

With central banks (like The Federal Reserve) around the world “printing currency” at unprecedented rates, everyone doing business in currency (like the dollar) is affected.  And the dollar has the greatest effect of all because it’s used globally as the world’s reserve currency.

So while most folks are simply simply focused on how to earn and accumulate more money, we thought it would be a good idea to think about what “money” is, and whether the dollar is the best or only vehicle to use as money.

So put on your golden thinking cap, and get ready to think outside the buck…

Sitting behind The Real Estate Guys™ silver microphones for this episode:

  • Your precious silver-tongued host, Robert Helms
  • His generic round co-host, Russell Gray
  • Special guest and golden boy, Anthem Blanchard

As real estate prices rise (denominated in dollars) and equity happens, real estate investors are going to be the proud owners of bulging balance sheets.  Finally!

Of course, we’ve seen this movie before, so while we enjoy booms, we’re very aware of the boom / bust cycle that is inherent in an unsound money system. If you don’t know what that means, don’t worry about it for now.  Just remember that there are booms and busts (ups and downs), and when a market is booming, you ride it up.  Along the way, you’re extracting profits and storing them up for the next bust, so you can go out into the wreckage and snap up bargains.

So as prices rise and lending comes back into the market, investors will have the ability to realize profits (through sales) or extract equity (through refinancing).  Even buy and hold investors (presuming positive cash flow) will be stacking up dollars because the more properties you own, the more cash reserves and operating “float” you hold.

Most people hold this cash in currency, like dollars.  In fact, for most people, dollars are the ONLY measurement of wealth.

But thinking outside the buck, we wonder if it might make sense to store a percentage of those profits and reserves in something other than currency?

After watching the “bail-in” that victimized savers in Cypress last year, the concept of “counter-party risk” changed our perception of risk when dealing with banks.  Especially considering the miniscule reserves held by the FDIC against the huge amount of bank deposits insured.  We already know banks can fail because hundreds did during the Great Recession.  What if the insurer fails?

Soif money in the bank isn’t as safe as…well, money in the bank…then where can you store wealth until you’re ready to use it again?

And even if money in the bank is safe from the bank failing to return it (counter party risk), what happens if when the bank returns it, it isn’t worth as much as when you deposited it?  Think about putting $5 in a bank account in 1965 when gas was 25 cents a gallon.  For five bucks, you could fill up a 20 gallon gas tank!  That’s a lot of driving!

But today, $5 won’t buy you 2 gallons of gas.  So even if the bank gives you your five dollars back, it’s lost its purchasing power.  This is what many baby boomer savers are discovering as the try to sail off into their golden years.  They have more money than they’ve ever had, but it won’t buy as much.

So we sit down to talk with Anthem Blanchard, who literally grew up in the precious metals business.  His father, James Blanchard, was a pioneer in restoring Americans’ right to own gold.  For you young folks out there, you may not know that from 1933 until 1971 is was illegal for U.S. citizens to own gold.

Really.

It’s a long and sad story, but the short of it is that when the U.S. was founded and for most of world history, gold and silver were regarded as “money”.  And dollars were just paper coupons redeemable for real money (gold and silver).  But in 1933, the U.S. decided it was bad for people to own gold, so they made it illegal.

The reason that happened is at the heart of the challenge faced by savers today:  governments wanted to spend more money than they have.  Shocker. And it’s obviously going on today in record fashion.

So alert investors are looking for alternatives.  In fact, it’s gotten so bad that even consumers are looking for alternatives.  There’s a reason Bitcoins are gaining so much popularity.  It’s a currency that isn’t controlled (yet) by government.

The fact that Bitcoins are creating such a stir tells you that people are concerned about the dollar.  And it isn’t convenience.  Because while tech is cool, dollars are effectively virtual too.  Just think about credit cards, debit card, wire transfer, online payments, etc.  All digital.

The issue with Bitcoins are they aren’t real and they don’t have government backing.  We’re not here to put down Bitcoins, but compared to the thousands of years of human history with gold and silver, we’d rather look to precious metals as an alternative to dollars for storing and transporting wealth.

Of course, because metals are tangible, they aren’t easy to use in commerce.  But that’s changing!

Just as innovators came up with Bitcoins as an alternative to the dollar, creative entrepreneurs are coming with technologies to make using precious metals more convenient.  Anthem Blanchard is one of those innovators.

So listen into this edition of The Real Estate Guys™ radio show as we discuss precious metals as an alternative to the dollar for the long term storage of wealth, and how technological innovations can make the use of precious metals in daily commerce less expensive and more convenient.

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If you like this topic, be sure to check out our special report: Real Asset Investing – How to Grow and Protect Your Wealth Against a Falling DollarClick here to request now.

Santa’s finished with his list. Now it’s YOUR turn.

Here we are on the threshold of a brand new year.  No matter your age or station in life, this new year is the first of the rest of your life.  No one really knows how many he or she has left.

What’s on YOUR list for 2014?

While getting gifts is great, what’s truly enriching is setting goals and achieving them.  In other words, often the treasure isn’t in the having, it’s in the earning – who you become through the effort, and how you feel about the result when attained.

How to set and keep compelling goalsSadly, far too many people pour too much effort into pursuing things that don’t have much meaning or reward when finally attained.

We’re not judging what someone should value.  Values are highly personal.  And that’s the point.

Often our values are assigned to us by parents, spouses, children, employers, partners…even (especially?) the media.  And we dutifully go about living out these external values without ever taking the time to explore our own heart.

Then we wake up one day disappointed and disillusioned, wondering why we have so much, yet feel so empty.

Real estate is just a financial vehicle…a way to make money.  And money is just a tool to store, transport and exchange value.  The key word is value.

To give your money and investing true value to YOU, what it does for you needs to be based on what’s important to you.  Yes, it’s all about you and that’s okay.  As the old proverb says, “Don’t muzzle the ox while he treads out the grain.”

In other words, if you’re going to do the work, it’s only fair that your “hunger” is satisfied.

So what are YOU hungry for?  What do you REALLY want?  When they turn the light off on your life, how do you want to have lived?  What will be your legacy?

Hopefully, your “list” will have lots of boxes checked off and you’ll have few important things left undone.

But with so many things to do, that may seem impossible, right?  So much to do and so little time!

So you can see the importance of making your list carefully.  Keep distractions off it.  Stay focused on what really matters to you.  Then stay busy working on keeping the main things the main things.

It sounds so easy.  Of course, if it was easy, everyone would do it and a quick look around tells you that most people don’t.  That’s because it isn’t easy.  And that’s what makes it so rewarding.

We choose to go to the moon because it is hard - John F. Kennedy“We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.” – John F. Kennedy

What’s YOUR moon project?  What goals will serve to organize and measure the best of your energies and skills?  What challenges are YOU willing to accept, are unwilling to postpone, and you intend to win?

It’s a BIG question.  More importantly, it’s the RIGHT question.  One that too few people even ask, much less take the time to answer.  Even answering this question is hard work.  Is it a challenge you are willing to accept, unwilling to postpone, and intend to win?
We hope so.  And we’re here to help.

There is an art and science to asking and answering the questions which create life-changing compelling goals.

Each year, we produce an event that provides the environment and structure to help you unleash the compelling goals within you.  Of course, for you to benefit, you have to be there.

So click here now to make your plans to join us at Creating Your Future – The 2014 Goals Retreat in beautiful San Diego, California on January 10-12, 2014.

Yes, there are many things competing for your time and attention.  You probably have a big list of chores and projects waiting for you.  Maybe there are parties or family commitments.  We understand.  They’re all important.

But what greater gift could you give to all the people who care about you and count on you than to get clear, focused energized and busy finding and fulfilling your personal mission?  We’re guessing the people you love will all be better served by a better you.

We’re not telling you what to do.  We’re just trying to help you find the right answer by asking the right question, which is what Creating Your Future is all about.

Click here now to make your plans to join us at Creating Your Future – The 2014 Goals Retreat in beautiful San Diego, California on January 10-12, 2014.

12/22/13: Who Moved the Door? How Dodd-Frank Affects Your Exit Strategy

Dodd-Frank just made real estate investing more confusing“Dodd only knows.  Dodd makes his plans.  The information’s unavailable to the mortal man.”Slip Sliding Away by Paul Simon…slightly modified by The Real Estate Guys™ 😉

And quite Frankly, my dear, Dodd doesn’t give a damn.” – Rhett Butler in Gone With The Wind…again, slightly modified by yours truly.

Yes, we’re old media guys.  Plus, we’re just plain old.  So we have all these old song and movie references.  Classic stuff, and the lead-in for this blog about another edition of The Real Estate Guys™ radio show.

You may have heard that 2013 is coming to end.  And right around the corner is a brand new year.  And, like a holiday tradition, Uncle Sam is handing out brand new laws for everyone to figure out. Fun.

In this case, we’re taking about Dodd-Frank, which is a big piece of…….

…legislation…that was written by bankers to protect consumers from…bankers.  Hmmm….we guess that makes sense. (Not really).

Nonetheless, there’s stuff buried in the bill that affects real estate investors, so we thought it would be a nice public service if we told you about it.  We don’t think Dodd or Frank will be sending you an alert.

In the studio for this edition of legislation mitigation:

  • Quite Frankly, the finest real estate investment talk show host there, Robert Helms
  • His Doddly Do-Right co-host, Russell Gray

Like a holiday fruit cake, there are some strange things in the Dodd-Frank bill.  And one of the most concerning items is a provision which places substantial burdens on owners of real estate who want to exit by offering residential owner-occupants seller financing.

Of course, we think this is a stupid law.  Oops.  We’re sorry, is our not-so-humble opinion showing?  We’ll put it away and let you decide for yourself…

Here’s the deal:

If you want to sell more than 3 properties per year by offering seller financing to owner-occupants, you will now be required to obtain a national mortgage lender’s license.  This means passing a test, learning a whole new set of rules and regulations, falling under the jurisdiction of yet another federal bureaucracy, and keeping up on continuing education.

Really.

Think about the ways investors use carry-back financing:

  • Buy an apartment and convert it to condos.  Sell the individual condos to high paying owner occupants and carry the financing to a) get a better price, b) get a higher rate of interest on the loan, c) attract a wider market (people who don’t qualify for conventional financing).  Except if you sell more than three in a year, you need to be licensed.
  • Same as above, except you build a little in-fill project with 5 or houses.  You want to offer it to owner-occupants and carry back financing, except you can’t because you built the homes.
  • Buy a nice piece of land and sub-divide it into custom home sites.  Convert your equity into cash flow by carrying back financing. Except now you can only sell three.

You get the idea.

But it gets “better”…

Not only can you NOT do more than three seller-financings in a year, you can’t offer terms of less than 30 years!  And no balloon payments!

Now, imagine you have a collection of properties that have lots of equity, but are in bad shape.  You don’t have the time, money or energy to fix them up.

So you decide to sell them to owner-occupants who want the opportunity to fix the house up the way they want it, and earn a little “sweat equity” along the way.

You take a tiny down payment so the buyer can use most of their cash to fix up the property.  You offer them an interest only loan, so they have minimal payments (all profit it to you), while fixing up the property.

They give you a higher than market price (but still well below what it will be worth when they fix it up), so you’re happy to wait for the money.

Of course, you don’t want to wait for every, so you give them a 3 year loan, with a 2 year option.  That way, you collect interest for 3-5 years and then either get paid, or get the now fixed up property back.

So the buyer gets to buy the property, with enough time and money to fix it up just they way they like it.  When they’re done, they think it will be worth more than they paid.  They’re happy.

The neighbors are happy because your ugly property gets a facelift and proud new owner to keep it up.

You’re happy because you get to sell a property for higher than market even though conventional lenders wouldn’t touch it.  Of course, once fixed up, a conventional lender will be happy to lend on it, which is how you’ll eventually get paid off.

So EVERYBODY wins.

Oops.  Except that under Dodd-Frank, you can’t have an interest only loan, you can’t have a balloon payment, and you can’t have a 3-5 year loan.

Ugh.

So what’s the good news?

Doff-Frank doesn’t (currently) apply to sales made to INVESTORS.

That means as a BUYER, you just got a lot more attractive to providers of seller financing, because all of the owner-occupants you used to compete with for deals are now at a big disadvantage when bidding on seller financed properties.

That’s right!  The law that’s supposed to help owner-occupied buyers, just put them at a disadvantage…even though they might be willing to pay more.  Brilliant.

But we don’t make the rules.  We just try to figure out how to adapt.  And heading int0 2014, we need to think carefully about how we would use seller-financing as an exit strategy.  But we also see a lot more opportunity to use seller-financing as an acquisition strategy.

So listen in to this episode and consider how Dodd-Frank affects your entrance and exit plans for 2014 and beyond.

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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!

Our Most Important Summit Yet

Join The Real Estate Guys for the 2014 Investor Summit at Sea

World leaders and banking elite have sometimes secret summits to make their plans for managing the global economy.  What they decide affects YOU…whether you like it or not.

Isn’t it time YOU and other investors got together with the best and brightest experts to make YOUR plans to grow and protect your wealth from whatever the central planners decide?

We think so.

That’s why we’re proud to bring you the 12th Annual Investor Summit at Sea™ featuring an amazing line up of speakers like Peter Schiff, Ken McElroy, Tom Hopkins and MANY, MANY more!  And NEW!!! Simon Black of Sovereign Man will be with us in 2014!!!

There are experts in real estate investing, economics, precious metals, oil & gas, infinite banking, asset protection, syndication, real estate development, and even sales.

It’s intense. But it’s fun.

Robert Kiyosaki came in 2012 and loved it.  But don’t take our word for it. Click here to hear directly from Robert.

The timing couldn’t be more important.  The world is changing at an amazing pace.  The Summit is your opportunity to discover trends, develop strategies, make connections and get away from the daily grind to focus on your future.

Where else on earth can you go to get a week with this caliber of thought leaders?  Nowhere.  It doesn’t exist.

And this Summit won’t exist for long either.  The ship is filling up and even the Summit isn’t until March, we’re running out of space.

We know it’s a big decision.  It’s a lot of time and money.  But in the past 11 years we’ve never had anyone say it wasn’t worth it.  So we want to strongly encourage you to seize the day and reserve your spot today.

Click here now to learn more about the Summit.

Or fill out the form below to schedule a personal consultation.


 

12/15/13: Ask The Guys – Leverage, Relationships, Technology, and Advice from a Legend

In this episode, The Real Estate Guys™ answer your question with our questionable answers. 😉

And at the end of the broadcast, a living legend in the real estate business answers the question we get asked more than any other.  So tune in and listen up for another exhilarating and informative edition of Ask The Guys!  To put your question in our email grab bag for the next Ask The Guys show, click here to visit our cleverly named Ask The Guys page.

From the Rich Dad Radio Show studios in chilly Scottsdale, Arizona (thanks to our good friend Robert Kiyosaki and his amazing team!):

  • A man who asks nothing and knows everything, your host Robert Helms
  • A man knows nothing and answers everything, co-host Russell Gray
  • A living legend in real estate who shall remain anonymous until revealed at the end of the episode, Mr. X

Okay!  We’ve got another great bunch of questions…thanks to YOU and our email room manager, Walter.  If you know Walter, it’s amazing he can even carry the email bag, much less pull anything out of it.  But he’s a resourceful little pecker…

So right out of the gate we get a question about LEVERAGE.  This is SUCH a great tool in every investor’s toolbox…and we love to talk about it.

The question is simple enough, but the answer, like a fine cut diamond, is multifaceted.

Should you pay cash or get a loan?

Mmmmmm….there’s a lot there.  And to blog on this topic is to write a chapter in a book, so we won’t do that.

Instead, we’ll give you some things to think about, then encourage you to listen to the show.  And if you can, get your hands on a used copy of our temporarily-out-of-print-while-we-look-for-time-to-update-it book, Equity Happens.  We spend a lot of time on the topic of leverage in the book.  It’s also covered in our Real Equity Home Study Course. available here.

Here some of the FEATURES and BENEFITS (that’s sales speak) of leverage:

  • Leverage allows you to own more real estate for less of your own money.  Instead of 100% down on just one property, you can put 20% down on 5 properties.  It’s not complicated…more is better.
  • Leverage allows you to enjoy 100% of the appreciation of a property with only a fraction of your own money in the deal.  So if you put 20% down, you pay for 1/5 a property.  The loan pays for the other 4/5.  But when the property goes up, you get 5/5 of the gain.  Nice!
  • Leverage allows you to SHORT THE DOLLAR.  If you believe that the dollar will continue to fall in value against things that are real (like food, energy, real estate, cars, clothes, labor, etc…), then you don’t want to save dollars, you want to convert them into things that are real.  Ideally into things that produce income.  Even better to go to go into the future and bring dollars into the present and buy more real assets today.  This is called “shorting the dollar”.  Confused?  Click here to get a copy of our special report on Real Asset Investing and see if it helps.
  • Leverage allow you to arbitrage your cash flow.  Arbitrage is just a fancy word for making money on the spread, like a bank does when they pay  you a paltry 1% on your savings and then buy Treasuries at 2.5%.    You can do the same thing when you borrow at 5% and then use the proceeds to buy 8% cash flow (like a rental property), you make 3% profit on the spread.  Fun!

We could go on and on (can you tell?), but hopefully you get the gist of it.  Real estate is a financial tool and leverage is an important financial concept that every investor needs to understand.  So study it.

And when you get good at understanding leverage, you’ll want to enjoy Multiple Mortgasms.

Sorry.  It’s a little crude, but after all, we are The Real Estate Guys, not The Real Estate Gentlemen.  Besides the line was too good to pass up.

So what are we talking about?

In residential real estate, the mortgage market is subsidized by the Federal government.  It’s kind of like what’s happening with healthcare under Obamacare.  The government wants to “help” by make housing more available to the little guy, so Uncle Sam created agencies to “help” the private sector make mortgages cheaper.

How? By providing more liquidity through a guaranteed buyer of mortgages in the secondary market.  That’s where mortgage originators go to sell the mortgages they make.  Remember that while we, as investors, think of mortgages as liabilities…paper investors think of them as assets.  When you OWE the money, it’s your liability.  When you are OWED the money, it’s your asset.

The street names for these agencies who buy (or guarantee) the mortgages are Fannie and Freddie.  Since their introduction to the market (among MANY unintended consequences), most residential lending conforms (a “conforming” loan) to their lending guidelines.  Even when the originator doesn’t plan to sell the loan to Fannie or Freddie.  It’s just nice to have a backup exit strategy.

One of the Fannie / Freddie “conforming” guidelines is they won’t lend to anyone who has more than 10 Fannie or Freddie loans already.  So when you get to 10, you’re “Fannie’d out”.

The point is that if you want to maximize your investing by taking advantage of these cheaper loans, you need to manage your loan portfolio carefully.  So when our listener told us they had just two properties with four loans on them, we knew he didn’t get this concept.  So we talk about it to be sure that everyone learns.

Of course, the segues into the next topic…

With so many properties, vendors and tenants, what software can be used to keep track of it all?  Great question!

Sadly, there isn’t a one-size-fits-all great answer.  And keeping track of all the moving parts is the bane of any business person, real estate or otherwise.  Unfortunately, complexity is the price we pay for prosperity.  Sometimes you just can’t remember all the properties you own or where they are.

Our short answer is to know that most property management platforms are PROPERTY centric.  Most CRM (Customer Relationship Management) platforms are CONTACT centric.  Of course, brilliant developers are constantly creating new and innovative products.  And each year, the products become more specialized as developers target specific niches.  That’s the good news.

The bad news is that there are still so many demographics bigger than the real estate investing community, so no product has come across our desks that we feel we can call, “Neo”…(from the Matrix…”the One”)…

The biggest problem we see with software is that it tries to be smarter than you.  In our case, that’s not too hard.  But when the software locks you into a process, it’s hard to adjust to changing conditions.

So our general advice is to go with something inexpensive, highly supported (lots of gurus who know how to tweak it), and very customizable.  This way, you can adjust it on the fly as you figure out how to use it to best manage your unique situation.  So if you start out with single-family homes, then get into self-storage or Christmas tree farms, your software can be made to fit your needs.

When you buy a program tightly designed for one niche, it may not fit the other.  But you can customize, you can add fields and functions to suit your investing fancy.  You don’t want the technology tail to wag the investing dog.  Investing is the main thing.  Technology is a support function.  Duh.

Lastly, we get a question from someone who just drank the real estate Kool-Aid and wants to make real estate a profession.  We get this one ALL the time.

So rather than recycle answers we’ve provided several times in the past…and because we happen to be in Scottsdale, Arizona…we give a shout to our friend, hero and 2014 Summit at Sea faculty member, the legendary Tom Hopkins.  Tom is gracious enough to drop everything and come into the studio to share a small portion of his immense wisdom.

But we won’t do you the disservice of trying to transcribe Tom’s sage advice, except this Yoda-like notion:  when you decide to do something, don’t try.  Commit.  And when you do, you’ll be successful.  Too many people “try” real estate sales or investing.  Too few “commit”.   “Do.  Or do not.  There is no try.”

So commit to listen to this episode, and then take the next steps to enhance your education, grow your network, and build your support team.  We’re committed to providing all kinds of opportunities to help you, including events, resources and episodes full of great ideas and information.  Thanks for listening to The Real Estate Guys™ radio show!  Tell a friend!

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!

12/8/13: Perking Up Your Portfolio with Profit Producing Properties

Call us paranoid (we’ve been called worse), but all the worldwide currency and credit expansion makes us a little nervous.  Sure, we like it when asset prices rise.  But they’re supposed to go up because of fundamentals…things like supply and demand, cash flow, a strong labor market.

But right now, asset values…especially stocks…are going up like there’s no tomorrow.  That’s great if you own stocks, real estate, collectibles, etc.  But last time we looked, your tenants don’t own those things.  What they get instead is rising prices on food, energy…and now healthcare.

Meanwhile (notwithstanding minimum wage workers in Washington State), labor and wages are soft.  Hence, landlords aren’t pushing through rental increases, even when supply and demand says they should be able to.

All this to say, while you’ve been busy working your day job, as your erstwhile surrogates, we’ve been traveling the globe looking for solutions.

How can you perk up your portfolio with more profit producing properties?  After all, we want to own all the real estate we can.  And we want to borrow heavily (short the falling dollar) to do it.  But that means we need solid cash flows to control everything.  And a soft labor market and real world inflation (the CPI is a joke) makes that “challenging”.Coffee farmland investing provide high cash flows and international diversification through a renewable resource.

Then one day, sipping a cup of coffee in an exotic location, it hit us!  When if you could create cash flow from the very commodities that are going up because of all the easy money in the system?  Brilliant!

But how?

Well, because we’re us, it didn’t take long for us to find the guy with the answer.  After a little chit chat, we put a microphone in front of his face and did a short segment as part of our show from the floor of Freedom Fest last summer.

Then a funny thing happened.  Our feedback page lit up and our audience wanted more!

Always eager to please, we checked out jet set calendars and noticed we’d be in Scottsdale, Arizona where our pal Robert Kiyosaki has a very nice studio.  So we snuck in, set up shop, and called our newest answer man (who happened to be in Colombia at the time) to talk cash flow from coffee farmland.

Percolating powerful pontifications in this fresh brewed episode of The Real Estate Guys™ Radio Show:

  • Your bold (with a hint of sweetness, but no room for cream) host, Robert Helms
  • His caffeinated co-host, Russell Gray
  • Our dark roasted special guest, David Sewell

When you think about it, the term “real estate” means “the King’s property”.  That’s why they call rental property owners land lords.  The serfs just got to work the land (farming and ranching) and keep 75% of the profits.  They paid the other 25% to the King.

Hmmmm….the serfs got to keep 75%?!?  Someone should tell Uncle Sam about that system.  Ironic that in the country that pioneered the concept of private property rights for the little guy, US citizens don’t get to to keep as much of their “produce” (income) as the serfs of old.  Are we the only ones who think that’s weird?  But we digress…

The point is that basic real estate was farming.  The tenants were farmers.  The income came from the produce and was shared between the farmer and the landlord.

So David didn’t come up with this idea. He simply brought it into the 21st century and we think it’s brilliant…and timely.

But as David explains, it’s also a socially responsible endeavor.  In their model, they buy coffee farmland from a poor farmer.  They retain and retrain the farmer to improve the product and production efficiency.

Cima Coffee Farms provide investors high cash flow from coffee farmlandBy getting more yield from the land, the poor farmer is now making more money than he’s ever made.  He’s happy.

The investor (that’s you) gets really attractive double digit cash flows.  You’re happy.

And the world gets more and better coffee. We’re happy.

And aside from our coffee addiction, we’re also attracted to profits.  And we love the idea of diversifying our holdings in various countries.  Of course, owning land offshore provides some asset protection and privacy benefits.  You can even use your self-directed retirement account to tack on some tax advantages.

Plus, creating income off shore income denominated in something other than dollars has some interesting possibilities.  Just ask Google, GE or Apple.

But while all those things are great, the thing we like best is that we can create cash flows from a commodity that is in demand worldwide.

See, when we buy residential real estate (which we love…we get to use leverage and we get tax advantages), we need to be careful to pick a good local economy.  “Good” means it creates the kind of jobs that our tenants need to pay the rent.  This is important because all your rental income is derived from the local economy.  That’s why we like locations where there are industries that pull money in from outside the area.

But when you own land that produces a commodity like energy or food that can be sold ANYWHERE in the world, it’s less important where the land is.  So in some cases the land is cheap, but the commodity is popular.  That’s a recipe for high ROI.  We like it. 🙂

So grab a cup of Joe, and sit back and listen in as we consider how YOU can create cash flow from coffee farmland as part of your real asset investing strategy.

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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!

Three Easy Steps to Improving Your Holiday Rental Listing

three easy steps to improving your holiday listingA decade or two ago, vacation home rentals were handled by professional vacation rental managers. Now, only 40 percent of these rentals are managed by professionals, according to the Vacation Rental Managers Association. If you are a vacation homeowner who has decided to tackle renting out and managing your vacation property on your own, you may be wondering how to boost your appeal. Using these tips, you can ensure that your holiday rental doesn’t sit empty very often:

Maximize the Internet

One of the reasons holiday property owners no longer have to turn their properties over to professional managers is the rise of Internet-based listing sites. Sites like AirBnB.com, HomeAway.com, and VRBO.com allow owners to post a free ad. Interested guests can search for holiday homes based on amenities, location, number of bedrooms and more, and guests can even pay for the rental through the site, which ensures that you don’t get stuck with a missed arrival and no payment.

If you opt to use one of these sites, ensure that your listing really sings. Write about bedrooms and bathrooms near the top of the listing as these facts have a huge impact on how many people can comfortably stay in your property. Remember to include compelling pictures — you might even want to invest in a professional photographer.

Boost Your Amenities

If you aren’t getting enough interest in your property, look at the most successful properties on those sites, and ask yourself what they have that you don’t have. Clearly, you can’t move your small town bed and breakfast to the city and you can’t move your cabin in the forest to the Alps, but you can make a few changes. You could add an exercise room or a hot tub. Specials on used equipment from stores like 2nd Wind Exercise make setting up an exercise room affordable, and there are always used hot tubs available on local resale websites.

While adding amenities, keep in mind that travelers like to be comfortable, and sometimes, it can be unnerving to stay in someone else’s home. To soothe your guests, consider adding a top rated security system from Lifeshield. These are easy to work, and they provide your guests with peace of mind. FlipKey.com also recommends adding amenities to be used in the area as well — offer you guests discount tickets to nearby restaurants, ski hills, or amusement parks.

Recommend Yourself

You know your property is great and so do the people who have stayed there. It’s time to let the world hear your positive reviews. Solicit former guests to write reviews for you on online travel sites. Post their glowing words on your social media account or copy them into a brochure. Guests like to stay in places that have a good reputation, and you can boost yours with a few free recommendations. If your former guests drag their feet on writing your reviews, give them a free night or a discounted week in exchange for their reviews.

Getting Started

If you are just getting started, you can post an ad on the sites listed above and increase your amenities as allowed by your budget. You will find it harder to get recommendations. Instead, invite a traveler blogger or someone else who can help you to get exposure to tour your place. Let them post pictures and reviews of your vacation home on their website. These three easy steps can be accomplished over a weekend, and many of them can be taken care of in just an hour or so. You will love the difference it makes in keeping your rental full.

This post provided by The Real Estate Guys™  guest contributor, Norma Martin

12/1/13: Exploring Your Options – Controlling Properties and Creating Profits

Options are one of the most interesting yet misunderstood tools in an investor’s tool box.  And how you think of them depends on whether you’re a Wall Street investor or a Main Street investor.

Options trading can be a great way for real estate investors to make money fastWall Street investors use options (puts, calls, LEAPs, etc.) to create profits, hedge positions (stop losses), and to speculate on uncertainty.  And while many people consider Wall Street options to be highly risky, ironically, options were actually created to and serve the very useful purpose of mitigating risk and providing pricing stability.

But we’re real estate guys.  So we want to know if there’s anything real estate investors can learn from options traders. And is there any way to use options trading to improve the performance of our real estate portfolio?

To find out, we flew to Scottsdale, Arizona and stepped into the Rich Dad radio studios to chat with a guy who’s big (and he is!) into options trading.

Exploring our options behind the purple Rich Dad microphones:

  • Your intrepid host, Robert Helms
  • His erstwhile co-host, Russell Gray
  • Big man on campus and Rich Dad’s Paper Asset Advisor, Andy Tanner

Long time listeners to The Real Estate Guys™ radio show know we like to get off the beaten path and go on conversational safaris.  It isn’t that termite reports and title insurance aren’t SUPER interesting, but that’s what your technical professionals are for.  So while we’ll have those kinds of subject matter experts on the show from time to time, we like to talk about big picture stuff we think investors need to know.

And speaking of “big”…

Andy Tanner - Rich Dad's Paper Asset Advisor and Options Trading ExpertIf you’ve never seen Andy Tanner live, he’s a BIG dude.  Something like 11′ 3″.  But he’s one of the smartest, nicest guys you’ll ever meet. And he’s VERY funny.  Plus, he’s a great teacher.  So who better to help us understand a somewhat confusing topic?

Why Options?

An option is a great tool because it gives the option holder the right, but not the obligation, to do something.  So an option to purchase in a real estate contract allows the option holder to effectively control a property (have the right to buy it) without the obligation to do so.

Why would you want that?

Actually, there’s a few reasons…

Options can be used to control a property without buying it.

Maybe you’re waiting for another deal to close and you need the proceeds to buy the new property.  With a purchase contract, you’d be obligated to buy the property even if the other deal didn’t close.  And if the other deal doesn’t close and you don’t have the money to close the new deal, you’re in breach of contract.  The other party is damaged (so is your reputation) and you lose your deposit.  Not good.

With an option, you have the right, but NOT the obligation, to close.  So if the other deal doesn’t close, you just walk away from the new deal.  Or maybe you assign the deal to another investor for a fee.

Which brings up another use of options – assignment.

The option is actually an asset to itself.  As such, it has value and can be sold to willing buyer.  This is usually done through a process called “assignment”.

When you assign an option contract, you’re giving the assignee the right to step into your place and control the property.  It’s a version of “wholesaling”, except you’re not using purchase contracts.  Again, this is important, because with options, the buyer isn’t obligated to close, so if the deal doesn’t happen, it’s less damaging to the seller and your reputation.

Options can also be used to speculate (invest on the potential of an event outside your control).

For example, let’s say you hear a rumor that a new amenity is going in that will likely increase the value of adjacent properties.  Something like a freeway overpass, a sports stadium or a hospital.  But it isn’t public yet.  (Remember, inside information is legal in real estate !).

So you buy options on the adjacent land, while waiting for the news to be confirmed.  Once it is, you can either close on the land or assign it to someone who now wants it at a higher price because of the new amenity.

And yet another use of options in real estate is to control a property to preserve a 1031 tax-deferred exchange.  (Remember, we’re not tax guys, so be sure to consult with yours before acting on anything you hear on the radio or read on the internet!).

In this case, you may have an “up-leg” property you want to exchange into, but don’t want to sell your current “down-leg” property until you know for sure you can get the up-leg.  If you can get the option on the up-leg, then you can take your time preparing to sell and marketing your down-leg property without getting into the dreaded trap of having to buy whatever is available when you need to close simply to avoid the tax.

In short, options can be used to control timing.

We could cite more examples of how you might use an option as the option holder, but you get the idea.

But what about the option giver?

Again, an option is the right, but not the obligation, which is great for the option holder.  The option holder has lots of flexibility, as we’ve described.  But the guy on the other side of the deal has the obligation to perform IF the option holder exercises his right.

So WHY would give someone an option?

The obvious answer is money.  Options aren’t free (usually).  They cost money.  So if you’re promising to someone (obligating yourself) to sell your property, but the other person isn’t promising to buy it, you need to compensated for the uncertainty.  This is called “option premium”.  Just like insurance companies collect premiums to compensate them for taking risk, so can you when you sell someone an option.

But what if you’re giving someone the right to buy your property (whether it’s a stock or parcel of dirt) and the “strike price” (the price they agree to pay) is profitable for you?  How much risk are you really taking?

Sure, you risk the lost opportunity of the asset going up higher than the price you sold it for.  Maybe you’d say it’s a risk that you can’t sell the property during the option period and it drops in value, but then the option holder doesn’t exercise (in this case, they usually won’t).  So certainly, selling options isn’t without risk.  (But you do get to keep the premium!)

But assuming you think through those risks and are willing to take them, options provide a great way to create sometimes instant cash in your bank account.

Maybe you give a tenant in your property a lease with an option to purchase.  For that he pays you rent, plus a little bit more each month.  Maybe he pays you a chunk when you sign the deal.  Some of the extra may be credited towards the purchase, which is effectively an interest free loan to you against your equity.  And maybe some of the extra is “option premium” which is pure compensation (profit) to you for taking the risk of uncertainty.

Either way, it’s more money in your pocket NOW.  And when it comes to getting more money in your pocket, NOW is always the best time.

Crossing over from Main Street (real estate) to Wall Street (stocks), options trading is truly instant gratification.

You can sit down at your computer and in just a few mouse clicks, end up with cash being placed in your account TODAY.  As much as we love it, usually real estate cant’ do that for you.

So if you’re educated in options trading (obviously, this is a very important consideration), you can use your options trading account to supplement cash flow during a vacancy or an unexpected expense.  While it might take days or weeks to get a new tenant and rent coming in, your option trading account can refuel your checking account right away.

Of maybe you want to use your options trading account to churn out down payments for your rental properties!

In any case, we think it’s a skill that investors ought to consider developing.  When it comes to creating instant cash, you can never have too many options!

So listen in to this episode of The Real Estate Guys™ radio show featuring Rich Dad’s Paper Asset Advisor, Andy Tanner.

If you like what you hear and want to learn more about how paper asset options trading can help you with your real estate investing, then exercise your option to join Andy Tanner, along with Ken McElroy, Peter Schiff, Tom Hopkins and the rest of our fabulous faculty on the 2014 Investor Summit at Sea™!

Listen Now:

  • Want more? Sign up for The Real Estate Guysfree newsletter
  • Don’t miss an episode of The Real Estate Guys™ radio show! Subscribe to the free podcast
  •  Stay connected with The Real Estate Guys™ on Facebook!

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!