Low rates and huge opportunity …

Financial planning 101 says create equity first, then invest it for cash flow later.

Of course, real estate investors know cash-flow creates equity … but that’s a different discussion.

With paper assets, the basic formula is to buy stocks young to grow equity, then sell them later to buy bonds in retirement that will produce cash flow to live on.

But for folks trying to retire today (and there’s millions of them!), today’s pitifully low rates pose a BIG problem.

They either need to have a TON of equity … or be willing to live a miserly existence.

Think about it … even $1 million dollars invested at two-percent only creates a meager $20,000 per year passive taxable income.

In other words, thanks to the Fed, you can be a cash millionaire … and only have enough interest income to live just above the poverty level.

When someone is trying to retire on savings and they can’t get enough yield to live on, besides staying in the workforce (which many boomers are doing), other options are …

… consume the principal and hope you don’t outlive your savings …

… or stay in equities (stocks) and hope the next inevitable correction (crash) doesn’t cut your nest egg in half.

Of course, if the stock market crashes, history says the Fed’s probable response is to LOWER interest rates.  For retirees, that’s a DOUBLE-WHAMMY … crushing both asset values and interest income.

Thankfully, as real estate investors, we don’t have to worry about most of this.

But non-real estate investing boomers have a BIG problem.  Their best hope of getting the Fed on their side is to stay in the stock market.

We think it’s fairly easy to make the argument real estate is a FAR better equity play than stocks … but that’s not today’s message … and you probably already know it anyway.

Today is about OPPORTUNITY … the HUGE opportunity for real estate investors because of what’s going on in today’s market.

For small-time operators, this is a great time to search for equity-rich owners who are selling so they can retire on liquidated equity.

So don’t just offer to buy the property … ask the seller what they plan to do with the proceeds. Uncover their problem so you can offer a solution.

If their plan is to put the money into bank CDs or government bonds … they’re looking at puny yields of less than three-percent.

Sure, we know there are bond funds with TOTAL returns of six to eight percent, but that includes capital gains on bond values.  If rates rise, those capital gains become LOSSES.

And if anyone wants to compare total returns … a typical leveraged single-family rental destroys bonds.  But that’s also a conversation for another day.

Our point today is LOW interest rates are creating a BIG PROBLEM for a HUGE group of people … and a TREMENDOUS opportunity for real estate investors to profit from helping.

Because when you approach equity rich property owners with an offer to pay them six or eight percent when they carry back their equity …

… you can triple or even quadruple their income compared to bank CD’s or bonds.

Let’s do the math …

$1,000,000 carried back equity at six-percent = $60,000 per year taxable

Of course, you may not want their specific property, so a carry-back isn’t always the best play.  But it doesn’t mean you can’t create a win-win deal anyway.

Suppose you have other properties you do want, but need financing … and for whatever reason you can’t or don’t want conventional loans.

The approach is the same, except the equity-rich property owner uses their equity to loan against the property you do want.

Now if you take this approach to the next level, instead of just one property owner and one or two properties …

… you could set up a syndication and aggregate several individual investors into a bigger pool to do bigger deals.

So even though the scale is bigger, the concept is the same …

Help people who need income and have stock or real estate equity, by showing them how to move the equity into higher yielding vehicles … with YOU.

Even if there’s interest expense involved in freeing the equity, as long as the risk-adjusted spread is positive, it’s a win.

For example, if a property owner has $100,000 in idle equity which can be unlocked with a fixed-rate long term loan of four-percent … they have interest expense of $4,000 per year (typically tax deductible).

When you offer an eight-percent yield through a private mortgage (loan) or a cash-flowing property (equity share) … you provide them $8,000 per year passive income.

Now you’ve delivered them $4,000 per year of additional free cash flow, while YOU own all or part of an investment property funded with their equity.

Once you understand the concept, you can just add investors, zeroes, commas … until you have a portfolio that’s as big as you’re capable of making it.

The bottom line is low-interest rates create HUGE opportunities for real estate investors big and small … and it’s not just simply going out and getting bank loans.

When you learn how to help people solve their cash flow problems through strategic equity management, you set yourself apart from investors who aren’t as creative.

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Ask The Guys – Apartments, Retirement, and Offshore Entities

Our listener questions this week run the gamut from extremely practical to extremely theoretical.

As always, we weigh in on topics that are relevant to YOU … listen in to hear our ideas on apartment management basics, diversification, and more … plus some podcast recommendations and a whole lot of info on one of our favorite places, Belize.

Keep in mind that we are not legal or tax professionals. We do not give advice. The ideas in this show are simply that … ideas.

In this edition of Ask The Guys you’ll hear from:

  • Your deal-hunting host, Robert Helms
  • His tag-along co-host, Russell Gray

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Question: What expenses do I need to budget for as an apartment building owner?

Arnie in Minneapolis has a 20-unit apartment building that provides student housing near a university. He asked us to explain what his basic expenses will be. First, the obvious:

  • Utilities. These can get a bit tricky, though, because the tenants may not pay all the utilities directly. You may have to pay for gas and water, for example.
  • Taxes. Make sure you’ve done your research and know how and when taxes are reassessed in your area.
  • Property insurance. This is a must.
  • Management costs. Consider how much staff you’ll need and whether you want to hire third-party management.

And the less obvious:

  • Marketing and advertising costs. Marketing your property helps cut vacancies. For a college property, brochures may be one option.
  • Legal costs. Make sure you have a legal team in place and a process for handling tenants with bad debt.
  • Maintenance. Small but necessary services like pest control and carpet cleaning can add up.

Although apartment owners have to juggle a list of expenses, there are ways they can make some extra income. Apartments geared toward both college students and other types of residents can offer paid laundry services, parking spots, and even furniture rentals.

Question: I’m a new investor. Should I diversify with different product types and markets now, or later?

This Texas listener started investing in the past year and is trying to hone his personal investment philosophy. Ryan said he owns two single-family homes, but is also interested in commercial, agricultural, and lifestyle properties.

He wanted to know whether it’s wise to start diversifying now or smarter to wait.

The simple answer is it’s up to Ryan. How much completely depends on the amount of time, energy, and focus you have to spare.

Having a great team can be the make-or-break factor.

Beginners are starting without the stable of resources that established investors have, and access to a mentor can make all the difference in whether you’re successful with a specific product class or market.

Being in the hottest niche doesn’t matter much if you don’t have a great team to support you.

We recommend Ryan spend some time poking around.

Diversification is great … but it means two markets, two sets of knowledge, two teams.

A single investor can only know a handful of markets really well, so getting well-acquainted with a single market can be a good place to start.

It all comes down to your goals … and passions.

The more you love a market or product type, the longer you’ll stay in the game.

Ryan, search your priorities and keep figuring out what you really want to do. What’s right for you may be honing in on single-family, or it may be finding a mentor to help you get involved in other markets.

Ultimately, the right choice is completely dependent on YOU.

Question: What do I need to know to get involved with a lending deal?

Steven from Havelock, North Carolina got an offer to be part of a private lending deal … but he wants to know how he can educate himself before he says YES … or NO.

Lending deals come in two forms … private loans, or divided private placements.

They all boil down to the same components:

  1. A piece of collateral against which you’re lending.
  2. A borrower to whom you’re lending money.
  3. A servicing process, to collect payments and distribute money to investors.

Although the basic process is pretty simple, it’s become more complicated since 2008. If you’re underwriting the loan, you need to know as much as you can about the following:

  • The management team’s process
    • How they manage and service loans
    • How they deal with default loans
    • What their basic guidelines are for protective equity
  • Projections for how much the market can pull back before the property in question is underwater
  • The debt-to-income ratio … how much income is available to service the loan

If you’re only investing, not underwriting, you don’t need to know every detail … but you do need to know enough to know that the people doing the loan know what they’re doing.

Take a look at the company’s track record, advisors, and business philosophy, policies, and procedures.

Make sure they have a realistic model for getting you a ROI.

And always make sure you have advisors … a smart legal team can tell you in minutes whether a deal is as good as it looks.

Question: Do you have any podcast recommendations?

Robert from Madison, Alabama said he’s obsessed with our podcast (thanks, Robert!) and also listens to Robert Kiyosaki and Peter Schiff.

He wondered whether we had recommendations for other podcasts in line with our thinking and perspective.

First, a caution … don’t seek out a single perspective!

As a real estate investor, you always want to strive to stand on the edge of the coin. Get multiple perspectives and then let those ideas interact with each other.

Peter Schiff and Robert Kiyosaki are absolutely valuable listening, but they don’t necessarily focus on real estate investing. If you’re looking for practical, tactical advice, consider the following:

Almost every real estate niche has experts producing media … if not podcasts, certainly books and courses.

Other wealth-related recommendations include:

We heard of a great technique for reading books, and we think it applies to podcasts too … read three chapters (or listen to three podcasts or so) and see whether the content grabs you.

If it doesn’t, it’s not worth your time!

Question: Do The Real Estate Guys™ provide mentoring services? How do I find a good mentor?

While we’re honored that Grant, from Denver, Colorado, would like to have us as his mentors, The Real Estate Guys™ do not provide individual coaching or mentoring services.

We coach the syndication mentoring club … a group for investors who have gone to our Secrets of Successful Syndication event and have a good baseline for investing and syndication.

That’s it.

However, we think there are lots of great resources out there for coaching.

Interested in a specific product type? Experts like Gene Guarino can coach you in residential assisted living. Other experts can help with everything from apartment buildings to commercial spaces.

Our recommendation … figure out what kind of help you really need.

Do you want someone to make you stick to deadlines and goals? Someone to give you practical resources? Someone to help you make connections?

Once you’ve identified your needs, take a look at who’s out there and do your research. Check in with former students to see if there’s evidence the program was successful.

Question: Do you have any tips on lifestyle investing in the Mediterranean?

Bob lives near dark and stormy Seattle. He and his wife are nearing retirement and want to spend their winters somewhere warmer … preferably the Mediterranean.

They’re looking for a part-time vacation home, part-time rental situation.

He asked whether we had any tips on researching the cost, feasibility, and process for buying a property in this region.

Unfortunately, we don’t have a lot of experience in this specific part of the world.

But we do have a lot of experience investing all over the world … enough to know that legal structures vary incredibly from jurisdiction to jurisdiction.

The key to success? Always get plugged in with someone who knows the market from a local point of view.

It would be a smart idea for Bob to plan a vacation … narrow down his interests to a specific market and work on making strategic relationships while he’s over there.

Yes, we just recommended a vacation!

Bob also needs to work on building a legal and tax team in the U.S. to deal with sometimes complicated foreign legal structures.

The short answer … worry more about acquiring relationships than acquiring knowledge.

Questions: Belize, Belize, Belize!

We had three listeners ask questions about our Belize Discovery Trip.

Travis, from Maple Grove, Minnesota, wondered whether investors have to be extremely wealthy to invest in Belize.

Along the same lines, Brad, from Bakersfield, California wanted to know the type of investments typically available in Belize … and whether potential investors can work around lack of available financing.

We believe there is a ton of opportunity in Belize … and you don’t have to be über wealthy to take advantage of it.

Belize doesn’t offer traditional bank loans. So investors have a few options.

One option is to go in on an investment with a group.

Another is to refinance a property you own in the U.S. and use the equity to fund a deal in Belize.

No matter the route you choose, be smart about it. Understand the supply and demand dynamics.

Ask yourself exactly what you want … whether it’s lifestyle, cash flow, asset protection, equity, or something else … then visit Belize and see whether the market will help you achieve your goals.

If the answer is YES, the next step is to build a team … and you can do that by joining us on our field trips and getting to know the people who will help you put together a great deal.

Our third question about Belize took a slightly different tack … Craig, from Rosemount, Minnesota asked whether an IBC is the only corporate structure two parties would need to go in on a deal together.

This is a legal question. And we’re not legal advisors.

But we can tell you that although people often use entities to buy properties in foreign coutnries, it’s perfectly acceptable to own property in your name.

If you do use an IBC, you’d have to use an IBC from a different country. IBCs can’t be used to do business in their country of origin.

The bigger question is making sure you understand what you’re trying to accomplish, why you’re doing it, and what the possible ramifications are.

Do your homework. You don’t want to learn a lesson by making the wrong mistake.

Yearning for more in-depth information about IBCs, financing, and buying in Belize? Come on our field trip!

Spend time with Robert and other investors, build relationships, investigate the market, and enjoy all Belize has to offer for three and a half days.

We guarantee you’ll learn something … and have fun too!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Certainty in an uncertain world …

It’s been said the only thing certain in life is death and taxes.

Of course, properly structured and well-advised real estate investors can usually mitigate most of their taxes. 

Meanwhile, before people die, they live.  Along the way, they get older.  And as people age, their needs change …

… and because entrepreneurship is about serving needs, it’s a safe bet there’s some opportunity in meeting the needs of aging people.

In a recent radio show, we talked about investing in undeniable demographics … specifically, the baby boomers … who are moving into retirement and beyond.

A few days later, this headline popped up in our news feed:

More Growth Ahead in Seniors Housing – NREI August 16, 2017

“… research shows continued confidence in improving fundamentals …”

 Of course, if you’ve been following The Real Estate Guys™ for any time, you know senior housing in general … and residential assisted living in particular … is a niche we REALLY like.

The article affirms our belief that …

“ Demographics continue to be a big driver for development.”

“ ‘As active as the market is with the product that we have today, we are looking at the tip of the iceberg in terms of boomers hitting retirement age,’ says Scott Stewart, a managing partner at Capitol Seniors Housing, a private equity-backed real estate acquisition, development and investment management firm based in Washington, D.C.”

‘The fast-paced growth of that population in that sector is going to make today’s discussion of overbuilding obsolete, because there just aren’t enough places for everybody today,’ ” he says.”

 The article is addressing … diffusing … concerns about over-building in the niche …

“ Demand mops up new supply.”

“Despite the new supply coming online, respondents remain confident in improving fundamentals. A majority of respondents (78 percent) anticipate that rents will rise over the next 12 months …”

Other notable comments include …

“When asked to rate the strength of market fundamentals by region, the South/Southeast/Southwest rated the highest.”

“When comparing with other property types, respondents continue to rate seniors housing as a highly attractive property type. Its scores topped that of the five major property types on a scale of one to 10.”

Okay, so it’s probably clear there’s some real opportunity here. 

But if you’re a Mom-and-Pop investor, does it make sense to jump into a niche that’s attracting big players … or are you just cruising for a bruising?

No … and YES!

When you invest in housing for seniors it’s critical to understand the difference between a high-density community and a residential facility …

… and not just from the investor’s perspective, but from the resident’s perspectve.

Let’s start with the resident …

 There are some seniors … probably MOST … and their children (the decision makers in many cases) who’d rather see Mom or Dad live in a real home …

… in a tree-lined residential neighborhood, with a backyard, and neighbors … where residents don’t feel like inmates in an institution.

Please understand … we’re not slamming the great people or services provided in bigger facilities. 

We’re just saying from a senior’s perspective, having a room in a home in a regular neighborhood FEELS a lot different than living in a room at a campus for old people.

But for a BIG investor, those individual homes are a logistical problem. 

To move BIG money, you need economies of scale and the ability to buy or build a lot of inventory at one time.

It’s the same problem Warren Buffet alluded to when he told CNBC …

“I’d buy up a ‘couple of hundred thousand” single-family homes if I could.”

The challenge, as noted in this Forbes article about Buffet’s statement, is …

“… the cost and logistics of making such an investment in large enough size to move the needle for Berkshire Hathaway is prohibitive.”

The point is big money can’t play well at the single-family residential (SFR) level …

… even if the SFR’s are being converted into highly-profitable residential assisted living facilities.

But YOU can.  And that’s why we like them.  Think about it … 

The supply and demand fundamentals are solid. 

The priority for expenditure is near the top of the list for any family.  Taking care of Mom or Dad is far from a discretionary purchase …

… so as an investor, being that far up your tenant’s payment priority ladder is a much safer place to be in uncertain economic times.

Plus, much of the money to pay you comes from insurance, government, and the senior’s estate.  In other words, you’re very likely to get paid … even in a weak jobs and weak wages economy.

Also, you don’t have to compete with big money investors, even though they clearly see the opportunity and are moving into the space. 

That’s because the barrier to entry for the big money isn’t how MUCH money is needed … it’s how LITTLE is needed.

Meanwhile, the customers would rather live in YOUR product than big money’s product.  So while big money is adding to supply, they’re not really in your niche.

This is a BEAUTIFUL thing.

But it gets better …

Residential assisted living homes can’t be mass produced.  They need to be built or converted one at a time.  There’s very little threat of a big player glutting the market.

And taking lessons learned from watching hedge funds move into the SFR space … big money was only able to acquire tens of thousands of SFRs because huge blocks of inventory were available temporarily through mass foreclosures. 

We don’t think there’ll be mass foreclosures in residential assisted living facilities.  They’re way too profitable.

But because this kind of senior housing is in high demand and highly profitable, at some point big money will start assembling them …

… buying up groups of homes from multi-facility operators … and then buying up nearby individual facilities which can strategically integrate into existing operations.

It’s called consolidation … and when it comes, big money will bid up existing operations (creating equity for those already there) …

… because they can recover the “over-payment” through operational efficiencies and financial leverage.

Between now and then, for the street level investor, the big opportunity is to be part of building the inventory by converting homes into residential assisted living facilities …

… cash-flowing along the way … then one day cashing out to big money players. 

And if those big money players never show up … just keep on cash-flowing while providing a much needed service to the community.

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

The Case for Entrepreneurship

Entrepreneurship is not for everyone. Being your own boss can be intoxicating and lucrative, but there’s a lot of work that goes into building a business.

The holy grail of being successful as a real estate investor is passive income. But to reach that goal, you have to come up with enough capital to feed your portfolio.

The typical path for an investor might be to work for someone else while saving and investing in real estate on the side, building a portfolio steadily and slowly until they reach a tipping point.

But for our guests, entrepreneurship offered an out from the rat race. Of course, it wasn’t an overnight process for either guest.

Listen in to hear us chat with two successful entrepreneurs about their paths to success … and the stumbling blocks they’ve encountered. These guests embody the maxim “Be more, do more, have more.”

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your entrepreneurial host, Robert Helms
  • His slightly eccentric co-host, Russell Gray
  • The original Shark Tank shark, Kevin Harrington
  • The Real Asset Investor, Dave Zook

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Getting his start with a creative solution

Kevin Harrington is credited with being the pioneer of long-form infomercial programming. That’s right … he invented a now-ubiquitous form of advertising.

We asked him how he got his start.

In the 80s, Kevin was watching Discovery Channel when he discovered the network went black for six hours a day. He saw an opening in the market … and started making 30-minute long-form advertisements to fill the space.

He’s a great example of someone finding a need in the market and monetizing it.

At the same time, Kevin was working to raise the profile of his own personal brand. That meant creating tons of material, appearing on talk shows, even writing books.

Eventually, Kevin got a call from Mark Burnett, the producer of Survivor, asking Kevin to be a part of Shark Tank.

Since then, Kevin’s built a global brand in marketing and investing.

Embracing change and failure to find success

We asked Kevin four questions about how he maintains success … and how newbies can find success too, despite inevitable failure.

How have your marketing techniques transformed with the profusion of modern media?

In a world with many diverse media sources, Kevin noted that television viewers are down by 50% today.

His solution is simple … “Follow the eyeballs.”

His audience is now on Facebook, Instagram, media streaming services … the list goes on.

To stay current, Kevin’s branched out into social media. He started using social media influencers and shortening ad times.

To be successful, an ad has to catch a viewer’s attention in the first five to eight seconds … much different than long-form infomercials.

It’s a different selling strategy, in different venues.

What is your business model?

Kevin told us he aims to invest in 20 projects a year, but only expects one-quarter to one-third of those to be successful.

“I fail more than I succeed,” he said. His goal is to “Fail fast, fail cheap, get the losers out of the way, and focus on the winners.”

He might lose $20,000 on an investment … but the winners bring in millions.

He finds inspiration in the quote, “Success is going from failure to failure with no loss of enthusiasm.”

What do new entrepreneurs need to focus on?

Kevin gave two great tips for budding entrepreneurs:

  • “Failure is part of your day to day.” Kevin told us that early on, “It really brought me down to put so much time, energy, and money into something that bombed.” But beginners NEED to know that failure is part of the game. Failures can pave the way for success, so dust yourself off and keep getting back on the horse.
  • “Surround yourself with a great dream team.” Kevin can do deals on the spot because he has a team of experienced lawyers, finance gurus, and mentors to back him up in every situation. Having a good team ensures you get paid the way you want to get paid. And Kevin sees too many entrepreneurs trying to do it all on their own. Success is a team effort.

How do you say no to ventures that might be good?

A key component of Kevin’s work is investing in entrepreneurs. He gets exposed to a LOT of ideas … so we asked him how he can pass up ventures that are pretty good, but not do-a-happy-dance good.

“I try to ask how I can help. I try to be involved,” Kevin said. He spends a lot of time providing advice and mentoring services to entrepreneurs who aren’t quite there yet.

“If you want to be successful and get what you want, just help enough people get what they want,” he said.

And Kevin does just that, spending equal amounts of time growing his own business and giving back to society by mentoring new entrepreneurs.

Breaking paradigms with syndication

Many people are under the impression that there’s only one path to building wealth through real estate investment … slowly building capital and buying properties one at a time until you’ve eventually accumulated enough.

Syndication breaks that paradigm, because the money you use to invest doesn’t have to be YOUR capital.

Dave Zook got started in syndication when he attended our Secrets of Successful Syndication event.

Dave was a published author and owner of several small businesses when he decided he wanted to dip his foot into syndication. He’s now raising millions of dollars each year to fund syndication deals.

For Dave, success means having his fingers in a lot of different pies. He recently invested in an office space that came onto the market at the right time, in the right place.

He’s also made a name for himself in the ATM business … a growing real asset.

Dave’s passive investors purchase the physical asset … the ATMs. Dave contracts with the land and business owners on whose property the ATMs sit. He also contracts with a management company to manage machines for investors.

ATMs offer both good cash flow and great tax benefits. And they are completely passive.

Dave’s investors get blended returns that are stable from month to month and dependable for a 7-year contract. And they get tax benefits when the assets depreciate after 5 years.

All investors have to do is sit back and watch.

Dave’s tried a lot of business ventures. He finds success in going ahead with the ones that are right for his situation and experience, and right for the market.

“Sometimes I have to pinch myself,” Dave told us. “It’s been an interesting journey.”

Dave will join us this year as faculty as Secrets of Successful Syndication … his way of giving back to a community that’s got him where he is today.

Just like Kevin, Dave’s been through highs and lows and come out the other side. He’ll share what he’s learned … and how you too can take action.

Want a preview of Dave’s wisdom? Interested in learning more about ATM investing? Listen in to get access to a special report Dave compiled just for our listeners!

Affording to lose and losing to WIN

Not everything these excellent entrepreneurs did worked.

In fact, many of their ideas failed. For Kevin, the majority of ventures STILL DO.

It’s a lesson to entrepreneurs … you need to be able to afford to lose.

Not everyone is cut out to be an entrepreneur. We can testify that entrepreneurs are wired a little differently.

They have to make opportunities where others just see dust and ashes. And that can be terrifying.

But it can also be exciting.

Whether you choose to be an entrepreneur or invest in one, entrepreneurship is what makes the world go ‘round.

Well, not literally … that’s gravity! But it does run the economy and create most jobs, and we think that’s pretty doggone important.

Until next time, go out and make some equity happen!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

North Korea and you …

With so much craziness in the world, we thought we’d consider what it might mean for real estate investors.

After all, why should paper asset investors get all the thrills of global instability?  Real estate investing might be stable, but it doesn’t have to be boring!

Biggest sword competition …

You may have heard that U.S. President Trump and North Korean Supreme Leader Kim Jong-un recently publicly compared sword sizes.

Since both the U.S. and North Korea are nuclear powers … this has the world understandably jittery.  Though things seem to have calmed down the last few days.

Still, geo-political jitters usually amplify the two basic emotions of investing … fear and greed.

Scared money tends to flee to “quality.”  (Trapped money flees to Bitcoin … but that’s a different discussion …)

Frightened investors are more concerned about preserving capital and purchasing power (which aren’t necessarily the same thing) … than making a profit.

For much of recent history, a flight to quality meant piling into the U.S. dollar and U.S. bonds.

But with another debt-ceiling debacle on the horizon, record debt at every level, pensions in crisis, huge unfunded liabilities, and an economy sending very mixed messages …

… it’s not inconceivable the world might not continue to see the U.S. dollar and bonds as the financial fallout shelter of choice.

Meanwhile, greedy money tends to focus on front-running the scared money, and buying up the scared money’s abandoned assets at bargain basement prices.

As for real estate investors …  we sit on the sideline munching popcorn and collecting rent checks.

But that doesn’t mean there aren’t risks, opportunities and lessons for real estate investors to learn from all the drama.

War is expensive …

We recently discussed the potential shift from “monetary” stimulus (cheap money funneled from central banks to the financial markets) …

… to “fiscal” stimulus (government spending funneled into the economy on infrastructure and military spending).

Now we’re not saying Uncle Sam is purposely pursuing war to stimulate the economy.  That would be far too cynical for two happy-go-lucky real estate guys.

But IF more war happens, it’s sure to be expensive.  And because Uncle Sam already operates at a deficit and has no savings (technically “broke”) … it means a lot more borrowing.

The big question is … from whom does Uncle Sam borrow?

This matters because whom Uncle Sam borrows from to pay for more war … and how it’s done … will probably impact asset prices and interest rates.

Watch your monitors …

If Uncle Sam issues bonds (borrows) and the bids are soft, interest rates rise.  It also says something about the way the world views the dollar (not good).

Of course, this means rising interest rates in the whole swimming pool … including good debt (your mortgages) and bad debt (your tenants’ credit card and car loans).  Either or both of those affect your bottom line.

Another sign confidence in the dollar is declining will be a spike in gold prices.  

If gold catches a bid, it could mean scared money would rather hide in a barbarous relic with no yield … over stacks of paper with pictures of dead people printed in green ink.

(Not sure how green paper is less useless than yellow metal … but that’s a different debate …)

But if big money prefers gold over greenbacks, it’s a clue about the direction of the dollar.

And assuming your assets, liabilities, and income are all denominated in dollars, we’re guessing the value of the dollar is of interest to you … or should be.

Pre-emptive strike …

So what do you do when you don’t know what’s going to happen?

Here are some things to think about …

Uncle Sam already has a huge debt problem.  Another war doesn’t change anything … it just speeds it up.

In the short term, a flight to quality could be temporarily good for the dollar and drop rates by creating demand for both dollars and bonds.

If rates fall for a season (and even if they don’t … they’re pretty low right now), it might be a great time to back up the truck and load up on lots of good debt … and use it to acquire assets that conservatively yield more than the cost of the loan.

That’s effectively going “short” the dollar based at a time of temporary strength.

You can also go a little further short by adding some gold to the mix.  But remember, gold isn’t about profit … it’s about preservation of purchasing power.  

Sure, a falling dollar causes gold to go “up” in dollar terms, but so does everything else, so more dollars doesn’t put you ahead … it just keeps you from falling behind.

Side note …

If you’re not really sure about gold or how it fits into what you’re doing, join us when we speak at the New Orleans Investment Conference in October.   

Some of the biggest brains in precious metals and resource investing will be in New Orleans … along with our friends Robert Kiyosaki, Simon Black, Peter Schiff and Simon Black.  It’ll be like an Investor Summit at Sea™ reunion!

Back to our story …

Something else to consider carefully right now are the markets you’re invested in … because the idea of “flight to quality” applies to real estate markets too.

People and businesses will move to where they can get a better life at a better price.

We like affordable markets in low tax, business friendly, fiscally sound states …

… places with good infrastructure (transportation, utilities, medical, education, resources), strategic location (distribution, travel hub, geographic amenities), and diverse economic drivers.

Also, take a look at your current debt and equity structure.

It might be wise to harvest excess equity and lock in low long-term rates on properties you’re committed to owning long term.

You can then use the proceeds to pick up additional properties in growth markets … or add some cash, precious metals, or high-yield private mortgages to add some diversification into your portfolio.

Stay calm and invest on …

It’s easy to freak out when the world is weird.  But it’s been weird before and it’ll be weird again.

Meanwhile, unlike so many other styles of investing, real estate allows you to hedge most probable outcomes.

Plus, there’s the time-tested assurance that virtually every major power player in the food chain has a vested interest in supporting real estate.

No one wins when real estate loses … and even as we learned in 2008 … if a bomb goes off in real estate, the powers-that-be move heaven and earth to fix it as quickly as possible.

Sure, there’s risk.

But it’s risk that’s largely understandable, reasonably mitigated and … so long as you’re structured to weather the occasional economic storm …

… real estate is arguably the most stable and easily operated investment vehicle available to everyday people.

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Clues in the News – Housing Sales, Home Improvement and Foreign Investors

Every real estate investor is afloat in a vast economic sea. As an investor, it’s easy to believe you’re on stable ground … only to wake up and find you’ve drifted far from your goals.

We believe SMART real estate investors (you!) have to act a bit like ocean biologists … tracking the winds, noting the undercurrents, and keeping detailed observations of the environments you find yourself inhabiting.

One way to take your notes is to read the news. And in this edition of Clues in the News, we bring the news to you! Listen in to hear from:

  • Your economic sea biologist host, Robert Helms
  • His lowly research assistant, Russell Gray

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Slumps in home sales, builder confidence

This is a trend we’ve been observing for a while … existing home sales are decreasing. In June, they dropped 1.8% to the second lowest level this year.

If we stopped right there, you might think the economy is in trouble because people aren’t buying houses. But let’s take a closer look.

While sales of homes overall are dropping, the median home price in June was $263,800 … 6.5% higher than the same time last year.

All housing types aren’t equal. While prices are rising for houses in the 250k+ category, they’re falling for homes under 100k.

Just further evidence, like Robert Kiyosaki says, that the rich are getting richer while the poor are getting poorer.

The article linked above quotes Lawrence Yun, NAR chief economist, who says, “The demand for buying a home is as strong as it has been since before the Great Recession.”

So why are home sales dropping?

Many factors could contribute to a slow market … the growing number of millennials with high debt and inadequate income, for example. And the flux of institutional investors entering the real estate market.

Severe housing shortages are also leaving folks on the sidelines.

While the average median home price has risen, the median price of a new home has dropped by 3%.

Homebuilder confidence in recent months has reached record lows … leaving buyers hoping for a new home in the lurch.

If you look at the stock market, it would be easy to believe everything is peachy. But look at homebuilders … and you’ll see an indicator that not everyone has a bright outlook right now.

Fewer new homes, more home improvement

Speaking of homebuilders, housing inventory is at a 30-year low.

This while home prices have risen to pre-crisis levels in most markets (and far higher in a select few).

It’s a conundrum. Why are homebuilders moving at a snail’s pace? Why is homebuilder confidence so low?

Take a look at capital markets, and you’ll get a partial answer … real estate is heavily dependent on financing, and while the markets may have recovered from 2008’s recession, banks are still wary about giving loans.

In addition, 78% of homebuilders complain that labor shortages are their No. 1 concern.

Reliable, skilled labor is difficult to find. One reason? Construction workers found different careers during and after the recession … then never returned to the home-building business.

In lieu of buying new homes, homeowners are instead spending record sums on home improvements.

According to an article in the Wall Street Journal, “A shortage of new single-family homes across the U.S. is pushing up prices and locking many buyers out of the market.”

Note the certainty in that statement? Reporters are quick to assign cause and effect.

It’s your job to look at the bigger picture and see what’s going on. Then reexamine the conclusions made in the news … and draw your own.

Sales to foreigners up, buyers and sellers struggle outside U.S.

While home sales overall are down, Forbes reports that foreign investments in U.S. properties have skyrocketed recently. Sales to foreigners are up 49% over last year.

If you’re a U.S. investor familiar with the current political situation, you may be wondering what these investors are thinking.

But think about it … the U.S. has strong property rights, lots of renters, a relatively stable government, and strong infrastructure.

Buyers from China and Canada want to move their cash to a place where they see a better long-term future … and the U.S. fits the bill.

Speaking of Canada, a model produced by Better Dwelling predicts that Canadian home prices still have farther to fall.

Canadian real estate markets started crashing when the Canadian government made policy changes that hinder foreign investment.

It’s a lesson for investors to look at both the economics and the politics of a situation … then align themselves financially to policy decisions for the smartest payoffs.

You also need to be aware of the data … and what that means in terms of rising trends. While the Canadian housing market is struggling, lonely urban centers are predicted to be the next big real estate trend in the country.

While our friends across the border are seeing home prices fall drastically, our friends across the pond are seeing a dearth of affordable housing. 

An article we found recommends the London government lower tax rates for new homeowners and suggests 100% mortgages as another option.

The alternative is that London will see a “brain drain” as young workers unable to find affordable housing move outside of London.

This is a problem in the U.S. too, as large companies seek to find locations where workers can afford decent housing and quality-of-life measures are high.

The good thing about problems? (And there is a good thing.) If you’re creative, a problem is only an opportunity to create a solution.

Businesses and people need good places to live. Real estate markets have the opportunity to create them.

Homelessness and hedge fund managers

A recent article in Bloomberg listed the cities where rent hikes leave the most people homeless.

The bottom line is markets with less slack see more homelessness. The message for you? Slack is good.

It’s crucial for you to dig into your local market and figure out the dynamics driving outcomes. Many things can put a squeeze on your bottom line … make sure you’re aware of current and potential trends in demographics, jobs, and the local economy.

Winning markets don’t require a good economy to stay viable. They allow you to stay profitable even when factors change and be the recipient of demand when other markets are struggling to keep prices down and renters happy.

Remember, when you invest in the rental marketplace, you’re getting into a long-term contract. But a stable one.

Stability is probably one of the big reasons hedge fund managers and other wealthy investors are making a break for real estate.

They see the opportunity for a safe haven … but most don’t want to get their hands dirty. If you do, you may find doors opening for you.

Tune in to our next episode to hear an amazing guest make his case for entrepreneurship.

Until then, go out and make some equity happen!


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Investing, infrastructure and you …

Timeless real estate wisdom says three things matter most when deciding what to buy … location, location, location.

It’s tongue-in-cheek, but the point is real estate derives its value from demand.

The key is choosing properties most likely to surge in demand relative to supply.

Of course, deciphering supply and demand means looking at demographics, economics, migration, and the potential for increases in supply.

The concept is simple.  But understanding actual market dynamics is more complex.

Still, it’s worth the effort because real estate investing is about buying and holding a property for the long term.

And even if your time horizon is shorter, you still need new buyers coming into a market to take you out.

So getting the market right matters a lot more than simply making sure the property’s free of termites and the plumbing works.

When it comes to residential rental real estate, some major demand factors are jobs, affordability, and quality of life.

Sure, everyone would LOVE to live in Tony Stark’s mansion in Malibu … it’s got a GREAT location and is low in supply.  But it’s not affordable.

And with so many retail jobs being automated or Amazoned … and manufacturing jobs still more off-shore than on …

… what kind of jobs and geographies offer the kind of growth potential likely to support working class folks?

We’re keeping our eyes on infrastructure for clues.

Both the Obama administration and now the Trump administration have said U.S. infrastructure needs attention.

It’s not a blue or red only issue, so maybe something will really get done.

We’ve commented before on Trump’s plan to spend a trillion dollars on infrastructure … and though it may seem to have fallen off the radar, infrastructure might be making a comeback.

First, even though the Fed backed off on the last rate hike, they’re still talking about reducing their balance sheet.

That’s code for tightening “monetary stimulus”.

This puts pressure on President Trump and Congress to fire up some “fiscal stimulus” … which is code for good old-fashioned government spending.

And while the military is quite likely to be on the receiving end of a chunk of it, we think some funding will probably find its way into infrastructure.

Of course, we’re not the only ones paying attention to this possibility.

Check out this headline from Bloomberg …

Buyers Bet on Infrastructure, With or Without Trump

The article is about one big company buying up another big company to get in position to feed off government spending on infrastructure.

“This rush to get positioned for an infrastructure-spending boom is a striking contrast to the stalled progress in Washington on legislation of any kind, let alone Trump’s proposed $1 trillion infrastructure plan. But like the private-equity firms raising buckets of money for infrastructure-focused funds, industrial firms are wagering the country’s roads, bridges and sewer systems have gotten so bad they can’t be ignored for too long.”

Of course, the big question for real estate investors is … where???

Some clues can probably be gleaned from the prospectuses of the private-equity and industrial funds … all of whom are presumably spending considerable resources on researching their mega-investments.

But there are also clues in the news.

The New York Times published an article claiming Trump Plans to Shift Infrastructure Funding to Cities, States and Business.

More recently, Reuters reports U.S. Construction Spending Falls as Government Outlays Tumble.

U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002 … The decline pushed public construction spending to its lowest level since February 2014.”

So even though Uncle Sam wants to spend money on infrastructure, they’re not doing it in earnest … yet.

But think about this …

Big companies and private-equity funds are getting positioned for big infrastructure spending.  They expect it to happen.

President Trump says he wants to spend a trillion dollars in infrastructure.

We can’t imagine Congress not wanting to spend money.  It’s what they do best.  Then again, getting anything done is what they do worst.

But everyone seems to agree infrastructure is in bad shape. And we’re guessing some places are in worse shape than others.

So like the big players, we think at some point, the need is going to force the spending … ready or not.

Now if the Feds don’t pay … or if Trump puts more responsibility on the states … it seems like those states which already have the best infrastructure … or the best economic ability to build or improve it … will have a big advantage.

And because we’re always looking for an advantage, we decided to look up those U.S. states in the best fiscal shape.

Not surprisingly, several of our favorites are in the top ten …

  1. North Dakota
  2. Wyoming
  3. Texas
  4. North Carolina
  5. South Dakota
  6. Vermont
  7. Tennessee
  8. Indiana
  9. Utah
  10. Florida

Of course, when picking a market to invest in there’s more than just fiscal strength.

Affordability, market size, business and landlord friendliness, quality of life … and your boots-on-the-ground team … are all important considerations also.

Nonetheless, with record levels of debt at every level, rising healthcare costs, pensions in crisis, and fiscally cancerous unfunded liabilities growing daily …

… we think companies and governments in relatively good financial shape are best positioned to make critical investments, gain competitive advantages, and attract an unfair share of population and business.

The goal, as Wayne Gretzky says, is to skate to where the puck is going.

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Pig in a Python – Investing in Undeniable Demographics

There are three undeniable certainties in life.

We are born. We live. We die.

We don’t have control over the birth and death part, but we can decide how we want to live.

In this episode of The Real Estate Guys™, we have invited Gene Guarino to teach us his secret solution to the age-old problem of, well … aging. Gene won’t be sharing secrets about erasing wrinkles, but he will teach us how to invest money wisely by following one undeniable demographic — the Baby Boomers.

Gene has trained thousands of investors and entrepreneurs about how to invest in and operate Residential Assisted Living homes. And today Gene is teaching us how the baby boomer generation can bring a financial boom to your bank account.

Listen in to the show today to hear from:

  • Your timeless host, Robert Helms
  • His hopefully-on-time co-host, Russell Gray
  • Founder and CEO of Residential Assisted Living Academy, Gene Guarino

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Mums the word

Gene Guarino started looking at his finances and his family a little differently years ago when his mother was getting older and needed more daily assistance.

Typically when families decide to move aging parents into care centers, they think there are only two options:

1) high-end, budget breaking assisted living communities or

2) government-subsidized centers with too many tenants and not enough staff.

When Gene started looking at the big-box care centers, he wasn’t too impressed. He wanted his mom to feel at home. He wanted her to feel like she was part of a close-knit community.

And that’s when he had his ah-ha moment.

In order for his mom to feel at home, she actually needed to be in just that … a home!

Many assisted living centers for the elderly are large structures housing anywhere from 100-500 residents. This hardly makes it easy to feel connected to your community.

Gene does assisted living differently and he’s teaching thousands to do the same.

The waves of change

Gene has a little nickname for the impact the Baby Boomer generation is going to have on just about everything from real estate to health care. He calls it the “silver tsunami.”

“You can’t argue with the demographics,” Gene says. “We are talking a demographic shift that is undeniable. There are elderly citizens in every state. You can make money doing this anywhere.”

So what exactly is Gene doing about the silver tsunami?

He invests in regular houses, makes a few key renovations, adds in tenants, staff, and caregivers … and just like that, he goes from landlord to business owner.

The philosophy of Residential Assisted Living appeals to Gene’s customers because they feel comforted that grandma or grandpa will be living a normal lifestyle.

And it appeals to Gene’s personal philosophy to “do good and do well.”

“We always have to remember that our tenant is not actually our customer,” Gene says. “Our customer is who we like to call ‘Daughter Judy.’ In other words, the tenant’s children who are looking for a clean, safe, happy home where their beloved parent will be well cared for.”

Home sweet home

Care and accommodations are crucial to the business model’s success. The average Residential Assisted Living property will house 10-12 residents. Living spaces such as offices and dining rooms can be converted into bedrooms.

Each state has their own rules regarding things like occupancy and structural regulations.

“We have to remember this is a home, not a hospital,” Gene says. “So it needs to feel comfortable. An ideal property to convert would be a single-level ranch style house divided into 300 square feet per resident.”

Over the years, Gene has found that some areas are better than others for Residential Assisted Living. As with all real estate it’s always about location, location, location.

Gene prefers to stay away from HOA neighborhoods because although they can work for the facility, they sometimes cause a little more headache than needed.

“When selecting a location, think about the community,” says Gene. “Don’t buy the property first with the intent to fill it up. First find your tenants and they will lead you to the prime real estate.”

The learning curve

This style of assisted living is new. It’s innovative. Gene started traveling uncharted territory, but he’s now the expert tour guide anxious to get new recruits onboard.

Each year Gene personally hosts the Residential Assisted Living Academy where individuals can learn the business model, tour properties, and speak to field experts and first-time owners.

This three-day, intensive course benefits the students because they can dive right in to see what life is like as a landlord and business owner.

Once finished with Gene’s courses each graduate has the confidence, systems, resources, and support to successfully operate their own Residential Assisted Living business.

Interested in seeing the possibilities for you?

Click here to learn more about Residential Assisted Living Academy Training.

As we like to say … go make some equity happen!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Waiting for the next recession …

Like waves on the beach or the rising and setting of the sun … the ebb and flow of the infamous “business cycle” is something every entrepreneur and investor must navigate.

The marketplace is fluid and dynamic.  There are no lane lines or guard rails.

More importantly, there is no singular cycle because there is no singular market.  As Jim Rickards says … it’s a complex system.

At our last Investor Summit at Sea™, Fannie Mae’s chief economist Doug Duncan warned the current economic expansion is one of the longest on record.

The odds, Duncan says, are high another recession is around the corner.

And as we’ve noted before, 10 of the last 13 times the Fed embarked on a rate raising program … the result was recession.  So …

Should real estate investors wait for the next recession to add to their portfolio?

The answer is … it depends.

That’s because it’s probably not smart to apply a one-size-fits-all simple strategy to an investing question about a complex system.

And even trying to “narrow” the question down to “real estate” is still complex.

After all, “real estate” covers a lot of ground (sorry, couldn’t help it) … in terms of geographic markets, property types, teams, available financing, and specific deal terms.

Common sense says if you look at enough deals, you’ll probably find a good one … in any cycle … because every real estate deal is unique.

So macro conditions are interesting for deciding which markets to shop in, but less so for deciding whether or not you want to find a deal.

Because if you won’t even look because you’re waiting for a macro-sale, you might miss a micro-sale… and find yourself sitting out much longer than you planned.

Remember, you can’t profit on property you don’t own.

Markets get hot for a reason …

When a real estate market gets hot, it’s because buyers are bullish about the future.  Sometimes they’re wrong, but often they’re right.

Local real estate markets are driven by local factors … the local economy, local tax and business policies; local infrastructure, weather, amenities and population trends.

When LOCAL factors are positive, LOCAL real estate prices and rents rise.  Sometimes in sync.

But sometimes, prices get ahead of rents.  Cap rates (rent ratios) fall.  Investors are willing to pay more for the same income in that market … for a reason.

And in a recession, the problem can actually get worse.  In other words, it’s not unusual in hard times for quality markets to become even MORE expensive.

That’s because when clouds form … or it starts raining … money seeks shelter in quality.

So strong markets and property types often attract MORE capital in uncertain times … thereby raising the price to acquire safe haven assets.

As we discussed last time, Americans and foreigners have already shown a strong preference for U.S. real estate … housing in particular … even as stock markets are raging to record highs.

Royal flushes are rare …

When a macro-event comes and slaps down the national or global economy, sometimes great markets get caught in the downdraft.

This happened in 2008 and it created some of the best buying opportunities since the real estate bust of 1989.  For those who were in position when it happened and acted, it was awesome.

But think about that.

If you missed buying the bargains coming out of 1989 and sat out waiting for the next real estate recession, you’d have been on the sidelines for nearly two decades.

Meanwhile, lots of people made lots of money in real estate … without getting the bargain of the century on every deal.

Pigs get fed.  Hogs get slaughtered … or starve.

This variation on an old investing adage still rings true in today’s investing climate.

The idea is there’s danger in getting greedy.  It’s about being overexposed to a market top, and taking on a lot of downside risk trying to squeeze out a little more upside gain.

But it’s also true about waiting … and waiting … and waiting … for the BIG correction, so you can swoop in and gobble up distressed assets for pennies on the dollar.

Remember … you can also strike out by standing at the plate waiting for the perfect pitch.  It’s usually better to swing.

What are YOU waiting for?  

A PIG is a Passive Income Generator … like rental real estate.  It’s the kind of asset which actually attracts capital in a recession.

That’s because when asset prices are uncertain, income is reassuring.  And as prices of stocks, bonds, commodities, and currencies go up and down like a roller coaster …

… working-class people ride the merry-go-round of getting up and going to work every day to pay their rent.

And if they don’t, you can replace them with someone who will … IF you’re in a market and product type with solid supply and demand dynamics.

To be there, you may have to pay a premium for quality.  The deal still needs to make sense, but it doesn’t have to be cheap to be a bargain.

“Bargain” is a relative term … and price is only ONE component.  There’s more to value and desirability than just price.  Few people want the cheapest brain surgeon.

So long as the market, team, property, and deal make sense … meaning you’ve got staying power to ride out a recession if it comes …

… then you can sail through the business cycle riding a PIG.  It’s not sexy.  But it’s better than starving or getting slaughtered.  You can score a lot of points with base hits.

Until next time … good investing!


 More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.