Bitcoin, gold, oil, stocks, real estate, and popcorn …

It’s hard to watch the financial news these days and not get the feeling the fragility in the financial system we’ve been concerned about … is starting to show.

We grew up in California and learned as kids how to react to an earthquake …

Get away from glass and hide under the shelter of a desk or doorway … because stuff was probably going to start falling.

Fragile things shatter in an earthquake.  They can’t handle the pressure.  The key to safety is to get to the sturdiest parts of the structure until the shaking subsides.

Of course, when it’s clear and bright … the windows are the most fun.  You can bask in the sunshine of hope and opportunity.

But when the foundation is shaking, it’s time to find shelter … FAST.

You’ve probably noticed stock prices slipping.  Even the fabled FAANGs (Facebook, Amazon, Apple, Netflix, Google) are ALL now in bear markets.

So what?  After all, we’re real estate investors.  What do we care about stocks?

We don’t.  At least not directly.  But all these markets are like gauges on our financial dashboard … and when they start flashing red, it’s wise to investigate.

This is a newsletter, not a seminar, but let’s see what we can reason together in the next few minutes about what’s shaking in the financial world … and where it might be headed.

The first place to look is the most important financial market there is … bonds.

Of course, real estate investors should watch the bond market for clues about the direction of interest rates.

But while interest rates are interesting … credit markets are what REALLY matter.

That’s because credit markets both create and price the currency which fuels everything else. 

Credit markets are like the big reactor core in the Star Wars Debt Death Star.  They’re both the fuel source and the weak spot at the same time.

To take the metaphor a conspiratorial step further … credit markets are also the source of the Emperor’s power.

And as Peter Schiff persistently points out … when the original Debt Star blew up in 2008, the Emperor wasted no time in building a bigger, deadlier version.

The obvious implication is the next explosion could be a LOT bigger.

Now in a plain vanilla stock market dip, some (usually innocuous) event spooks highly-leveraged paper traders.  They sprint to the exits … and stock prices fall.

But then they calm down and the next day they’re back out there snapping up bargains.  This “buy-the-dip” strategy has been the name of the game for several years.

But the longer-term downtrend suggests something is different this time.  Perhaps worries the Debt Star is running out of power?

The Bitcoin crowd has been chanting “buy the dip” also … but here too, it seems the Farce is strong … and the downtrend has more gravitational pull than past dips.

Clearly, nervous stock investors aren’t piling into Bitcoin for safety.

Of course, the usual safe space for snowflake stock investors to hide is bonds.

But if gobs of money were pouring into bonds … interest rates would be falling.

While rates have certainly moderated the last few weeks from their upward trend, it’s hardly a serious decline.

So … nothing happening now has us disagreeing with our recent conversation with David Stockman on the direction of rates.

And we certainly would NOT be using short-term debt on tight-cap properties hoping to re-fi to lower rates in a year or two!  If that’s your plan … be careful.

Then there’s oil.  You’ve probably heard the price has fallen.  We’re guessing your tenants like it at the pump.  Businesses too.

Obviously, energy costs … just like interest and taxes … RAISE the costs of operating a business, a household, and an economy.

President Trump’s a business guy.  So to no surprise he prefers ALL three lower … so more profit gets to the bottom line.

But oil … like gold … is MUCH more than just a commodity. 

Both have significant connections to the future of the U.S. dollar … and all three are powerful tools in geo-politics.

Just last year, we pointed out China’s noteworthy moves with both oil and gold.

And just because things are moving slowly, doesn’t mean they aren’t moving.

All that to say … we’ve been paying close attention to this for several years … and it seems to us things are picking up speed.

We keep them on our radar … and yours … for TWO reasons …

First … major financial events often seem to show up suddenly and shock the world … but they usually had a long and obvious (in hindsight) build up.

We’ve learned to look further out so we have more time to re-position.  After all, the blessing and curse of real estate is it moves slowly.

So real estate investors are wise to pay attention to early warning indicators … and then rearrange portfolios to both mitigate risk and capture opportunities.

Second … when economic and financial earthquakes first tremble … it’s smart to seek shelter under sturdy structures.

For that reason, we think it’s likely to see MORE money moving into real estate in search of stability (and tax breaks).

But just because real estate is stable doesn’t mean YOUR portfolio is.

As we learned in 2008, bad portfolio structure crumbles when hit with tremors from a Debt Star explosion.

However, when those market forces clean out weak portfolios, there are bargains galore … for those who are ready, willing, and able to take advantage.

Ironically, consumers are tapping home equity like it’s 2007.  We’re guessing holiday shopping will be solid.  But it won’t make those borrowers wealthier.

Savvy investors are grabbing equity too … and using it both to purchase strong cash flows … and to hold in reserve.

It’s always good to have some cash if market tides turn.

YOUR mission is to be among the aware and prepared … and NOT among the unaware and unprepared.  It could be a good time to increase liquidity.

Are we saying another crash is coming?  No.  But we can’t say it’s not.

Right now, there are tremors.

So while you’re thinking about your goals for next year … including how to invest your educational time and money …

… we encourage you to make getting better educated, better connected, and better structured a top priority … so IF things turn quickly …

… YOU can sit safely inside your reinforced portfolio chomping on popcorn and watching the fireworks.

And if the fireworks turn out to be a dud … you’re really no worse off for being prepared.

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.


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Podcast: Preparing for the Future of Interest Rates and the Dollar

As you know, interest rates have been trending upwards … and they show no sign of stopping.

Interest rates directly affect your real estate investment business … they determine how much you are charged when you borrow money for new investments.

We’ve been spending a lot of time digging deeper into what rising rates mean for our audience of investors.

That’s why, in our latest show, we’re talking to two very different experts who are uniquely qualified to comment on interest rates, the U.S. dollar, and the Federal Reserve.

You’ll hear commentary and opinions from …

  • James Grant, an economic expert and author of eight books on the U.S. financial system, who was named by Ron Paul as his likely candidate for Chairman of the Federal Reserve
  • Nomi Prins, a former Wall Street analyst, journalist, and six-time author who was a member of Senator Bernie Sanders’ panel of advisors on Federal Reserve reform

These folks offer diverse perspectives on the economy … so you can get informed about how changes in the economy impact YOU and your real estate holdings.

Get educated. Listen in now!


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.


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Preparing for the Future of Interest Rates and the Dollar

We’re concerned about interest rates … and you should be too.

Consistently rising interest rates affect your ability to borrow money for investments.

In this episode of The Real Estate Guys™ show, we dig into how the Federal Reserve and central banks affect interest rates. We talk about the future of the dollar. And we discuss how rising interest rates affect YOU.

We met with two knowledgeable experts in the economics field. You’ll hear from:

  • Your interested host, Robert Helms
  • His uninteresting co-host, Russell Gray
  • James Grant, economic expert and author of eight books on the U.S. financial system
  • Nomi Prins, former Wall Street analyst, journalist, and six-time author

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James Grant on interest rates and securities

James Grant was named by Ron Paul as his likely candidate for Chairman of the Federal Reserve. Over the years, he has been a voice of reason … he calls himself “a ‘yes, but’ guy in a ‘gee whiz’ world.”

We got right into the subject of interest … interest rates.

Are rates going up? “Rates tend to trend over the long term,” James says.

They’ve been on the down-swing since the 1980s, but they may be on the up-swing again … and although rates are currently rising, James emphasizes we’ll have to wait and see whether the trend continues.

James says investors should look to the bond market for clues.

A 10-year treasury bond delivered a yield of 1.37 percent in 2016 … the lowest yield since the year 1311, according to a study by the Bank of England.

In the early 80s, a 30-year security would’ve netted you a 14 percent yield. That’s a big difference.

Today, almost every security is priced next to nothing when investors account for taxes and inflation, James says.

Who manipulates interest rates? The Federal Reserve.

“It’s an act of malpractice that the Fed and central banks worldwide are manipulating these rates,” he says.

And real estate cap rates are driven by interest rates.

To James, this means we now live in a world of great danger. “We live in a kind of hall of mirrors,” he says.

On forecasting the future and investing in gold

James notes forecasts are for people who think they know what’s going to happen … when the reality is, no one actually knows.

“We can’t know the future, but we can know how it’s being handicapped in the present,” James says.

He finds it helpful to remind himself of how our descendants will think of us.

And he says, “Successful investing is about having everyone agree with you … later.” Investors must imagine plausible outcomes before the market catches up.

We asked him his thoughts on gold investing. “Gold is interesting because it’s where people flee,” James says. “But it’s really an investment, not a flight asset.”

Gold is a way to step outside of orthodox institution investments. “Gold is simply money to me. It’s a cash balance. It’s something the central bankers can’t debase.”

To hear more from James Grant … and keep your eye on interest rates … check out Grant’s Interest Rate Observer, an independent journal covering financial markets.

Nomi Prins on the Federal Reserve and the world market

Journalist Nomi Prins was a member of Senator Bernie Sanders’ panel of advisors on Federal Reserve reform. She’s coming at this from a different angle than James Grant … but both guests are incredibly informed, with lots of great things to say.

In 2007, Nomi wrote that there could be a problem if financial institutions and the government continued the credit derivative system and high leverage.

No one wanted to hear it. But then ’08 happened.

Nomi says that over the last 10 years, “The Fed has subsidized a lot of credit problems that existed before the ’08 crisis by creating electronic money.”

That has raised the level of artificial leverage.

And THAT means the next market collapse will come from an even higher height than in ’08, she says.

Even worse, many central banks around the world created electric money and dropped rates when the Fed did. Nomi examined this situation in her book Collusion.

“We’re in a very precarious situation going forward,” she says.

Quantitative easing … the introduction of new money onto the market … causes inflation and collapses markets, starting with emerging markets.

In order to retain capital, central banks in these countries have to raise rates and increase the value of their currency. That’s what’s happening now.

This, in turn, lowers the value of foreign currencies relative to the value of the dollar. So, any debt these countries have has to be paid back or renewed at a higher rate.

Apparently, however, the U.S. is back to quantitative tightening now, says Nomi.

The Fed’s statements and its actions and reports tell different stories.

Fed Chair Jerome Powell SAYS current quantitative tightening is official. That means the government will continue to sell … but not re-invest … assets.

But in reality, the Fed is selling much more slowly than they’ve said they will.

The reason? “They know that if they sell too much too fast, rates will increase too fast, and the value of assets will go down too fast,” Nomi says. “They want to be in a holding pattern.”

More on quantitative easing, coming crisis

Nomi wants people to know there is NO correlation between GDP growth and quantitative easing. However, there is a very high correlation between quantitative easing and the stock market.

She thinks the next financial crisis will look like a bunch of smaller crises that add up to big gaps in liquidity and credit availability.

Nomi says she sees a few things happening around the world … bond defaults are creeping up in emerging markets, and certain countries are starting to have major credit problems.

“I think all of that will come to bear on the Fed.” And because of that, Nomi says, “I think their language will start to move toward growth slowing.”

Think two rate raises over the next year, instead of the forecasted four.

She predicts extreme appreciation is not going to happen. Rates will stay low, although they might continue to rise a bit relative to the Fed.

What about real estate? “Commercial real estate may have more leverage, so rate hikes will have more impact.”

Instead, Nomi recommends “any area where rent can overcompensate for an increase in cost.”

She says there are currently opportunities in emerging markets where there’s still room for upward growth in prices.

Mexico City, for example, is a place where prices are low, the government has a strong growth strategy, and there is opportunity in the near team.

Lessons learned

Debt doesn’t operate in a vacuum. Interest rates have a HUGE impact on whether your investments will be successful.

You don’t need to understand ALL the mechanics … but you should have a basic understanding of WHAT will affect interest rates and WHERE they’re headed.


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Podcast: Working with Real Estate Agents Who Understand Investment Property

The world is full of real estate agents … millions of them.

But only a tiny fraction of these agents are truly dedicated to servicing the unique needs of real estate investors. And boy, are your needs unique!

How do you find an agent that works for you … and with you?

The Godfather of Real Estate is here to help!

In this episode, Bob Helms draws on his multi-decade career as both an investor and a broker … so you can learn from his experience.

The right partnership between investor and agent means mutual success. The wrong partnership makes everyone’s jobs more difficult.

Bob shares how agents can become indispensable to their investor clients … and what YOU should keep in mind when shopping for and working with an investment property specialist.


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Think like a big dog …

Whether you’re an active real estate investor out there finding and managing deals in your own account …

… or you’re a passive investor looking to invest in someone else’s deals …

… or you’re a syndicator putting together deals on behalf of your passive investors …

… it can be smart to think like a big dog.

After all, major players have big research and due diligence budgets.  They hire big brains to study the market and make smart strategic decisions.

YOU can learn a LOT … just by watching what they’re doing.

Sometimes you can get in front of a big wave they’re about to create and ride it.

And sometimes you can front run them … buying what they want BEFORE they get there … selling to them at a premium when they arrive.

(We think there could be a particularly good opportunity to get in position to do this in the residential assisted living space right now.)

So even though you can’t play at their level, you can still get in the game by paying attention and being more nimble.

For example, this headline caught our attention …

Apollo is Targeting $1 Billion for U.S. Real Estate Fund Bloomberg 11/20/18

Apollo Global Management LLC has started talking to investors about its third U.S. real estate fund …

Hmmmm … $ 1 billion is a chunk of change.  And apparently it’s not their first rodeo.

In fact, Apollo has been around since 1990 and has over $270 billion under management.

Not that we’re promoting or vouching for them.  We’re just saying it seems like they’re qualified to have an opinion about investing.

So back to the article …

“Investment will be in senior housing, hotels, retail”

A little deeper down we discover … in addition to these three … Apollo is also into industrial real estate and manufactured housing.

Of course, this doesn’t come as a big surprise to us or our long-time followers.

We’ve been paying attention to sub-niches in senior housinghotelsretail,industrial and manufactured housing for quite some time.

But even though it’s affirming to have a big dog like Apollo see what we see … it’s not like we’re geniuses.

The clues in the news, trends, data, and our discussions with our boots-on-the-ground contributors make it easy to see the opportunities.

Of course, seeing the opportunity and knowing someone in the space … is just the beginning.

It’s also important to think about your personal investment philosophy … build great relationships with a solid team … and structure things to endure in both good times and bad.

Recently, the wild ride in the stock market is reminding 401k owners how fickle paper equity can be.

It’s no surprise smart fund managers are looking to real estate as a way to find high risk-adjusted returns … and stability in a volatile world.

Right now, we’re watching Wall Street investors race each other to the exits … leaving a flood of red in their wake.

And while history doesn’t necessarily repeat itself, it often rhymes.

Remember, after the dotcom bust at the turn of the century … frightened capital found a safe haven in real estate.  It just might be happening again.

For those already there, it could make for a fun ride.

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.


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Podcast: Passive Income Investing – Equity versus Debt

Smart real estate investors diversify their portfolios … in terms of risk, in terms of market and asset class, and in terms of investment method.

Maybe you want stable cashflow. Maybe you want passive growth. Maybe you’re looking for capital gains.

Whatever your investing goals, there are two main ways to make money in real estate … equity and debt.

In this episode, we take a deep dive into the world of debt investing, aka private lending.

With rising interest rates and real estate prices, private lending is becoming increasingly popular … and for investors, it can be a low-risk, predictable, passive investment opportunity.

Learn what one debt syndicator requires from investors … and hear why he thinks debt investing is a great, safe option for you, depending on your investment goals.

Dive into debt investing. Listen in!


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.


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Working with Real Estate Agents Who Understand Investment Property

The world is full of real estate agents and brokers eager to do a deal … but only a small handful of those agents are qualified to service your unique needs.

The best partnerships between agents and investors create mutual success. How do you find an agent that works FOR you and WITH you?

In this episode of The Real Estate Guys™ show, we chat with Bob Helms, the Godfather of Real Estate. His experience as both an investor and a broker spans decades … and he knows how valuable relationships between professionals are to successful deals.

You’ll hear from:

  • Your play-maker host, Robert Helms
  • His playful co-host, Russell Gray
  • Bob Helms, the Godfather of Real Estate

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This is a relationship business

One of the most critical relationships you have as an investor is with your real estate professional.

Whether you’re working with an agent or a broker … and we’ll use the terms interchangeably … the partnership you have with the individual legally representing you in a deal is vital to your success.

We call Bob Helms the Godfather of Real Estate … and for good reason. Bob has spent decades actively brokering properties, teaching and managing agents, and investing in deals himself.

“This is a relationship business,” Bob says. And it’s absolutely true.

Your agent isn’t your enemy. The very best deals we’ve ever been involved in have been with real estate professionals who know their stuff.

When it comes to real estate brokerage, it’s about cooperation … not competition.

“It’s urgently important that you not practice business by trying to take advantage of the person on the other side of the transaction,” Bob says.

Both sides have to win

So many investors think they have to squeeze every last dime that they can out of a deal in order to call it a win. They think they have to get the upper hand to be the winner … which means the buyer or seller is the loser.

The best transactions are when a deal closes and everyone in the room gives each other a high five.

Those are the deals you want to do again. And real estate investment is a long-term game.

Unlike the typical homeowner … who moves every four to seven years to a different marketplace … investors do multiple transactions over time in the same market. And you do more business more often.

There’s a good chance you will do additional deals with these same people, so your attitude is important, Bob says.

If you’re the guy who is trying to exploit the other guy, no one will want to work with you again.

Remember, it’s about relationships. There IS a better way!

Working well with your agent

How do you work with an agent or broker to get the best deals at the right prices?

The first thing to keep in mind is loyalty.

You might think it’s a good idea to have several agents working for you in a single marketplace. But more often than not, this competition doesn’t work in your favor.

If an agent knows you have other agents working for you too, they are less likely to invest time in finding you the best deals.

On the other hand, if an agent knows you are invested in a long-term relationship with them, they’ll work hard to impress you and keep you around.

Exhibit loyalty to your agent, and they’ll be loyal to you.

Find the best agent you can, and set up a meeting. If they are at the top of their market, they probably already have a full portfolio of clients.

Show the agent you are worth their attention. Be able to articulate why you are qualified, why you are serious about making things happen, and how you can add value to their business.

Can’t get an appointment? Try taking the agent to lunch. Everybody has to eat!

You may have to start with a “C” agent and work your way up to an “A” agent … and that’s ok.

Even if your agent of choice isn’t ready to take you on, take advantage of their experience.

“Say, ‘I want to be your best client in five years. If you were me and starting over today, what would you do? What do you wish your current clients knew?’” Bob says.

Show you’re there for the long haul, and start building a relationship.

Why agents should work with investors

The majority of real estate agents sell houses to people who want to live in them. But the investment property niche can be very profitable.

So, if you are reading this from the perspective of a real estate agent, here are four big reasons to get involved with investors …

  1. Do more transactions. Investors purchase properties in the same market again and again.
  2. Get more referrals. Investors tend to work in multiple marketplaces. They rely on a network of agents to help them. You can pass clients to other agents and have clients passed on to you. That saves you money you would have spent tracking down new buyers and sellers.
  3. Earn bigger commissions. Investors graduate to bigger and bigger properties over time. That means bigger and bigger commissions for agents.
  4. Become an investor yourself. Be your own best client. Learn from the investors you work with. Make a living selling to other people and get success by buying yourself.

Keep brokering real estate deals, but invest your money into deals of your own.

Investors love working with agents who invest too. That means the agent knows the rules of the game, and will bring investors the deals they can’t do … but would do … themselves.

Most real estate agents don’t work with investors because they don’t know how.

Bob Helms’ new book Be in the Top 1%: A Real Estate Agent’s Guide to Getting Rich in the Investment Property Niche is a great resource for getting started.

The book is aimed at agents, but investors can benefit from its lessons too … because by working together, agents and investors can form long-term relationships destined for success.


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.


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Seven lessons for better investing …

With less than 7 weeks remaining in 2018, we’re taking a short break from our obsessive-compulsive perusal of the financial news.

Because with an exciting New Year about to begin … full of hope, challenges, and opportunities … it’s a great time to focus on some important fundamentals.

Lesson# 1:  Invest in yourself first and frequently

Think of the amount of money you put into fixing up a property in the hopes of generating a few thousand dollars of profit or cash flow.

How much MORE important are YOUR education, skills, and network over the rest of your career?

For a fraction of what you’ll spend sprucing up just a single property, you can increase your sales skills, gain more strategic clarity, expand your economic education, and grow your professional network.

Any ONE of those things can pay you back 10x or more in just a few years.  Plus, investing in your education and networks sets you up for …

Lesson #2:  Focus on relationships, not transactions

Sure, we understand you need to do deals … to produce profits … so you can pay the bills and keep investing.  But transactions are really just a by-product of great relationships.

When you put the transaction over the relationship, you risk killing the goose that lays the golden eggs.

And remember, every person you know knows MANY more people you don’t.

So even if the person in front of you isn’t ready to do a deal today, someone they know might be.

This is where YOUR education and network come into play …

When you know things other people don’t, but need to … or when you know people other people don’t, but need to …

… YOU have something of great value to enhance a relationship or work through one contact to reach another.

Most people won’t give you a referral if they think you want to sell their referral something.

But they’ll happily connect you if they think you will HELP their referral.  That’s based on trust, which is based on the relationship.

It sounds so easy … and it is.  But for some reason, most people focus on the small value of the transaction and miss the HUGE value of the relationship.

Lesson #3:  Emphasize mission and values

The old adage says, “People don’t care how much you know, until they know how much you care.”

It’s true.  But it goes further …

People do business with people and brands they trust.  And when you focus on mission and values, and filter all you say and do through them …

… over time, you’ll create a trustworthy reputation.

Of course, a good, trustworthy reputation will attract more people into your life … and that means more relationships, and ultimately, more deals.

Lesson #4:  Build a business and portfolio that works for YOU … and not vice-versa

We’re old enough to remember when Michael Gerber’s now classic title, The E-Myth, was the hot new business book.

But the timeless lessons are as applicable today as ever.

Too many people … employees, entrepreneurs, and investors … do the “two-step.”

They set out to do whatever they can find to make money based on the belief that if they can just make enough money, THEN they can go do what they REALLY want.

The problem is when you don’t love what you do, either you let off the gas and never really succeed …

… or worse, you lose yourself in service to a business, portfolio and lifestyle you don’t really enjoy.

And then you just hold your breath until the day you can sell it or retire on your investments.

Better to ask yourself EARLY what’s really important to you … how you want to live … what you love to do … and then build a business and/or portfolio around THAT.

It’s a harder problem to solve, but you’ll LOVE the answer when you find it.

Lesson #5:  Develop and maintain a clear vision

We all run around with pictures in our mind. How we see the world … how we see ourselves … what we’re working to accomplish.

The challenge for many is the picture is fuzzy.

It’s like driving in the fog.  You have a sense of direction … but aren’t exactly sure how to get there.

You’re feeling your way … scared to go too fast and miss a turn or fall into a ditch.

Yet some people are taking bold action and moving aggressively through life.

What’s the difference?

Clarity.

Bold action takers can “see” exactly where they’re going, what they’re building, and WHY … and that vision inspires and emboldens them to move towards the goals with enthusiasm and confidence.

We say, “When you have clarity of vision, strategy and tactics become evident.”

So when you’re not sure what to do, focus on your vision.  Just seeing the end from the beginning is often enough to tell you what to do next.

Lesson #6:  Always see the downside

Really?  Doesn’t focusing on the negative create paralysis?

Only for amateurs.  Pros are more afraid of what they DON’T see than what they do … because you can’t avoid or manage risks you aren’t aware of.

Billionaire real estate investor Sam Zell says everyone sees the upside.  That’s what they look for and what motivates them to go for it.

But Zell says his success comes from being able to see the DOWNSIDE too …  and then making plans to mitigate it … even if it means walking away.

Pessimists ONLY see the downside and can’t act.  Optimists only see the upside and hope for the best.

We’re pretty sure hope is not an investment strategy. Be a realist and get good at seeing and managing risk.

Lesson #7:  Always pay attention to cash and cash flow

Profit and net worth are important.   Cash and cash flow are essential.

A business mentor of ours once taught us that cash is like oxygen, while revenue is like water, and profit is like food.

You can survive for a long time without profit … if you have revenue and cash.

You can survive for a little while without revenue … if you have cash.

But run out of cash … and you’ll be dead very soon.

Pre-politician Donald Trump once told us it’s always good to have cash in the downtimes. We say, “Cash Flow controls and Cash Reserves preserve.”

So have some liquidity at all times. Write off the lost opportunity cost on the cash as an insurance premium.

And do NOT count on credit for liquidity. We did that once … and it didn’t end well.  Lenders tend to cut off credit when you need it the most.

Bonus Lesson:  Use firewalls to avoid portfolio contagion

Let’s face it.  Some investments are more risky than others.

But if you don’t have firewalls, then just ONE risky investment can implode your entire portfolio.

You might have a solidly built, cash-flowing portfolio of properties, and a high net worth with good liquidity, and hedges against inflation and deflation.

But just ONE lawsuit, or personal loan guarantee on just ONE risky deal, or pulling money out of performing property or business to feed a loser …

… and EVERYTHING goes … UNLESS you use legal structures, mental discipline, and emotional control to isolate risk.

It’s a bigger topic than we have time for here, but we address it in ourIntroduction to Strategic Real Asset Investing webinar.

You can get the webinar as a free bonus when you order the Future of Money and Wealth video series … which is a great primer on several risks ALL investors should be paying attention to right now.

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.


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Passive Income Investing – Equity Versus Debt

Real estate prices and interest rates are rising. Cap rates are compressing. As a result, some investors are switching from equity investing to debt investing.

So in this episode, we’ll take a deep dive into the world of debt investing.

Equity investing is a way to capture growth and get capital gain. Debt investing, on the other hand, means loaning money to other investors as a way to generate income.

There are great reasons for both strategies. As we like to say, “Different investment philosophies for different folks.”

But in times of financial uncertainty, debt investing can be a way to reduce risk and generate predictable incomes.

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

  • Your pro-debt host, Robert Helms
  • His indebted co-host, Russell Gray
  • Managing partner at American Real Estate Investments, John Larson

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A new option for investors in tight markets

John Larson is a turn-key provider at American Real Estate Investments (AREI) in Dallas, Texas. He’s worked in Dallas and other markets for many years … but now he’s seeing something new happening in Dallas.

Prices and interest rates are now higher than they were in 2006. The cap rate is compressing, and as a result, cashflow is decreasing.

And rents are starting to plateau, which puts investors in a bind. Larson says this isn’t enough for him to start moving into C and D class neighborhoods … cash flow on paper doesn’t mean easy cash flow in reality.

Instead, he’s come up with a different option … syndicated money lending.

John manages the development opportunities … investors just have to put in the capital. In return, they get a fixed, passive income stream each month.

“It’s a way to play a strong market AND get cash flow,” John says.

How debt-investing works

Which is safer … equity or debt?

In terms of rate of return, the debt investing model allows investors to get a specific, predictable rate of return.

John uses a trust deed model, where lenders get deeded the trust to the property … but in this case, there are multiple lenders.

For each deal, John raises 2 to 3 million from a group of 25 to 35 lenders.

Investors get double-digit fixed returns … 10.5 percent of the amount they’ve invested, paid out over 15 months or until the loan is complete.

Usually John’s loan deals last from 18 to 36 months. And John pays out returns on a consistent monthly basis.

It’s private lending, redefined.

John calls the solution a “win-win” for both AREI and the lender groups. Lenders get great returns … and John gets funding for many different types of development opportunities.

More nitty-gritty details about private lending

When you go into a debt-lending deal, there are two important questions you NEED to ask yourself before you say “yes” …

  1. How will the borrower pay me back?
  2. What happens if they don’t?

Typically, debt syndicators will use money from private loans to rehabilitate or develop a property. Once construction is complete, lenders get their principle PLUS proceeds back.

Debt investing is a lot different from the traditional equity route … and investors need to get their heads around that.

Do investors need to be syndicated? At AREI, the answer is NO.

Most of John’s investors are not accredited, because loans are not securities.

But often, private lending requires a minimum principle amount. John says his investors come in at around $100,000 on average, and the minimum is about $50,000.

Passive investing pros

We mentioned John works in the Dallas-Fort Worth area … but we didn’t mention WHY. Dallas-Fort Worth is top-10 metropolitan statistical area … and it hits all the right notes.

“I feel safe about this market,” John says. He notes that data shows continued demand in the area, along with multiple companies in a variety of industries. The population is expected to continue increasing in future years.

But investors DON’T have to be located in Dallas or even Texas to take advantage of John’s debt-investing program. That’s the great thing about passive investing.

For more from John, check out his podcast, The Real Estate Cowboys … which is all about how you can capitalize on passive income investing.

And listen in to this show to get access to a special report from John with more information about passive private lending opportunities.

Capitalize on a bull market

When people think about real estate investing, they usually dream about owning a ton of properties.

But debt investing is a way to expand your portfolio and bring in monthly cashflow … without having to manage a physical property.

It’s also a way to capitalize on a tight market.

With property investments, cash flow changes as rents, and rates, rise and fall. Cash flow from debt, on the other hand, is more stable.

And lending money in a hot market is a great way to help investors get around rising interest rates … while taking in great returns, yourself.

Just like equity investing, debt investing can be done many ways. You can make small loans and be more hands-on … or you can work with someone like John and be totally passive.

Regardless of the option you choose, you’ve got to look at what the market is giving you. Right now, it’s giving you rising interest rates for the first time in decades … but that doesn’t mean there aren’t great investment opportunities if you look closely.


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.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

The mid-term morning after …

If you’re an American, unless you’ve been in a coma or living under a rock, you know the United States just had one of the most energetic mid-term elections in quite some time.

The day after, both sides are disappointed … and both sides are claiming victory.

One of the advantages of being older is we’ve seen this movie before.

In our younger days, when elections didn’t go our way, we thought it was the end of the world.  Today, not so much.

It doesn’t mean we don’t care.  We do.  And certainly, politicians and their policies have a direct impact on our Main Street investing.

But it’s in times like these we’re reminded of the beautiful, boring stability of real estate.

Because while all the post-election drama and speculation plays out, people still get up and go to work and pay their rent.

And though the Trump-train just got slowed … like Barack Obama before him, big chunks of his agenda got pushed through early … and are likely here to stay for a while.

In other words, it doesn’t look like Obamacare or the Trump tax reform will be repealed any time soon.

More importantly, investors of all stripes … paper and real … now know what the lay of the land is for the next two years.

Early indications (based on the all-green dashboard of Wall Street) reveal there’s cash on the sidelines waiting to see what happened … and now that gridlock is the answer… money is pouring into everything.

We know that sounds counter-intuitive.  But while political activists push change … too much change too fast makes money nervous.

Investors and entrepreneurs need to make decisions about long-term risk and reward.  And when the world is changing too fast, those decisions are harder to make.

Way back in the lead-up to the 2010 mid-terms, we penned this piece about a concept we call “healthy tension.”  Just change the team colors and it’s just as applicable today as it was back then.

The point is that money and markets like gridlock.

At this point, from an investing perspective, it doesn’t really matter if any of us like or dislike what happened … politically.  It’s done.

Now we all just need to decide what it means to us and how to move forward … because life goes on.

So bringing it all back to Main Street …

We’re guessing all the great Trump-tax reform benefits for real estate investors… from bonus depreciation to Opportunity Zones … are here to stay.

And as we said just a week ago …  there’s probably a lot more money headed into real estate.  Nothing about this election appears to change that.

So gridlock inside the beltway means stability on Main Street.

Sure, it might be a little boring.  But real estate investors are used to boring.  And when it comes to long-term wealth building … boring is good.

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.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

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