After one of the most turbulent elections in the United States, one thing is clear … we live in a time of massive uncertainty.
If you feel like the ship is sinking, rather than being depressed or concerned, we advise you be DILIGENT.
This means putting yourself in a position to mitigate the risks and capitalize on the opportunities swirling around you.
We believe real estate is one of the safest investments you can make during uncertain times.
In this episode, we discuss areas of concern and opportunity. You decide what position you want to take, and how to protect yourself if things go wrong and keep your assets from being “low hanging fruit” for financial predators.
In the panic room studio for this episode of The Real Estate Guys™ radio show:
- Your safe-haven host, Robert Helms
- His risky-business co-host, Russell Gray
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But first, understand the U.S. dollar
To understand threats to your investments in the U.S. market, you first need to understand our currency.
For the past 100 years, the U.S. dollar has been under ATTACK.
For better or worse, our beloved greenbacks have been constantly losing value by the Federal Reserve since its founding in 1913.
This happens subtly and slowly with inflation.
Doesn’t that mean real estate investors can buy properties cheaper? Yes!
BUT it also means the dollar – the basis of our ENTIRE FINANCIAL SYSTEM – could go the way of the dodo …
The trend is clear. If that happens will you be prepared?
Speaking of the U.S. and world financial system, we live on a currency of debt.
We borrow money into existence. creating insurmountable debt in the process.
For instance, if you had an economy of $100, and borrowed the money into existence at a 10% interest rate, you would owe $110 at the end of the year. That’s $10 more than what you actually have.
It’s a cycle of eternal, perpetual debt.
There can be a devastating domino effect by something as simple as someone defaulting on a loan.
Bring back any memories of 2008? During that market crash, property wasn’t the problem. People were able to assume loans and sell properties.
It’s not about having the real estate, it’s about the STRUCTURE. Loans in 2008 weren’t structured to weather the storm.
Real estate investment in a safe haven portfolio is about having the real estate with the right structure for an UNSTABLE financial system.
It’s always better to be prepared and not need it, than not prepared and need it …
Focus on income over appreciation
One way to shore up against damages is to focus income in the right places.
With real estate, INCOME is EQUITY.
It’s easy in a hot market to focus on equity outside of income. If you can sell a property for more than you paid for it, you make money, right?
Yes in a technical sense, but it’s not as solid as other methods.
To increase income fundamentally, you need to improve value of property.
Favor assets with income you can influence. Pick a market, then choose property strategically to maximize profit opportunity and gain equity.
Unlike investing in stocks and shares, with real estate there are SO MANY things you can do to increase income, and create a “durable income.” To name a few ideas:
- Select a desirable property.
- Select an area with a high number of renters.
- Upgrade the property.
- Build new units.
The bottom line? Increased income means increased equity.
If the dollar were to collapse, your tenants will always find some way to add value to you to earn the roof over their head, because it’s a basic human need.
Use cash flow to create equity
Real estate gets a bad rap for being a slow way to build wealth.
That is true from a strict cash flow perspective …
HOWEVER, when you realize that properties like stocks trade for a multiple of earnings, a new world is open to you.
You can manage a cash flow topline (like revenue and expenses) with a solid bottom line (net operating income). Your portfolio of assets can be creating value no matter that the currency is.
Real estate TRANSCENDS borders, economic times, currencies, and more.
Building a portfolio of income-creating real estate that addresses basic human needs, agriculture, energy, and niches in housing, creates SAFETY.
These things will be in demand despite the ups and downs of the economy.
Consider the “time horizon” of your investments. Rather than flipping homes, (buying, fixing up, selling) you are adding to your portfolio.
Times change. Properties increase and decrease in value.
Interest rates are high, then low, then high again. There an ebb and flow to so many factors over the span of 10 to 20 years.
We want to increase value from inflation and appreciation. We do this by CONTROLLING a property long-term—through the cash flow.
Hedge all the bets… counter-party risk
Many people think about investing for income as investing in bonds, annuities, CDs, bank accounts, etc.
Real estate investors think about buying real estate properties.
The hard truth is whatever you have purchased relies on someone else in some way.
A bond is only as good as the person behind it. If they go bankrupt or default, you are out of income.
All kinds of investments are risks. Real estate mortgage is counterparty risk, tenants are a counterparty risk … so WHAT can you do?
Identify income from real assets and not liabilities that can default.
Tenants who cannot pay rent can be evicted and replaced with paying tenants. Can you imagine if bonds worked that way? They DON’T!
On the mortgage side of things, private money loans typically have 30-40% of equity in the property, and the borrower is making the payment.
If they default, your assignment of rent clause gives you the rental income. You then can take over the property through foreclosure, replace the tenants, sell it, etc.
Real estate is superior to a paper asset from a yield, tax, and counterparty risk perspective. To get a report on real asset investing, send an email to realasset (at) realestateguysradio (dot) com
Warding off financial predators
When you have a lot of assets in a big portfolio, your wallet is hanging out there.
Like an armadillo or porcupine curling up, there are lots of things you can do to make yourself undesirable to predators.
Picture a large tree as a metaphor for the grand scheme of investing:
The low hanging fruit that predators can access easily are bank accounts, brokerage accounts, properties in your own name and paper assets. Think twice about these investments!
Middle hanging fruit that is more difficult to access are domestic real assets, real estate that is real, investing in private placements, entity structures and private banking (check out our awesome special report with Patrick Donahoe, the Perpetual Wealth Strategy.)
High-level fruit that are impossible to reach for most predators are holding real assets outside jurisdiction and international investing.
How can you get the red target off your back?
Hold assets outside of the financial system. Your brokerage account and bank account are visible by lawyers and courts.
We want to believe the best of our judicial system. Unfortunately, we all know that sometimes whether you are right or wrong has little to do with whether or not you WIN a lawsuit.
Own property in multiple states or go offshore. Spreading your investments across different areas makes it difficult for predators to see all of your investments.
Use privacy structures that make it difficult to find that you are the owner. Liens and second mortgages make you more difficult to go after.
As you grow your portolio, it’s important to seek out advisors for professional coaching. You could even invest in your own knowledge through a memorable week with us and our investing expert friends.
Be smart about where and how you invest – and you’ll be paid in profits and peace of mind!
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