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6/26/11: Cash Flow with Confidence Using Guaranteed Leases

Why do people put up with jobs they hate?  Or limit their upside opportunity and use only a fraction of their potential in their careers?  They want security – the certainty of someone else being responsible for making sure that paycheck shows up.

But there aren’t any guaranteed paychecks in real estate investing… or are there?

One of the many wonderful things about a crappy economy is that sellers become motivated to make concessions that would otherwise be off the table.  Just like an employer will take the risk of promising a paycheck to get you to work for less than you produce (think about it…employers don’t hire you to lose money), would a builder guarantee your rent to get you to buy so he can make a profit on the sale?

To find out, we invited a real estate broker friend of ours back into the studio to tell us about just such a program.

Camped out around the microphones, somewhere deep in the heart of Texas:

  • Your host and primary promise maker, Robert Helms
  • Co-host and chief promise keeper, Russell Gray
  • Special guest and purveyor of cash flow promises sure to delight every investor, Ron Black

If you’re a long time listener of the show, you know Ron Black has a knack for finding creative ways to help real estate developers and investors get together for everyone’s benefit.  Back when houses were selling like hotcakes, builders needed to get model homes up and open.  But that tied up a lot of cash in houses that couldn’t be sold until the very end.

So Ron set up a program where a builder would sell, then lease back, the model home to an investor at a very attractive price, which freed up cash to go build and sell more houses.  It’s the same reason a business would rather rent than buy the building they occupy.  They want more money in the business and less in the real estate.  They make more money in the business.  See?

Of course, those heady days of a happy housing market are but a dim memory.  Today, developers aren’t building houses “on spec” (build it and they will come), but instead they wait until it’s sold, then build it.  Except that even as safe as that sounds, the banks are still too afraid to provide construction funding.   Sounds like a problem.

Well it is a problem for the builder, but the builder’s problem is Ron Black’s (and his investors’) opportunity.

Ron’s creative solution is to organize private money to provide high-yield interim construction loans.  Builders can afford to pay a nice return because they only have the money for a short period of time.  Investors can get high yields without transaction costs and be in and out in six months or less.  They can even do it in their self-directed IRA and rollover 401k’s.  We did an entire episode on this topic, which turned out to be one of our most popular.  If you missed it, click here for immediate transport into The Real Estate Guys™ archives.

So what’s Ron’s latest creative solution?  Well, we don’t want to steal his thunder from the show, so you’ll have to listen in to find out.

Let’s just say if you like the idea of buying a brand new property (no deferred maintenance!) and having your rental income guaranteed for the early years, you’re going to LOVE this episode.  And if you’re a really good student and listen all the way through, you’ll find out how to access a free follow up webinar Ron created which provides even more information.  Enjoy!

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