08/09/15: Ask The Guys – Cash Flow, Cap Rates, Cuba and More!

Another great collection of questions from our ever-growing audience!

Behind the microphones, but ahead of the curve for this high-speed episode of The Real Estate Guys™ radio show:

  • Your driver of dialog and high-performance host, Robert Helms
  • His mechanic of mathematics and financial strategist, Russell Gray

Lots to cover in this jam-packed edition of Ask The Guys, so as soon as the green light flashes, we’re off!

One listener is ready to move up from single-family to multi-family.  He’s found a market with higher than average cap rates. Is that good?

Well…it SOUNDS good.  But multi-family cap rates are pretty low right now.  So maybe this market is high for a reason.

“Cap rate” is short for capitalization rate.  It’s simply a way to measure cash flow from operations.

Think of it like interest on your savings account…back when you actually earned interest on your savings account!

Interest is a way to price risk.  So sometimes a high rate, means a high risk.  This is especially true when a market is very active.  No one is dropping prices to attract buyers.  In fact, it’s quite the opposite.

So higher than usual cap rates COULD mean there’s some risk the other buyers are seeing…that you aren’t.  It’s not a a reason to say “no”.  But it’s a clue to take a closer look at the various risk factors.

Another listener is trying to use his 401k funds to invest in real estate.  And who can blame him?

With the stock market at bubble highs, it might be time to get into something a little more…real.  Like real estate.

But how to access 401k funds without paying all those nasty taxes?

It’s actually pretty easy if it’s a 401k from a FORMER employer.  You simply convert it to a self-directed IRA and place it with a custodian willing to allow you to use it for real estate.

If your 401k is with your CURRENT employer, you might be stuck with only being able to borrow out a portion of it.  Although sometimes, if you work for small company with an understanding owner…or better, you own your OWN business…you can set up or change your 401k plan to permit self-direction.

Then someone asks if The Real Estate Guys™ were going to do a field trip to Cuba any time soon…

Um….no.

Not that we don’t like Cuba.  But it’s still in the “pioneer” stage as far as real estate investing goes.  The EARLY pioneering stage.

U.S. sanctions against Cuba were only recently lifted…and the security of private property rights is still a LONG way from being something you can depend on.

So we’ll wait and watch for now.

There are lots of other great questions…about broken leases, underwater properties, lease options and the impact of the baby boomers re-allocating from stocks to bonds.

Heady stuff.

But that’s because we have a really smart audience!

So tune in as we take our best shot at listener questions on The Real Estate Guys™ radio show!

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