Call us paranoid (we’ve been called worse), but all the worldwide currency and credit expansion makes us a little nervous. Sure, we like it when asset prices rise. But they’re supposed to go up because of fundamentals…things like supply and demand, cash flow, a strong labor market.
But right now, asset values…especially stocks…are going up like there’s no tomorrow. That’s great if you own stocks, real estate, collectibles, etc. But last time we looked, your tenants don’t own those things. What they get instead is rising prices on food, energy…and now healthcare.
Meanwhile (notwithstanding minimum wage workers in Washington State), labor and wages are soft. Hence, landlords aren’t pushing through rental increases, even when supply and demand says they should be able to.
All this to say, while you’ve been busy working your day job, as your erstwhile surrogates, we’ve been traveling the globe looking for solutions.
How can you perk up your portfolio with more profit producing properties? After all, we want to own all the real estate we can. And we want to borrow heavily (short the falling dollar) to do it. But that means we need solid cash flows to control everything. And a soft labor market and real world inflation (the CPI is a joke) makes that “challenging”.
Then one day, sipping a cup of coffee in an exotic location, it hit us! When if you could create cash flow from the very commodities that are going up because of all the easy money in the system? Brilliant!
Well, because we’re us, it didn’t take long for us to find the guy with the answer. After a little chit chat, we put a microphone in front of his face and did a short segment as part of our show from the floor of Freedom Fest last summer.
Then a funny thing happened. Our feedback page lit up and our audience wanted more!
Always eager to please, we checked out jet set calendars and noticed we’d be in Scottsdale, Arizona where our pal Robert Kiyosaki has a very nice studio. So we snuck in, set up shop, and called our newest answer man (who happened to be in Colombia at the time) to talk cash flow from coffee farmland.
Percolating powerful pontifications in this fresh brewed episode of The Real Estate Guys™ Radio Show:
- Your bold (with a hint of sweetness, but no room for cream) host, Robert Helms
- His caffeinated co-host, Russell Gray
- Our dark roasted special guest, David Sewell
When you think about it, the term “real estate” means “the King’s property”. That’s why they call rental property owners land lords. The serfs just got to work the land (farming and ranching) and keep 75% of the profits. They paid the other 25% to the King.
Hmmmm….the serfs got to keep 75%?!? Someone should tell Uncle Sam about that system. Ironic that in the country that pioneered the concept of private property rights for the little guy, US citizens don’t get to to keep as much of their “produce” (income) as the serfs of old. Are we the only ones who think that’s weird? But we digress…
The point is that basic real estate was farming. The tenants were farmers. The income came from the produce and was shared between the farmer and the landlord.
So David didn’t come up with this idea. He simply brought it into the 21st century and we think it’s brilliant…and timely.
But as David explains, it’s also a socially responsible endeavor. In their model, they buy coffee farmland from a poor farmer. They retain and retrain the farmer to improve the product and production efficiency.
By getting more yield from the land, the poor farmer is now making more money than he’s ever made. He’s happy.
The investor (that’s you) gets really attractive double digit cash flows. You’re happy.
And the world gets more and better coffee. We’re happy.
And aside from our coffee addiction, we’re also attracted to profits. And we love the idea of diversifying our holdings in various countries. Of course, owning land offshore provides some asset protection and privacy benefits. You can even use your self-directed retirement account to tack on some tax advantages.
Plus, creating income off shore income denominated in something other than dollars has some interesting possibilities. Just ask Google, GE or Apple.
But while all those things are great, the thing we like best is that we can create cash flows from a commodity that is in demand worldwide.
See, when we buy residential real estate (which we love…we get to use leverage and we get tax advantages), we need to be careful to pick a good local economy. “Good” means it creates the kind of jobs that our tenants need to pay the rent. This is important because all your rental income is derived from the local economy. That’s why we like locations where there are industries that pull money in from outside the area.
But when you own land that produces a commodity like energy or food that can be sold ANYWHERE in the world, it’s less important where the land is. So in some cases the land is cheap, but the commodity is popular. That’s a recipe for high ROI. We like it. 🙂
So grab a cup of Joe, and sit back and listen in as we consider how YOU can create cash flow from coffee farmland as part of your real asset investing strategy.
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