Keeping it real in the face of tariffs and trade wars …
When you trade in highly liquid, lightning fast, electronically enabled casino markets … you watch the news like a ten-foot tailgater at 100 miles per hour.
And that’s who most of the mainstream financial media cater to.
The more fear, uncertainty, drama, and doubt … the better (for ratings). So they pour fuel on the fire.
The current drama du jour is President Trump’s up and down trade war with China.
Paper markets are gyrating as nervous traders try to time the trends and skim “profits” from the volatility. Politicians use every twist and turn as tool to score political points.
Meanwhile, on Main Street …
… folks get up every day and do their jobs, collect their pay, pay their bills, and largely ignore all the drama … most of which they don’t understand anyway (as if anyone really does).
That’s why investing in Main Street is SO different than investing in Wall Street.
Because while stock prices race up and down with every breeze of news or rumor … paychecks and rents remain relatively stable. Boring. But stable.
Of course, this doesn’t mean real estate investors can afford to be ignorant, naïve, or cocky. Real estate’s stability and resilience isn’t invincible.
The pain of 2008 made it very clear – what happens on Wall Street can bleed over to Main Street … rare as it might be.
Fortunately, real estate investors can usually follow the proceedings from a comfortable distance … with plenty of time to react and avoid mishaps.
Besides, more often than not, many of the “doomsday” fears just fade into the archives of “breaking news” that didn’t actually break anything.
So life goes on. People go to work and pay rent. Passive income flows. Equity happens … at least for those who aren’t paralyzed by all the drama.
Sure, we think it’s vitally important to watch macro-trends. And we do.
Macro-trends provide clues about long-term migration patterns … warnings of systemic breakdowns (credit, currency) …
… and insights about whether any key drivers in our markets and niches of choice might benefit or suffer from whatever’s developing.
But once you’re in a market you like based on macro-factors …
… the real work of real estate investing is building and working with your local team … and closing on deals that make sense and are structured to withstand a macro storm or two.
Once you master this, you’re not just a successful investor in your own right … you also have the potential to become a hot property yourself.
Because even though the Wall Street roller-coaster is exciting for the young and daring …
… after a few harrowing experiences, many Main Street investors would prefer to reach for the brass ring of prosperity from the much calmer merry-go-round of real estate.
When it comes to their life savings, most folks want stability, ease, and an after-tax growth rate in excess of real world inflation.
Ideally, they’d love to simply park their money in a boring bank account and collect a steady stream of interest income.
The problem is it doesn’t look like banks will be paying anything remotely resembling an inflation-adjusted positive yield any time soon.
That’s a big reason why income-producing real estate is very attractive right now … perhaps more than ever.
Of course, real estate investing is very messy and inconvenient to most people.
Wall Street and banks are easier, but at the price of nauseating volatility, minuscule yields, and high taxes … now or in the future.
So when YOU know how to produce predictable, high-yield (after tax) passive income through an inflation-hedged vehicle like real estate … you’ll find more than a few folks willing to invest in YOUR deals.
But whether you decide to fly solo or pilot a plane full of limited partners, real estate remains appealing as a stable investment in uncertain times … perhaps more so now than ever before.
So grab your popcorn and watch all the geo-political and Wall Street drama from a safe distance.
Just be careful not to let all the commotion keep you parked in the garage.
Until next time … good investing!
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Getting in the flow of money on the move …
Investors and their money are attracted to opportunities. They purchase assets, including properties and businesses, in the pursuit of profits.
That’s probably why YOU are reading this.
It’s why we perpetually peruse the news … looking for clues about where investors, businesses, jobs and money might be going and growing.
After all, where people and prosperity are … demand and capacity to pay for real estate are too.
So when we saw this headline pop up in our feed, we decided to look past the political positioning and see if we could find opportunity …
Jobs Are Booming in Trump Country, But Pay Lags
– Bloomberg, 5/7/19 via Yahoo Finance
“ … the 2,622 mostly rural and exurban counties [Trump] won in the 2017 added jobs at twice the pace as they did under … Obama …”
“Red America overtook Blue America … in 12-month employment growth for the first time in seven years …”
Of course, the article is focused on the political ramifications … which is fine for raising your blood pressure or getting unfriended on Facebook.
But we really struggle with all that red and blue stuff.
When we look out the window from the airplane, we see mostly brown and green. And when we talk to folks on the ground, it’s true there are different colors … but not blue or red.
Maybe we’re missing something.
In any case, we’re far more interested in discovering the investing opportunities of where “jobs are booming” and why … so we can get in on the action.
The Bloomberg article affirms a trend we’ve been commenting on for some time …
“… the changes are driven largely by a spread of growth to outlying areas typical of the late stages of an economic expansion and a bounce-back in energy production and manufacturing.”
In other words, when people get priced out of expensive areas because of a boom … they move to more affordable areas.
Meanwhile, the resurgences in energy and manufacturing are very important economic drivers to watch.
Energy has been a big jobs driver post-2008 … and continues to play an important role in the creation of domestic jobs.
Meanwhile, the rebirth of manufacturing is affecting some former boom towns whose fortunes fell as American manufacturing went offshore over the last two decades.
It’s no secret President Trump believes the U.S. must re-establish itself as a manufacturing powerhouse. This makes sense for a guy who made his fortune building things.
What may be less obvious is how Trump hopes to achieve this fundamental transformation of the way America produces prosperity. But there are clues.
We may or may not agree with Trump’s goals or methods. But that’s not the point. What matters is what he’s doing and the effect it’s having.
When we asked then-candidate Trump what a healthy housing market looks like in a Trump administration, he simply replied, “Jobs.”
Of course, back then it was just talk. Now, just over two years on the job, headlines say …
U.S. creates 263,000 jobs in April as unemployment falls to 49-year low – MarketWatch, 5/3/19
Job openings in U.S. jump to 7.49 million — more proof of ultra-strong labor market – MarketWatch, 5/7/19
While there’s more to the story than we can delve into today, most observers agree those are pretty good numbers.
Of course, to get from interesting to actionable, we need to dig a little deeper …
Our good friend, world-class tax-strategist, CPA and best-selling author Tom Wheelwright wrote this in his recently updated book, Tax-Free Wealth …
“ … tax laws … have evolved to become tools of social and economic policy making.”
But this isn’t a anything new …
Way back in 1946, then-Chairman of the Federal Reserve Bank of New York gave a speech and made these shocking admissions …
“ … taxes … serve … to express public policy in the distribution of wealth and of income … subsidizing or … penalizing various industries and economic groups …”
In other words, tax laws move money where the government wants it.
Right now, the tax laws tell us Donald Trump wants money moving to Main Street.
As Tom Wheelwright explains in his presentation at The Future of Money and Wealth, the new tax law makes real estate EXTREMELY attractive for investors.
In fact, many real estate syndicators are having success attracting investors who are just as eager for tax breaks as they are for the profit potential of the deal!
And now that the opportunity zones regulations are becoming more clear (watch for a follow-up radio show on this hot topic shortly) … it’s likely even MORE money will be moving from Wall Street to Main Street.
For a glimpse of what’s coming, we took a look at the Jobs Opening and Labor Turnover (JOLT) report from the Bureau of Labor Statistics (BLS).
Here are some notable highlights …
“The number of jobs openings increased for total private(+363,000) and was little changed for government.”
“ … largest increases in transportation, warehousing, utilities (+87,000) construction (+73,000), and real estate and rental and leasing (+57,000).”
No surprise there’s a lot of job-creating money going into distribution and related commercial real estate.
What remains to be seen is whether Trump’s tactics will trigger long-term sustainable domestic manufacturing … and the middle-class jobs that come with it.
There’s been some progress, but it takes a lot of capital to create the infrastructure to support serious manufacturing.
But just as the tax law helps attract billions into the shale oil production revolution …
… the Opportunity Zones tax incentives could pull billions into creating the real property infrastructure to rebuild atrophied manufacturing communities.
Money moving from Wall Street to Main Street. We like it. And it’s a trend alert real estate investors are watching carefully.
Until next time … good investing!
More From The Real Estate Guys™…
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- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook, and our Feedback page.
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!
Using Market Metrics to Spot Trends and Opportunities
Markets are always in motion.
Population, economic growth, demographics … these factors and more affect the supply and demand for every property you own.
Without understanding market metrics, investing is like reaching into a lake and hoping you pull out a fish.
But WITH market metrics … the savvy investor can spot trends and opportunities … and bag a winning catch!
Listen in as we explore how to make market metrics work for you.
In this episode of The Real Estate Guys™ show, hear from:
- Your metric-master host, Robert Helms
- His laugh-master co-host, Russell Gray
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Crystal balls aren’t real, but market metrics are
Every market is different.
Every city … every neighborhood … even every street has unique attributes of real estate.
When we look at real estate, we’re dealing with many different kinds of markets … niche markets, geographic markets, and demographic markets.
Real estate isn’t a typical asset class. Every deal is unique.
You can choose to throw a dart at the map and buy a property … or you can study market metrics and identify trends.
Most of the information readily available to investors isn’t local … it’s national or state data.
As an investor, you need to learn to take that higher-level data, look at both sides of the equation, and break down what it means for you.
We don’t have a magical crystal ball … but we do know that we can spot important trends if we pay attention to key metrics … and so can you!
Deciphering national statistics
Let’s start by talking about days a property stays on the market.
The National Association of Realtors recently announced that residential properties remained on the market for an average of 36 days in March 2019 … which was down from 44 days in February 2019.
What does this mean for the newbie real estate investor trying to figure out if this is a seller’s market or a buyer’s market?
This is the perfect example of national statistics that give a false impression when you focus on the market at a local level.
Someone in the Bay Area may think that 30 days on the market is forever … but to someone else from Kansas, that seems like selling in record speed!
Remember to dig deeper and look at both sides of the equation. Think about what other factors could be creating this metric.
Imagine that fewer people were listing their homes … that would mean that there were fewer houses available.
If there are fewer houses available but the same number of buyers … then the number of days spent on the market is going to go down.
On the other hand, if there are more sellers than buyers … then homes are going to spend more time on the market.
Three crucial metrics for real estate
Depending on the information you’re after, you pay need to attention to different metrics.
To get a good amount of information, you need a big statistical set.
That’s why most of the data that you read is going to be relating to a bigger group of properties than really affects your market and your property every day.
News pundits often talk about average home price and median home price. These are two different things with very different meanings.
If you have a list of 101 sales that happened last month, the sale in the middle of the list … number 51 … is the median price.
So, if you have the numbers two, five, and seven … the median is five.
And if you have the numbers two, five, and fourteen … the median is STILL five. Median price is NOT the same as the average price.
Another important metric to understand is net in migration.
People are always moving in and moving out of markets. Net in migration means a market where more people are entering than leaving.
More people means more demand for schools, services, shopping, and … housing!
It may seem like a rudimentary concept … but it is essential. If people are leaving a market, demand goes down and so do prices.
Dallas, Texas, is the perfect example of putting a market with net in migration to work for investors.
After the 2008 financial crisis, investors were forced to look at markets differently … and up until this time, Dallas had been boring.
The market had the least appreciation of markets on our radar … but after 2008, stability started to look really, really good.
Dallas had a winning combination of affordability, low income tax, vibrant infrastructure, and diverse economy.
The energy sector was a huge player … and it was one of the few industries that remained solid after 2008. As people moved in for jobs, demand grew.
Now, a decade later, we look at the net in migration, and Dallas has an additional one million residents since we first started looking into the market.
Look to the future
Some of these concepts may seem basic … but in real estate, it’s easy to fall asleep at the wheel. Real estate really does move slowly.
But when you see the headlines, you may feel like the wind is changing fast … and you need to act or be swept away.
Don’t panic. You have time to get in position, study a market, and build relationships.
Keep your focus on the basics … supply, demand, and capacity to pay. Every metric impacts these basic principles of real estate investing.
We can all look at the past and act on what we learn here in the present … but we need to look forward too.
As investors, we ultimately have to take our best educated guess. Market metrics give us the information we need to do our due diligence and act in the best way we know how.
More From The Real Estate Guys™…
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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!
Podcast: Using Market Metrics to Spot Trends and Opportunities
Every property you own sits in a market that’s in motion.
MANY factors affect the all-important supply, demand, and capacity-to-pay dynamics which dictate the health and direction of your investment.
But like a skilled-mariner on a choppy sea, you can read the wind, waves, and stars to chart a safer and more prosperous course.
So listen in to this episode as we explore using market metrics to spot trends and opportunities.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook and our Feedback page.
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 Avengers Endgame and YOUR real estate investing …
You probably know The Avengers Endgame is the culmination of a 22-film decade-long extravaganza of EPIC story-telling.
What you may not know is how many great real estate investing lessons surround The Avengers Endgame.
Here are just a few … and don’t worry, there are no spoilers!
Lesson 1: Businesses and their jobs will move to seek a better environment.
The Avengers Endgame was filmed at Pinewood Studios in Atlanta, Georgia … and NOT in Hollywood, California.
The Pinewood Studios website says Georgia is “the number one filming location in the world” according to this industry report by Film LA.
One of the reasons is ” … the highly competitive nature of tax credits …”
Over five years ago, the Los Angeles Daily News reported this trend …
Why TV, Film Production is Running Away from Hollywood
“ … they’re running away from here … primarily due to tax incentives offered in … states with rich tax credits such as Georgia …”
But it’s not just taxes, though they’re a BIG part.
As New York discovered when Amazon abruptly backed out of plans to bring 25,000 jobs to Long Island city for their much sought after HQ2 …
“ … it came down to a long-term environment that Amazon did not care to work in …”
And they’re not talking weather. It’s the political environment.
So while YOU may or may not agree with Amazon’s or Disney’s politics or business practices … it’s important to remember how the businesses feel.
Learn to look at markets the way employers do … even if you disagree.
Lesson 2: Get rich in a niche.
This is where LOCAL knowledge really helps.
As you might guess, creating a blockbuster film like The Avengers Endgame requires hundreds … perhaps thousands … of talented, highly-paid people.
While some workers are local to the studio, many come to town temporarily during production … which can last months.
These folks aren’t going to live in a hotel room or a trailer all that time, which means they need nice, local housing. But they aren’t buying. They’re renting.
Some investors we know figured this out … and developed an entire business model catering to the unique temporary housing needs of the film producers.
“What? You didn’t see that coming?”
– Hawkeye to Quicksilver in The Avengers – Age of Ultron
We learned about it during an Atlanta field trip years ago … and it made perfect sense then … and it still does.
After all, when a producer is driving hard and fast to execute on a high-stakes timeline to get a 9-figure film over the line …
… they’re deploying a LOT of capital really fast … and they need to get things off their checklist quickly.
Focus on the REAL needs of your customer and you don’t need to compete on price.
Lesson 3: Primary drivers create secondary and tertiary jobs.
Even if you’re unable to get into the primary path of cash, there’s still a lot of opportunity to get in on the action … a little downstream.
When money is being drawn into a geography by a large enterprise or industry … the money flows through the primary driver to the locals.
So even though not all real estate investors are renting directly to members of The Avengers Endgame production team …
… there are plenty of employees of secondary local vendors who are also being paid out of the fat production budget.
Of course, it’s not just The Avengers Endgame budget, which is temporary.
The real driver is the CONSISTENT stream of production budgets drawn to Pinewood Studios.
But whether you’re deriving rental income directly tied to those production budgets via primary and secondary employees … there’s yet a third tier.
Even your tenants who don’t get paid directly from the production are working for the restaurants, shops, and other local businesses who serve those who are.
Just remember … it all starts with the PRIMARY drivers.
Pay attention to primary drivers and the rest will usually follow.
Lesson 4: Always begin with the end in mind.
You may recognize this adage as one of The Seven Habits of Highly Successful People by Stephen Covey. It’s a powerful concept.
The Avengers Endgame is the capstone of a world-class case study in what “beginning with the end in mind” looks like in the real world.
Every film over a decade painstakingly added new characters and story-lines carefully woven together into a powerful tapestry of cinematography.
It’s a testament to thinking ahead.
Of course, there’s probably been many course adjustments along the way … as talent, opportunity, and even adversity, all manifested on the road to success.
In that regard, The Marvel Cinematic Universe is a lot like life and investing.
Yet very few folks we know are thinking that far ahead. But perhaps they should be.
In the Create Your Future Goals Retreat, one important outcome is to define your personal mission, vision, values and most important goals … for ALL areas of your life.
With clarity of vision, you can make better small decisions about how you want to live and fund a life you’ll be pleased with when you put you head on the pillow for that very last time.
Take time to plan a happy ending for YOUR endgame.
Lesson 5: Big dreams take time to build.
In the 22 films from Iron Man to The Avengers Endgame, Marvel Studios patiently constructed an entire “cinematic universe”.
It made the concept of a trilogy seem tiny. It was (and is) a BIG vision … and it took over a decade to develop.
In real estate, whether you’re assembling a powerful portfolio of properties or building a mega-million-dollar master planned development, it takes time and consistency to get it done.
Most people can’t think that big … and still pay attention to details at the same time. And many that do, can’t stay the course.
But when you do, you have a chance to accomplish something extraordinary.
Think big. Plan small. Stay the course.
Lesson 6: Together Everyone Achieve More.
TEAM is a huge theme both inside and outside The Avengers Endgame story line.
From the first Avengers film, where a self-absorbed Tony Stark transforms into someone willing to make the ultimate sacrifice …
… to the violently divisive Captain America – Civil War and The Avengers – Age of Ultron where division nearly destroys the team …
… The Avengers discover time and again their best chance for success is teamwork.
Of course, out in the real world, it took teams of writers, directors, actors, special effects, stunt people, production and marketing staff …
… all working together with diverse skills, backgrounds, personalities and perspectives …
… to make The Avengers Endgame the BIGGEST box-office success in history.
If you have aspirations to build a great real estate investing business or portfolio … ESPECIALLY if you’re syndicating, you’ll need a team.
Build a great team.
Finally, to paraphrase Scarlett Johansson’s Black Widow when she unleashed The Hulk to smash the baddies … Go be an investing hero.
Until next time … good investing!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook, and our Feedback page.
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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