Real estate is NOT an asset class …

When the talking heads on mainstream financial media talk about real estate, they often refer to it as an “asset class.”

And lately, they say real estate is “in a bubble.”

No wonder so many of them are mystified about how the real estate guy in the White House goes about his business.  But that’s a different discussion.

Today, we’re focused on the huge difference between how real estate investors and paper investors see the world … and why it matters.

Because the way you think affects the way you act … which affects your results.  

If you pay too much attention to people who don’t understand your business, you’ll probably make bad decisions.

Folks who deal in “commodity” assets like stocks, bonds, currencies … even precious metals, oil, food and other resources …

… think in terms of charts, graphs, trends, and asset classes.

By “commodity”, we mean a group of individual items which are all identical. 

So an ounce of gold, a share of Apple stock, a U.S. Treasury bond, a barrel of oil, the U.S. dollar, or a bushel of wheat …

… are all virtually identical in any market, anywhere in the world.  They’re essentially commodities.

 And because they’re traded in hyper-efficient, highly-visible, globally accessible exchanges … there’s no room for negotiation.  Only bidding. 

So instead of the Art of the Deal, there’s just the speed of the bid. 

But real estate is different.

There’s ALWAYS room for negotiation.  Properties don’t trade in packs.  Every geography is unique … right down to the neighborhood and property.

Here’s a recent article from ATTOM Data Solutions, who does a great job putting out lots of data rich content … 

Equity Rich U.S. Properties Increase to New High in 2018 

– February 5, 2019 

We like equity, so naturally this caught our attention. 

The article cites a recent ATTOM report which reveals in Q4 2018 … “U.S. properties were equity rich” … at the highest level since Q4 2013.

Of course, a mainstream pundit might surmise this means the “asset class” of real estate is in a bubble.  Watch out below!

But as ATTOM points out …

“… the report helps to showcase a story of the West coast markets having the highest share of equity rich homeowners versus the South and Midwest market, who continue to have stubbornly high rates of seriously underwater homeowners.”

Forget for a moment they’re only talking about houses …

… as opposed to industrial, resort, retail, office, multi-family, farmland, self-storage, residential assisted living, RV parks, campgrounds, student housing …

… and any of a myriad of other sectors of real estate.

Not sure how all those diverse sectors get lumped into one “asset class”.  Unless Earth is an asset class.

Obviously, in just the sub-category of single-family houses … there’s a big difference in price-setting dynamics in the West Coast versus the South and Midwest.

And even while some properties are at record levels of equity …

 “… more than 5 million U.S. properties were seriously underwater — where the … balance of loans … was at least 25 percent higher than the property’s … value, representing 8.8 percent of all U.S. properties with a mortgage.” 

Apparently, while equity is happening in some markets, in others the opposite is true.  At the same time.

So it seems not all the individual units in the “asset class” of housing are uniformly priced … or bubbling up together … or even moving in the same direction.

Yes, we realize “stocks” as a class has both winners and losers on the same day.  Some are up and some are down.

And yes, we realize an individual stock can be up one day and down (way down!) the next. 

But the entire lot of individual units move in lock step. There are still millions of shares of Facebook stock out there … and if it tanks, it tanks everywhere at the same time.

There’s no negotiation.  No deal making.  Just a high-speed bid. 

But this isn’t about whether stocks are good or bad … or whether stocks are or aren’t an asset class. 

Our point is … real estate is NOT an asset class.  And this means there are ample pockets of opportunity in niches and neighborhoods.

And those opportunities are often found in unlikely places.  

Here’s another ATTOM article …

Top 10 Seriously Underwater Metro Areas – February 8, 2019

Not surprisingly, there are a few rust belt cities on the list of underwater cities. 

Until recently, net job losses in manufacturing has hampered economic recovery in many of these locations.

Of course, recent job growth in manufacturing is setting the table for a resurgence in rust belt communities … and creating opportunity in comeback markets.

Meanwhile, a couple of markets where we have boots-on-the-ground teams popped up on the underwater list … including Cleveland and Memphis.

So now we’ve gone from the macro picture of the “equity rich” United States housing market …

… to discovering the macro picture is made up of a blend of the high-equity West and lower-equity Midwest and South.

But even the metro level is too macro for practical Main Street investing.

Consider Memphis … a metro we know VERY well thanks to our long-time friend,  Terry Kerr 

Remember, Memphis is a top 10 underwater metro. Sounds like a loser, right?

Not so fast.

Thanks to Terry Kerr, we discovered Memphis 10 years ago.  And Terry told us about a little sub-market of Memphis called Frayser. 

If Elvis is the King of Rock and Roll … then Terry Kerr is the King of Turnkey in Frayser. 

We won’t bore you with all the great reasons why Terry focuses on Frayser.  That’s not the point of this muse. 

But because we’re interested in Frayser, we pay attention. And this little gem popped up …

Home values in Frayser on the rise – January 17, 2019

“According to the Frayser Community Development Corporation, the areas’s median home selling price has nearly doubled in the past two years.”

“The prices of homes in Frayser are rising higher than in any other part of Shelby County.”

There much we could say … and MANY lessons.  For now, just remember, this is happening in a metro that’s top 10 underwater. 

Frayser is a place both macro and metro watchers have probably never heard of.  But we have.  That’s the value of having a great local team.

Our main point today is …

Real estate is NOT an asset class.  Each sector, region, metro, neighborhood, property, and ownership are unique. 

To find hidden gems, it’s important to go from macro to metro to micro with the help of savvy boots-on-the-ground experts.

So when you hear chatter about the “everything” bubble including real estate … those are trend followers talking about commodity assets at the macro level.

But no one in the real world buys real estate at the macro level.

In the trenches of Main Street, street smart and well-connected investors find and negotiate unique deals at micro level … finding great opportunities in the crevices of inefficiency. 

 It’s one of the many reasons we love real estate.

Until next time … good investing!


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Podcast: Tax Strategies for 2019 with CPA Tom Wheelwright

CPA Tom Wheelwright brings his renowned expertise and enthusiasm to the normally boring subject of taxes.

Tom tells us there’s lots for U.S. real estate investors to like about the relatively new tax laws … and provides valuable tips on how to build more wealth faster by deferring or eliminating taxes.

Sounds good to us!

So tune in as Tom Wheelwright reveals his top tax tips for real estate investors!


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Taking a Quantum Leap through Syndication

Incremental growth is interesting … but quantum growth is exhilarating and enriching!

With your own funds, you can grow your portfolio gradually over time. But we’re talking years and years.

Graduate to bigger deals on a shorter timeline by taking a quantum leap … with syndication.

Smart investors use syndication as a strategy for turbo-charging their income AND their investments.

Learn why syndication is the key to quantum growth and how you can get started on your own syndication strategy.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your leaping host, Robert Helms
  • His lurching co-host, Russell Gray

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Creating your own quantum leap

Whether in life or in real estate investment, it doesn’t take a genius to know you can do MORE with more resources.

There are two ways to grow your resources. You can grow them incrementally over time … or you can take a quantum leap.

The question is how. How can you go bigger … and how can you do it as quickly as possible?

You can only go so far on your own account. With the money you save and the loans you qualify for, you can build a nice portfolio.

But if you want a SUPER portfolio, it’s time to look at syndication … raising money from private investors to do bigger deals.

Syndication can sound intimidating. The irony is that it’s actually EASIER to go big than you think.

Doing more … more easily … at scale

Many investors do real estate on the side … but what if investing were your day job?

Syndication allows you to invest your money alongside your investors’ money. Plus, you get a piece of your investors’ profits because you put in the time doing the work.

One of the big benefits of real estate syndication is you are no longer limited by your own thinking or your own finances.

By working together with private investors, you have a bigger budget … and a bigger budget allows you to scale your work more effectively.

Money isn’t something to be hoarded. It’s a resource to be used.

Your job is to figure out how to make smart investments with your money and your time so when the money goes out, more comes back.

Finding deals, book keeping, filing, issuing reports … all the things you have to do when you are managing real estate … you can hire people to do for you.

By hiring experts instead of trying to do everything yourself, the quality of your work will improve.

When you hire the best, it doesn’t cost you money … it makes you money.

Syndicating lets you work at scale, which makes your job easier and helps you work better.

Leveraging your real estate experience

A quantum leap requires leverage. As a smart deal-maker, you leverage your time and your money … but you also leverage your experience resume.

All the successes … and all the failures … you’ve had in real estate deals over the years become your greatest attributes.

As a syndicator, your job is to find real estate opportunities and package them as passive investments for people who have more money than they have time.

Your experience making real estate deals for yourself makes you a valuable resource to your investors. You’ll know what markets to shop in, when to buy, and how to generate cash flow.

And with syndication, the bigger the deals you take on, the smaller the cut you can take … and still make a nice return.

This means an even bigger slice of the pie can go to your investors … making the deal more attractive for them.

Creating your own job and getting paid

When you raise money to do a syndicated deal, you are creating a job for yourself.

If you do the job well, syndication can be a very lucrative opportunity.

When you partner with private investors, you make money when the deal makes money. You get paid when your investors do.

But there are other ways to earn money as a syndicator. You can charge additional fees for all the work you are doing to manage the deal.

Some syndicators bill a fee up front called a “promote.” This fee allows them to make income while they are working to make the deal happen, so they can then bring in revenue for their investors.

You can also add fees for the time you spend working to sell a property, acquire a property, or finance your deals.

There is plenty of money to be made if the deal is good.

Getting started in syndication

You don’t have to be a multimillionaire to leap into syndication. You can start small and work your way up to bigger and bigger deals.

You do need be able to sell. You have to create deals that are attractive enough to build your investment team … and you need to be able to lead and inspire your team to action.

So, you get started in syndication the way you should start with all things real estate … education.

Syndication starts with understanding. The things you learned best in life you didn’t master because someone told you … it was because they showed you.

Place yourself in the company of other syndicators who are finding success. Ask them questions and watch how they make deals.

A great way to start is by attending The Secrets of Successful Syndication. You’ll learn the details of starting your own real estate syndication business from some of the best syndicators operating today.

And you’ll meet investors just like you who are ready to jumpstart their growth.

There’s a lot to learn … but it is learnable!

Quantum leaps start in your mind. Learn the basics, get around the right people, and be diligent.


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Tracking trends and making smart moves …

The winds of change are swirling like a tornado … even if they’re outside your personal horizon at the moment.

That’s why we stay up on the lookout perch … watching for clues in the news and shouting out what we see … so you have time to make smart moves.

A couple of things popped up that we think are noteworthy for real estate investors …

Private Equity is Moving in on Single-Family Rentals – NREI Online 2/4/19

“In the past, individual investors owned more than 80 percent of single-family rentals. Since then, the number has fallen significantly.”

“…individual landlords have been increasingly marginalized by big institutional investors.”

“When banks started to foreclose on mortgages, institutional investors swooped in, leaving individual landlords with new, outsized competition.

If you’re an active Main Street individual investor, you know inventory is hard to find in major markets … and it’s even harder to make the numbers work.

Of course, the article’s author runs a crowdfunding platform, so his implied solution is to join the crowd and invest in a bigger deal.

While we agree with the premise of going bigger, crowdfunding is only a solution for small-time passive investors because of government imposed limits.

So if you’re passive and want to go bigger, you need a better answer.  More on that in a moment.

But if you’re an active investor, then what?

Starting your own crowdfunding platform is a heavy lift.  You need tech, special licensing, and a crowd.  None are cheap or easy.

So how can an active Main Street investor compete, when the big boys are marginalizing the little guy?

You’ll need to find a way to go big and invest outside the box.

For us, that comes in two forms …

First, perhaps the best way for an active Main Street real estate investor to go big is to syndicate private capital.

It’s like crowdfunding … without the crowd or tech.  It’s still work, but doable for a Main Street individual.  In fact, we know MANY are doing it.

And for passive investors who need in on bigger deals without arbitrary limits, and want to be more than just a face in a crowd or number on a spreadsheet …

…. investing in syndicated private placements opens a world of opportunity.

So the synergy between active and passive Main Street investors should be obvious.  That’s why it works.

When it comes to investing outside the box …

… it’s REALLY important to pay attention to developing trends … and then paddle quickly and get in position to catch a wave.

For example, there’s a huge demographic wave known as the baby boomers.

You’ve probably heard of it. 😉

Boomers are getting old.  So real estate niches that cater to seniors is a hot sector … in both residential and commercial.

If you’re a passive investor, you can invest in a senior housing REIT, a crowdfunded big box project, or a privately syndicated residential facility.

They each have pros and cons.

But right now, margins on residential facilities are pretty fat.  That’s because the big boys are playing at the big box level … for now.

When we speak at Gene Guarino’s Residential Assisted Living Academy training, we point out … big money won’t ignore fat profits forever.

Big money’s already moving aggressively into single-family homes … bidding prices up and squeezing out late-to-the party individual investors.

Those who saw the big boys coming and paddled into place early are riding a nice equity wave.

This could easily happen with residential assisted living.  So it’s a bit of a land grab right now.  The good news is there’s .

That’s just one way to invest outside the box.

Another is to pay attention to economic trends and migration patterns.

Think about it …

As big players gobble up inventory in major markets, smaller investors … and eventually big money … will migrate outside the box into secondary markets.

For example, though Dallas is still a solid single-family market … deals are few and far between.

It wasn’t always that way.  When we started going to Dallas 10 years ago, it was the front end of a real estate boom that’s been GREAT for early adopters.

Today, markets like Kansas CitySalt Lake City and Cleveland are on our radar … each for a different reason, but they’re variations on a theme.

These markets have affordable price points with strong cash flows for investors.

They’re also attractive to Millennials (another important demographic to watch) who’ve been priced out of primary markets.

But it’s not just the young and cash-strapped who move for financial reasons.

There’s another important economic trend we’re watching closely, and it’s alluded to in this Washington Examiner article …

Cuomo’s woe: More taxation means more out-migration

Caution:  This is an opinion piece and you may not agree.

But the point is high-earners are leaving New York to escape high taxes they can no longer deduct from their federal tax bill.

This Bloomberg article elaborates …

Cuomo Blames Trump Tax Plan for Reduced New York Tax Collections

“Governor says wealthy New Yorkers are giving up residences …”

“…leaving for second homes in Florida and other states …” 

Once again, these trends are easy to see coming, watch develop, and then act on … BEFORE they pick up a lot of steam.

We’ve been excited about Florida for some time … and this whole tax thing just makes it better … especially for nicer properties.

So here’s the point …

We got a HUGE wake-up call in 2008 … and it wasn’t any fun.  But those lessons help us see trends and opportunities early instead of late.

The key is to pay close attention to clues in the news …

 … then get around REALLY smart people who can help you understand what you’re seeing … so you can act decisively.

Because if all you are is aware, but you don’t act … you might as well watch game shows.

But when you see a trend and have the right relationships, you can identity opportunities and take effective action quickly.

Everyone’s smart in hindsight.  But can you see the future?

Until next time … good investing!


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Out of control debt is a problem … and an opportunity

Debt is a lot like religion and politics.  People have strong opinions … so it’s risky to talk about it in a group setting.

But we’re going to do it anyway … because there’s more debt in the world than ever before.  And it has big potential ramifications for real estate investors.

Most real estate investors use debt.  Some because they need to … others because they want to.

Consumer finance gurus hate debt.  They say cut up your credit cards, pay down your mortgage, drive an old car, and brown bag your lunch.

On the other hand, Robert Kiyosaki (the greatest-selling personal finance author in history) LOVES debt …

… but he makes an important distinction between “good” debt and “bad” debt.

“Bad” debt is used for non-productive purposes, and payments come from the earnings of the borrower. 

When you borrow more than you can service and eventually pay off, the debt first enslaves you … then bankrupts you.

That’s bad.  And it can happen to people, businesses, and countries.

“Good” debt is invested for productive purposes … creating income and capital gains exceeding the interest expense.  Good debt is profitable.

And when the payments come from the investment itself … the loan is essentially free, the return is infinite, and the debt goes from good to GREAT!

The topic of debt popped up when ex-Starbucks CEO Howard Schultz announced he may run for President.

His pet worry?   According to this Time.com article

‘‘… the fact that the United States is $20 trillion in debt…” 

Actually, it’s closer to $22 trillion.  But who’s counting? 

It seems Schultz thinks the MAIN problem is Uncle Sam’s debt … and presumably he can fix it.

Maybe.  But we’ve seen dozens of politicians over the decades … both winners and losers … all warn about the national debt.

But no matter what combination of colors end up in control … one thing is SURE.  The debt grows … and grows … and GROWS.

So even if Schultz runs and wins, he’ll probably be the same as Donald Trump, who’s no different than Barack Obama, who was no different than Ronald Reagan.

There.  That should have offended pretty much everyone … so now we’re all on a level playing field.

But this isn’t about politics or personal preferences. 

The whole point is to cut through the noise and look at the structural realities so we can make better investing decisions.

Here’s the dirty little secret … the entire system is debt

When currency is borrowed into existence (which is how it works), then it can’t be paid back WITH interest … unless you borrow even MORE currency into existence to pay the interest too.

It’s an infinite loop of ever-expanding debt.  It’s not political.  It’s STRUCTURAL.

Like water in an aquarium, you can swim from one end to the other, hide under a rock or behind a plant, lurk in the depths, or float at the top. 

But no matter where you go or how you’re positioned, you’re ALWAYS in the water.  If you jump out, you suffocate.

Even if you personally manage to become “debt free” … your government goes into debt for you … then uses taxes and inflation to force you to debt service.

Depressed?  Don’t be. 

But that red pill reality check is the first step towards “confronting the brutal facts” … a pre-requisite to making better, more pragmatic decisions. 

Robert Kiysosaki understands the financial system is based on perpetual, growing debt.  You can’t effectively escape it.

In fact, on our 2012 Investor Summit at Sea™ …  after G. Edward Griffin (The Creature from Jekyll Island)  explained the debt-driven nature of the Federal Reserve system …

… Kiyosaki said, “Don’t fight the Fed.  BE the Fed.”

That’s a LOT of paradigm shattering brilliance all distilled into two short sentences.

But it begs the question … HOW?

Debt. 

The Fed uses debt to create currency and so can you.  The key is to use GOOD debt … and stay keenly aware of where you are in the “cycle.”

Consider this truism …

“If something cannot go on forever, it will stop.” 

 – Herbert Stein 

Debt can only grow safely if it can be serviced.  When payments are missed, then debts default, credit market seize, and asset prices plunge.

That’s what happened in 2008.  And it was GOOD … at least for those who saw it coming (or listened to them) and were properly positioned.

For investors, crashes are like sales.  You can stock up on quality assets … IF you’re emotionally, intellectually, and financially prepared to act quickly.

Good debt is the tool of choice for extracting equity while it’s available … and having it liquid for the next inevitable shopping spree.

And real estate is the collateral of choice …

… because the cash flows, large loan limits, tax breaks, favorable interest rates and amortization schedules make real estate debt the best good debt available.

Plus, you’re double-hedged against inflation because you have both a real asset AND long-term debt.

That’s important because …

Out-of-control debt virtually assures currency debasement.

That’s wonky talk for inflation. It takes more paper money to buy the same real things.

The sooner you “get real” with real estate, commodities, energy … the better you avoid the inflation tax.  Of course, real estate and oil also help avoid income tax too!

And one last thing …

(thanks to our Peak Prosperity pals Chris Martenson and Adam Taggart for enlightening us)

Economic activity requires resources.  Try making a product without raw materials or energy.  It ranges from not easy to impossible.

Debt requires payments … which come from profits … which come from productivity … which requires resources.

Growing debt requires growing supplies of resources.

But if supplies are limited, then growing demand will inevitably bid UP the prices of those resources.

And those who own, produce, process, and distribute those resources … and along with those who invest in the communities those folks live in … will be enriched.

There’s a reason we pay attention to precious metals, energy, farmland … in addition to our fascination with everyday real estate.

Real assets help build a resilient portfolio … even in the midst of a debt-fueled slow-motion train wreck. 

So go ahead and cheer your for your favorite politician.  Watch the Super Bowl, too.  They’re both cheap entertainment.

But remember to confront the brutal flaws of a debt-based system and then structure yourself accordingly.

Until next time … good investing!


More From The Real Estate Guys™…

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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Podcast: Taking a Quantum Leap through Syndication

When it comes to your portfolio, incremental growth is interesting … but quantum growth is exhilarating and enriching!

Most real estate investors aren’t full-time investors. They get into the game part-time with a few properties … and then they catch the bug. They want MORE.

More means bigger deals … and bigger deals mean leverage, experience, and opportunities. But there is only so far you can go with your own account.

With the money you save and the loans you qualify for, you can build a nice portfolio … you want a SUPER portfolio.

That’s where syndication comes in.

In this episode, we revisit syndication as a strategy for turbo-charging BOTH your income AND your investments.

It’s easier than you think! Learn to raise money and do bigger deals through successful syndication.

Get your education on! Listen in now.


More From The Real Estate Guys™…

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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Forecasting the Future of Real Estate in 2019

Are you prepared for the future?

In our annual yearly forecast episode, we explore the future of real estate in 2019. We don’t have a crystal ball … but we do have great resources and smart friends.

Hear from three real estate experts on the state of the housing market, the effect of changing interest rates, the outlook for commercial real estate, and MORE.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your forward-thinking host, Robert Helms
  • His fraidy-cat co-host, Russell Gray
  • Consultant and new home expert John Burns
  • Podcaster and real-estate expert Kathy Fettke
  • The Apartment King, Brad Sumrok

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In the news …

We’ve scoured the news sources and industry journals to see what might be coming in 2019.

The National Association of Realtors predicts in their 2019 Forecast that home sales will flatten and home prices will continue to increase.

The report also says not to expect a buyers’ market within the next five years except in the case of a significant economic shift.

On the other hand, the forecast cautions sellers to be mindful of increasing competition. It notes inventory growth, particularly in high-end housing, but reminds readers of the current housing shortage.

We’ve looked at predictions from various experts. Several of those experts predicted home prices will stabilize or rise at a much slower rate than in previous years.

One expert predicted listings in entry-level markets will remain tight. Yet another predicted industrial markets will continue to sizzle, interest rates will keep rising, and apartment rents will steadily moderate.

We’ve also read an article covering the State of the Market Panel hosted by Real Estate Journals.

The panelists agreed 2019 will be a big year for commercial real estate, including some new industrial and distribution/warehousing opportunities. They noted commercial rates will keep inching up.

Investors should consider opportunity zones and changes in the tax code in 2019. There are far different incentives for investors than for homeowners, and expensive housing means even more people will be pushed from buying to renting.

Predictions for the new home industry from John Burns

John Burns runs John Burns Real Estate Consulting, and he aims to help people in the new home industry understand trends.

In 2019, John says he is, “confident we won’t see construction grow that much.” He notes sales slowed dramatically in 2018, and he believes people will continue to be cautious.

What are builders paying attention to? They’re trying to build smarter with strategies like offsite construction and materials efficiency. They’re also building better by integrating smart-home technology and pivoting toward lower price points.

What about trends in home ownership? John says he thinks ownership is ticking back up. He says the millennial generation has some unique considerations … most want homes, but compared to previous generations, it may take them a bit longer to commit, especially because of increasing student loan debt.

And how do interest rates affect home builders? “It takes a big bite out the market,” John says. If people can’t get mortgages or can’t afford a new mortgage, they’re less likely to invest in a new home.

Take advantage of opportunity zones in 2019, says Kathy Fettke

Investors should look for jobs and opportunities in 2019. There will always be certain companies and cities that will thrive through a recession, says podcaster and Real Wealth Network founder Kathy Fettke.

These areas can provide investors with both equity and cashflow … and with new opportunity zones, there’s also the potential for tax breaks.

Neighborhoods that are flooded with investors because they’re opportunity zones WILL see equity growth, Kathy notes.

But just because an area is an opportunity zone doesn’t mean it’s a guaranteed good deal, and Kathy cautions investors to make sure deals make sense by investigating if they’ll hold out in the long run. That means job sources, stable and growing infrastructure, and good prospects for revitalization.

“You need the city on your side,” she says.

In 2019, Kathy is looking for stable employers that can thrive through a recession … she mentions Netflix. She warns investors not to get ahead of themselves by investing in areas that aren’t likely to improve within 10 years.

Employment is low, and interest rates are rising. We asked Kathy what she thinks will happen in that arena.

She says that while it’s hard to predict what will happen with the Trump administration, investors should keep their eye on corporate debt.

The ’08 recession happened because of a big consumer debt problem … corporate debt might cause trouble in the future. So, take a close look at the businesses that employ renters when investigating a market.

“Our world is changing so quickly,” Kathy notes. “Today is no longer a world where you can invest and forget about it for 30 years.” So in the housing realm, make sure you’re looking beyond the current tenant to say, who’s next? And will they have a job? Look for stability.

Demand and supply in multi-family, with Brad Sumrok

Last, we talked to the Apartment King, Brad Sumrok, educator and investor in the multi-family housing realm.

“I’m still proceeding with caution,” Brad says. But he notes there are many indicators that multi-family will continue to be a good asset.

We asked him whether some of the signs of doom from ’07 and ’08 are happening again in the multi-family space. The short answer? No.

Back then, there was a huge oversupply of housing. Now, there’s a 2-million-unit shortage. Most building now is happening in the A-class luxury space … but that’s not where the demand is. That means there’s an oversupply of luxury housing … but still some great opportunities to provide housing for working-class tenants.

Most people in the B and C class aren’t renters by choice … it costs, on average, $339 more per month to own a home than to rent. For blue-collar tenants, that’s a huge difference. And strict financing is further reducing the number of buyers.

That means more renters, and more demand for housing.

An increasing number of investors are looking at multi-family, which does inevitably mean cap-rate compression. But tax laws are on the side of investors.

“As the market changes, you have to temper your expectations,” Brad notes. Investors can’t expect to triple their equity in three years, and returns are likely to align with historical models.

That means there’s less of a cushion for making mistakes. It’s a strong case for investors to educate themselves before getting into an asset class.

To get educated on the multi-family market, check out Brad Sumrok’s 2019 Apartment Forecast! We wish you lots of equity in the new year.


More From The Real Estate Guys™…

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: Forecasting the Future of Real Estate in 2019

Real estate is a long-term commitment.

It’s important to understand what might be coming … so you can put yourself in a favorable position as you move into the uncertain future.

No one has a crystal ball. We can’t guarantee the future. But we CAN seek out expert voices with lots of experience in real estate who can filter all the different factors and come up with smart predictions.

Listen in as we examine what the experts are saying in our latest podcast. This episode features a round-up of real estate predictions from several organizations and publications we follow.

Most importantly, see what three real estate stars in different market and asset class segments are watching out for in 2019.

Learn about asset classes from commercial to multifamily, markets to watch, and trends in the housing market in 2019.

And join us as we examine the future of interest rates and the trajectory of supply-and-demand cycles.

Map out your 2019 game plan with expert advice from all corners of the map.

This detailed examination of real estate factors, trends, and changes provides helpful information as you plan your 2019 investment strategy … whether you’re a new investor or an old hand.

Listen in now!


More From The Real Estate Guys™…

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!

What this legendary real estate investor is buying NOW …

Even though most of us will never become billionaires, it’s sure fun trying.

But if we want to have a chance of making it BIG, it’s probably smart to watch and listen to those who’ve actually done it.

After all, as Tony Robbins says, “Success leaves clues.”

To which the Godfather of Real Estate, Bob Helms, adds … “You don’t need to give natural childbirth to a good idea … you can adopt!”

So when multi-billionaire real estate investor Sam Zell has something to say, we pay attention and take notes.

In a recent appearance on Bloomberg News, Zell reveals what he’s doing right now and why.  It’s a short clip, and you can watch it here.

There are some great pearls of wisdom to glean … and if you’ve been followingThe Real Estate Guys™ for a while, some of them will sound familiar.

But that’s not because we’re super smart.  It’s more because we’re well- informed from spending quality time with lots of really smart people.

Sam Zell is buying gold … for the first time in his life.

We think that’s REALLY interesting.

Of course, we’ve been following gold for quite some time … for a lot of reasons.

So while it’s interesting that Zell is buying gold for the very first time in his long and uber-successful investing career … what’s even MORE intriguing is WHY.

In the interview, Zell offers up two reasons.  One is obvious.  The other is more subtle … and leads to some even more subtle lessons.

All this from a guy who wrote a book titled Am I Being Too Subtle?

First, Zell says he’s buying gold because of the supply and demand dynamic.  He overtly states he sees gold supply constrained going forward.

It’s obvious from Zell’s comments that it’s important to understand supply and demand when investing in anything, because …

When supply is low relative to demand, there’s opportunity.

Yes, we realize that’s Investing 101.  But it’s also a GREAT reminder that even at the billionaire level, successful investing is based on basic, timeless concepts.

However, there’s MORE to be gleaned from Zell’s comments about gold …

While he openly explains that he sees the supply being constrained, he onlyimplies his confidence in persistent demand for gold.

 After all, if supply drops … but demand drops too … there’s no imbalance, and therefore, no opportunity.  Zell’s too smart to miss that.

So Zell must see gold demand holding … or increasing.

That means the supply and demand dynamic in gold is SO compelling that billionaire Sam Zell is buying gold for the FIRST time in his EPIC career.

That’s telling in and of itself.  But wait!  There’s more …

In addition to constrained supply combined with persistent and growing demand going forward … Zell must think the opportunity in gold is quite good right now relative to other investment options.

Which begs the question …

What’s different in TODAY’s world to push the prospects for gold so high up Sam Zell’s priority ladder?

After all, he’s been around a LONG time … through stock market crashes, recessions, financial crises.  What’s different NOW that makes gold alluring? 

That’s a topic too big for this commentary … and our limited brains …

… but it will be a hot topic of discussion with gold experts Brien Lundin, Dana Samuelson and Peter Schiff aboard the upcoming Investor Summit at Sea™.

We’re guessing part of the answer is wrapped up in Sam Zell’s second subtle comment …

Sam Zell is buying gold as a “hedge.”

Hmmmm … that’s interesting.   A hedge against what?

Investopedia defines a hedge this way …

“A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.”

Well, THAT’S interesting.

So Zell is using gold to “reduce the risk of adverse price movement in an asset.”

And he apparently considers gold to be highly useful as “an offsetting position in a related security.”

Which begs yet another question …

What asset / related security is Zell worried about … for the first time in his long and illustrious career?

Our guess is it’s the U.S. dollar.  In fact, we’d bet a beer on it.

And there’s one more clue we think bolsters the argument Zell is hedging the dollar …

Zell is bullish on oil.

 Wow.  What a coincidence …  our recent episode on precious metals was immediately followed with an episode on oil and gas.

Maybe Zell’s been listening to The Real Estate Guys™ radio show???

Um, probably not.

More likely, we’re learning a lot from all the smart folks we hang out with and listen to … and we’re starting to think like billionaires.  We hope so.

So why oil?

Also coincidentally … just a week before the Sam Zell interview was published, we published our weekly newsletter and talked about … oil.

So we won’t take time here to explain why we think oil could be a big story going forward.  You can read our thoughts here.

But this Zell interview affirms what we and many of our big-brained pals have been monitoring carefully for several years …

The dollar is under attack … from both internal and external forces.

So anyone who earns, invests, borrows, lends, or denominates net worth in dollars … most likely YOU … should probably take steps to become more aware and better prepared.

After all, if multi-billionaire real estate investor Sam Zell is hedging against the dollar … it’s smart to pay attention and consider doing the same.

Until next time … good investing!

More From The Real Estate Guys™…

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!

Preparing for the mega-trends of the next decade …

We realize it’s only the START of 2019 …

But 2019 is the LAST year of the second decade of the 21st century.

And with our annual goal setting workshop coming up this weekend, we’re in the mood for thinking ahead.  Like a decade ahead.

Perhaps you should too …

After all, real estate investing is based on long-term commitments … to markets, to properties, and often to financing.

Right now, there are more than a few reasons to think there are probably some MAJOR shifts coming … things which are important to consider in today’s investing decisions.

Consider this recent headline …

U.S. economy could slip from top spot in 2020 and keep slipping, analysts say – MarketWatch, January 14, 2019

Standard Chartered predicts that China’s GDP will overtake the U.S. next year. What’s more, within another decade, India is pegged to push the U.S. even further down the list

Think about that.

This isn’t some routine wave in an economic cycle.  This is a complete global shift of economic (and probably military) power and influence.

Virtually NO ONE investing today has ever done so in a world where the United States and its almighty dollar aren’t the undisputed dominant economy and currency.

Of course, we’ve been talking for quite some time about preparing for the possibility of the U.S. dollar losing its unique and powerful position as the world’s reserve currency.

There are several internal and external forces working against it, in spite of recent relative strength.

In fact, Russia just dumped all its dollar holdings and traded them for Chinese yuan …

Russia Buys Quarter of World Yuan Reserves in Shift From Dollar – Bloomberg, January 9, 2019

These are both MEGA-trends … major shifts that are gradually taking place over a long period of time.

Back in 2016, Business Insider published an article about four mega-trends that could change the world by 2030 … including the U.S. losing top status.

Of course, we’re only a few years in.   But IF you’re paying attention, you’ve been watching these trends slowly and surely develop.

Most people don’t even see it happening, much less have any understanding of what it might mean to them … or how to prepare.

We think that’s a mistake.

There’s an old investing adage which says, “the trend is your friend.”

In other words, it’s generally a losing proposition to invest against the trend.  It’s just too powerful.  Especially a mega-trend.

Sure, you can be contrarian and buy when others are selling or vice-versa.

But that’s just navigating cycles.  If you get it wrong, you can simply wait it out because time often heals those wounds.

But a mega-trend isn’t a cycle.  It’s a major long-term shift in the landscape.  It fundamentally changes the way the world works.

The gradual erosion of the United States exclusive status is a powerful mega-trend.

Artificial intelligence is another.

In a recent news report, a leading expert predicts AI will displace 40 percent of world’s workers as soon as 2035.

That kind of disruption has the potential to impact economies, political systems, and your real estate investments.

So when thinking about the New Year ahead … we encourage you to start thinking about the next decade as well.  Because big change is on the horizon.

Fortunately, real estate moves slowly … just like a mega-trend.

And because real estate is a permanent and essential part of human existence, there’s likely to be investment opportunity … so long as private property rights survive.

So what might all this mean to YOUR real estate investing?

It’s obviously way too much to unpack in a weekly newsletter, but here’s some food for thought as we approach the 3rd decade of the new millennium …

U.S. real estate could grow in appeal as a preferred wealth preservation haven for foreign investors.

Sure, the U.S. economy and dollar might get knocked out of the top spot.  But the U.S. has a long and stable history of strong private property rights.

The same can’t be said for some these up and coming economies.

However, if the dollar loses reserve status, then dollar-denominated asset prices … along with interest rates … could surge in response to inflation.

So anyone who uses long-term fixed debt to acquire real estate BEFORE it happens could end up a two-time winner.

Rising prices against fixed debt makes equity happen.  We like it.

The key is to pick markets and product types likely to see increased demand if economic conditions become more challenging for working class folks.

Of course, if economic conditions improve then all the better.  But best to prepare for downward pressure.

These are themes we’ve been talking about for years … because the mega-trends driving them have been slowly developing for quite some time.

Be careful not to let routine cycles, political winds, or investing fads blind you to the mega-trends underneath it all.  Mega-trends transcend all those things.

The good news is mega-trends move slowly.

So IF you’re paying attention, you’ll almost always have plenty of time to adjust your position to capture opportunity and mitigate risk.

The even better news is real estate is a tangible, essential asset … with a unique status.  All stakeholders in society have a vested interest in keeping it valuable.

Not all investments can say that.

Of course, all investing involves risk.  But so does NOT investing.

So it’s a matter of  being strategic and taking well-calculated risks … which is why we think it’s critical to keep a keen eye on mega-trends as well as cycles.

When you play off the big picture, it smooths out short-term gyrations which can sucker Pollyanna investors to jump in … or spook skeptical investors into missing out.

That’s why we’re REALLY looking forward to spending a week with our incredible faculty members on our fast-approaching 17th annual Investor Summit at Sea™.

Of course, we hope you’ll join us.

But whether you do or don’t, we encourage you to get together with smart, experienced investors and discuss the way the world is changing …

… and how YOU can best position yourself to survive and thrive as the future unfolds.

Until next time … good investing!


More From The Real Estate Guys™…

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!

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