Ask The Guys – Infinite Returns, Gold, Cap Rates, and Cash Flow

It’s your questions and our answers.

That’s right. It’s time for another segment of Ask The Guys … when we hear about the real-world challenges investors like YOU face every day.

We have another great collection of questions from our loyal listeners … covering everything from infinite returns to gold, proper reserves, compressed cap rates, and cash flow.

Remember … we aren’t tax advisors or legal professionals.

We give ideas and information … NOT advice.

In this episode of The Real Estate Guys™ show, hear from:

  • Your in-the-know host, Robert Helms
  • His go-with-the-flow co-host, Russell Gray

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The ins and outs of infinite returns

Our first question comes from Sean in Durango, Colorado, who wants to know more about the ins and outs of infinite returns.

This is a topic we are pretty passionate about … it was even the theme of this year’s Investors Summit at Sea.

The idea of an infinite return is pretty simple. It means that you’re investing on the house’s money.

In other words, you put up some money for a deal … to buy a property or be in syndication or grow crops … and at some point the deal has paid you back … and you’re still making money.

Maybe that takes a year or five years … but once you get all of your initial capital off the table, everything else that comes in is an infinite return.

Infinite returns are easy to do in real estate … but it DOES take time.

There are lots of different ways to chase an infinite return, like getting creative with financing and syndication … but the core concept remains the same.

You’re earning a return on no money at risk.

Purchasing real estate with other people’s money

Teresa in Claremont, California, wants to know more about using other people’s money to leverage the purchase of real estate.

Does it only work with people who have lots of money for a downpayment? Are there any lenders willing to finance 100 percent of a deal for a buy and hold?

Using someone else’s money doesn’t mean breaking into their house in the middle of the night or stealing from their bank account.

It means showing them the opportunity.

One of the primary sources of other people’s money are lenders. They’re in the business of putting capital to work for their depositors, for their shareholders, and sometimes for themselves.

Lenders put up some of the money for a deal in exchange for some portion of the return or a predictable income stream, like an interest payment.

You can also leverage other people’s money through syndication. If you need $1 million to do a deal, you can raise $100,000 from 10 different people.

There are lots of legal and ethical implications to a syndicated route like this … but it can be a great way to get started passively or if you’re interested in being a full-time real estate practitioner.

A lot of people think they have to have some sort of money to start with to do a deal. It helps … but you don’t have to.

What you do have to have is a deal that makes sense … because it’s going to end up being the collateral or the investment that your equity partners come to.

No matter what, you’re going to have debt … and you’re going to have equity.

The key is to look at how much profit is in the deal and figure out how much of that you can give away to different people for their participation.

And when all of that is done … is there enough leftover for you?

Finding a lender who will cover 100 percent of deal through a loan is tough … and the ones that do will usually be for a primary residence.

Protect your cash flow with reserves

Gary in Scottsdale, Arizona, owns four single-family rental properties.

The question on Gary’s mind is how to deal with the reality of net cash flow … one major expense can wipe out your entire annual cash flow.

It’s real and it happens. It has even happened to us.

We always … always … put contingencies and reserves in our pro formas.

A pro forma is your plan for the property … what you think the income and expenses are going to be.

There are two major places where you will need reserves.

When you buy the property, you can’t put 100 percent of your cash into the down payment and the property. You need to have some in reserve.

Most lenders require this. When you close escrow, they’ll want to make sure that you still have money in your bank account.

We also recommend that you take some reserve capital out of every month’s payment as the rent comes in.

Perform your vital functions … and then put a little bit aside. That amount depends on your projected plan for your property and what needs you anticipate.

The cause and effect of cap rates and interest rates

With cap rates compressing across the country, it has been said that investors should be careful to still maintain a good spread between the cap rate and the interest rate.

Drew in Chicago, Illinois, wants to know if there is a direct correlation between these two factors or if it’s just a general rule of thumb to indicate when a market might be overpriced.

We think this is a great question.

Capitalization rate … or cap rate … is determined using net operating income.

Cap rate doesn’t include anything to do with leverage or your loan … so there is zero correlation between cap rate and the interest rate.

But there CAN be cause and effect.

If interest rates are low and you can borrow money for cheap … you want to borrow more.

And if you want to go out and find a property, you’re going to find a lot of competition because rates are low.

So, you’ll bid up the price for the same amount of income … making the cap rate go down.

Leveraging from gold and real estate

Debra in Alpharetta, Georgia, wants some further insight into leveraging from gold and real estate combined.

Assets like gold and oil are basically proxies for the dollar.

We borrow in dollars. We lend in dollars. We invest in dollars.

When you start looking at the dollar, you see a long-term trend in loss of purchasing power … it’s called inflation.

Real estate investors use inflation to get rich by borrowing money from the future and bringing it into the present when it’s worth more.

So when you borrow … you have effectively shorted the dollar.

You can accelerate that process with gold.

If you look at the history of gold relative to the dollar, it basically stays the same as the purchasing power of the dollar declines.

Gold gives you the opportunity to hold some liquid wealth outside of the banking system and hedge against the falling currency.

More Ask The Guys

Listen to the full episode for more questions and answers.

Have a real estate investing question? Let us know! Your question could be featured in our next Ask The Guys episode.


More From The Real Estate Guys™…

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Podcast: Ask The Guys – Infinite Returns, Gold, Cap Rates, and Cash Flow

Another great collection of real-world questions from The Real Estate Guys loyal listeners!

Tune in as we talk infinite returns, gold, proper reserves, compressed cap rates, cash flow … and more!


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!

Ask the Guys – Long-Distance Landlording, Property Management and More

Welcome back to an all-new edition of Ask The Guys!

Today, we’ll be answering listener questions. So listen in for our best real estate tips and tricks!

A disclaimer … we are not tax advisors or legal professionals. In our Ask The Guys series, we give ideas and information … NOT advice.

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

  • Your tipster host, Robert Helms
  • His tricky co-host, Russell Gray

Listen

 


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How do I find a property management company?

This question comes from Lee, in Bay City, Michigan. He wants to know whether we have any advice for finding—and vetting—management companies.

He says he’s investing in his area, but the only management companies he can find are run by real estate agents on the side. He has a day job, and doesn’t have time to manage on his own … so he wants to find a reputable company that’s up for the task.

He also asks whether he should move out of his local area, since there aren’t many management companies.

We always say you should invest where the numbers make sense … but you also need to invest in places where you can find a great team.

In the long term, your property manager is the most important person on your team. So if there aren’t any great property management solutions where you live … perhaps it’s time to expand your geographic investing boundaries.

Start by refining your personal investment philosophy, then look for a market that both matches your goals and has the management companies to fill your needs.

You don’t want single-point failure. Make sure the company you choose aligns with your philosophy. Ask them, “Who supports you, and how?”

You want to make sure their compensation model is aligned with your best interests. In other words, when you earn money, they do too.

And choose your property management company BEFORE you buy your properties. They can be an excellent resource for finding properties and asset class types that will work well for both of you.

Remember, you can’t scale up without putting the right team in place. Getting a great property manager on your team helps you find the professional distance you need to run your business properly.

How do Section 8 rentals work?

Laura, from Naples, Florida, wants to know how Section 8 rentals work and how she can acquire affordable housing in her investment market.

First, a few things about Section 8. Section 8 is housing subsidized by the Department of Housing and Urban Development (HUD). But it’s administered by local public housing agencies, so it’s not always available and differs across the country.

Section 8 can be great because a portion of the rent is paid by the government. You basically have a guarantee you’ll get most of your rent on time, regularly.

But tenants in this housing can be a tough crowd … sometimes they don’t blend well with other, non-Section 8 tenants. For that reason, we like a property to be all Section 8 or none.

A great resource for learning about Section 8 is Mike McLean, who has published a book called the Section 8 Bible and has some great online resources, too.

Affordable housing can be a good place to be because of stagnant purchasing power … but make sure you’re playing close attention to the program from which funding comes.

And keep in mind … the devil is in the details. If you’re not managing the property yourself, make sure your property manager is well acquainted with Section 8.

Should I invest now, or later?

Casey, in Lehi, Utah, has been listening to the podcast, and now he has a pressing question.

Casey has saved up $100,000 to invest, but he wants to know whether he should invest now or wait until the market takes a dive. He mentions worries such as rising interest rates, an unstable dollar, and inflation.

Let’s start with a premise … markets will either do well or poorly in the future. We know that. We also know that when the market hits the bottom, you can only go up.

Real estate is a long-term, buy-and-hold business. But it is interest-rate sensitive, so you want to make sure you lock in long-term financing if you invest now.

It’s also good to keep some liquidity for if and when the market does go downhill.

Something we like to say is, “Opportunities are like busses. Another one will always come along … but you have to get on the bus at some point.”

The way we see it, Casey has a few options …

  1. Invest in things that are likely to do well, even when the market is bad, particularly mid-level rentals and below. There will always be demand for housing, especially mid-range housing.
  2. Invest in a forced equity situation … a neighborhood or property that has room for improvement, which you can force upward in value. This will help you mitigate downward pressure to the dollar.
  3. Invest in a bigger market … this provides stability, as these markets have more ballast during tough times.
  4. Step in on the debt side of the market by lending money to other investors.
  5. Work with an experienced syndicator who is more likely to get investments right, even when times are more precarious.

Remember, when you’re in property for the long haul, most of the time you’ll be fine. The key is to structure deals so you can weather the ups and downs.

Another thing to consider … the price only matters when you buy and when you sell. In between, it’s all about cashflow.

Real estate is one of the best inflation hedges if you structure the financing properly relative to cashflow … but you can’t fledge against inflation if you don’t do anything at all!

How do I create residual income with little savings?

Jeff, in Fountain Hills, Arizona, says he is in an interesting situation.

He doesn’t have any income, but he has enough cash to live on for 24 months. In the meantime, he wants to figure out how to create residual income that will pay for his living expenses going forward.

Jeff is looking at building a balance sheet of passive income sources.

But right now, he has time, labor, and energy he can put to work. And since he’s not holding on to a chunk of cash, the active investor route is a good one.

Some options …

  1. Force equity by fixing and flipping.
  2. Earn cashflow by fixing, holding, and renting.
  3. Become a syndicator and use other people’s money to make great investments. It’s our favorite way to go full-time, fast.
  4. Try wholesaling.

Basically, what Jeff needs to do right now is to build up his investment capital so he can start getting some cashflow.

But before he does that, we suggest he invest in education and build relationships. Get the right tools in your toolbox and the right advisors at your back before you go big.

Can you recommend turnkey management companies?

Keith hails from East Sandwich, Massachusetts. He recently bought a home through Mid South Homebuyers and is ready to buy another.

The problem? He’s on the waitlist at Mid South. In the meantime, he’s looking for another turnkey company that manages the houses it sells.

One disclaimer … we don’t know anybody quite like Terry Kerr at Mid South.

But we do know lots of other great folks.

The idea of a turnkey provider is that they do the whole thing … find the properties, get them in great shape, put tenants in, and manage the rentals.

But before you look for a provider, think about the type of property, market, and team you want.

Then go ahead and search our provider network for someone who can help fill your needs. We don’t guarantee anyone on the list, but we do promise we’ve spent a lot of time with them on the ground and have seen enough to trust them.

Should I attend Secrets of Successful Syndication now, or later?

Gene, in Boston, Massachusetts, is an investor who owns two duplexes. He wonders whether he should attend our signature Secrets of Successful Syndication conference now, or later in the year when he has more experience.

We’ve gotta say, we really think the key is for investors to come early and often.

This conference is designed for investors who already have a portfolio and are ready to take the next step.

But even if you’re just starting out, it’s a great way to get around what we call “evidence of success” and learn the power of networking.

Experience is something you can accumulate through other people. And syndication is all about having the experience to make good investment decisions.

So, for those who want to move forward, we recommend you start as soon as you can.


More From The Real Estate Guys™…

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Ask The Guys – Cash Offers, Crappy Properties, and More

We’re back again to tackle the questions we missed in our last Ask The Guys episode. We love these episodes and the opportunity we get to talk through some of YOUR real-world investing opportunities and challenges.

We hear from listeners dealing with tenant damage and security deposits, 1031 tax-deferred exchanges, nontraditional lending ideas and TONS more.

First, the ground rules.

We talk about ideas and information. When you’re dealing with real money in the real world, you want to consult a professional. We don’t offer legal, investment, or tax advice.

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

  • Your problem-solving host, Robert Helms
  • His trouble-making co-host, Russell Gray

Listen

 


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Question: How soon can I move in after a cash offer, and how low can I go under the asking price?

Joseph in Tacoma, Washington, asked this question. The important concept to understand here is price versus terms.

Whether or not you offer cash or take out a loan, the outcome is essentially the same for the seller. What cash offers is a quicker payout with certainty.

But, this isn’t attractive to every seller. In some cases, a quick closing isn’t what a buyer wants at all, so the promise of quick cash won’t be an incentive.

When you’re negotiating with cash, make sure what you’re offering lines up with the seller’s priorities. A cash offer doesn’t automatically mean a 20 percent discount.

Question: I rehabbed a rental property in Detroit, and now I’m ready to sell. My tenant wants to purchase the property, but she has limited cash on hand. How can I find a lender to do the deal?

Wilbert in South Field, Michigan, brings us this question. He wants to sell the home for $38,000, but the appraisal came back at $20,000. That price gap, as well as the location has made it difficult to find a traditional lender.

The first problem is that many banks won’t do a loan for less than $50,000. If the lender is going to go to all the trouble to do the paperwork for a percentage of the loan amount, then the loan amount needs to be enough to get their attention.

Here are a couple alternatives for Wilbert to consider:

  • Find a private lender. This might mean a higher interest rate for the buyer. But, that higher interest rate will be more likely to attract a lender.
  • Be the private lender. Rather than finding an outside investor, work a deal with the tenant to have them pay the loan to you instead. If they pay off the mortgage, you’ve still had that steady stream of income. If not, you’ll get the property back to rent or sell to someone else.
  • Find a different buyer. If finding a private lender isn’t possible, consider finding a different buyer who is able to get financing or purchase the home for the price you want to sell.

Question: When a tenant in our out-of-state rental moved out, they caused a lot of damage. Why don’t tenants take care of their rentals better, and why are they surprised when they don’t get their deposit back?

Renters view their home differently than an owner. How else do you explain that it feels like no renter owns a vacuum cleaner?

Damage to property is part of doing business as a landlord. But, Lauren in Charleston, South Carolina, did a lot of things right. They documented all the damage with photos before the tenant moved out, had a third-party realtor do a final walkthrough with the tenant, and got estimates from contractors to repair the damage.

Here are a few other things you can do to deal with damage:

  • A picture is worth a thousand words. Take photos of the property BEFORE the new tenant moves in and get their initials on the photos. Then, when they’re ready to move out, you can use those photos to justify the cost of any damage.
  • Open up a pet policy. Many landlords are hesitant to allow pets in a rental. But, with a hefty pet deposit and even a little higher rent, you can come out on top.
  • Get a read on your renters. As you screen applicants, be perceptive. We’ve also known people who will meet with potential renters at their current residence to see how they treat their current space. This may not be possible for everyone, but get creative and thoughtful about how you screen new renters.

At the end of the day, renters are more likely to treat a rental home with less care than you do. Damage and repairs are a cost of doing business, so make sure you build that into your budget.

Question: I want to sell my rental home in California, and I’m interested in the 1031 tax-deferred exchange to buy a new property in Texas. I’m confused by the IRS form and want to know if this will eliminate my taxes in California?

Cindy in Fort Worth, Texas, is definitely an A student!

First of all, we want to be clear that with this kind of complicated tax question, you need expert opinion and advice. A 1031 tax exchange intermediary will be well worth the cost and can answer all your questions.

The intent of the 1031 tax-deferred exchange is that if you sell a property and then purchase another property, you can defer the tax. As you buy and sell properties, you can continue to defer the tax, but there isn’t a way to eliminate the tax completely.

Finally, try not to let the tax tail wag the investment dog.

Real estate offers many great tax benefits, which is one of the reasons we love it! But, when you’re dealing with real money and the IRS, you need a team of experts to guide you.

Life is short, and you don’t want to spend your valuable time reading an IRS form.

Question: How can I learn more and get coaching on real estate syndication?

Addie in Seattle, Washington, brings us a question that is near and dear to our hearts!

We recommend our Secrets of Successful Syndication seminar as your first step. Whether you want to be a syndicator and learn how to leverage money with a group of investors or invest passively in real estate, this is an event you’ll learn a lot from.

In this seminar, we’re teaching the strategies that have been a part of our investments for years.

We do have a coaching program, but you can only learn about it at the seminar during an OPTIONAL session after the two days are done.

If you want to register for the event and see if syndication is right for you, we’d love to have you!

Question: My wife and I have a real estate investment company with 23 doors under rent. We’ve found traditional lenders to be slow and cumbersome and want to simplify our lending process. How can we do this?

John and Karen in Troy, Ohio, are having trouble scaling their business because of lenders. They write that they’d be willing to pay a higher interest rate to make the process easier and more streamlined.

For traditional banks, the process is often necessarily slow. They need to do due diligence to make sure the investment is a good one.

Private capital is easier and faster, but it comes at a higher price. This can be done through syndication or networking to find interested investors. Make sure you’re well advised and working with big deals, and you’re well on your way.

We’d also suggest that with the rollback of some of the Dodd-Frank provisions, some of the restrictions on community lending have eased. If you haven’t checked in with your community lender recently, it’s worth getting to know them. They’ll get to know you and your entire portfolio of properties and could be a valuable resource.

Question: I wasn’t able to attend your events for the Future of Money and Wealth in Florida. But I’d sure love to get access to that information. How do I do that?

A listener in Hawaii wants to learn from the incredibly faculty we brought in to talk about how to keep up with the changing times in the economy.

This was a one-off event, and it was an incredible gathering of some of the best minds in a variety of subjects all focused on how to protect your wealth.

We recorded the event with a professional video crew and now have 20 different panel discussions and presentations available to watch.

You can visit the Future of Money and Wealth website to learn more or send us an email to future [at] realestateguysradio [dot] com. We’ll get you all the details on how to access these videos.

Question: My schedule seems to be always booked up by the time I hear about the Belize discover trips. Do you know the future trip dates for later in the year?

Tim in Silverton, Oregon, like many of us, has a busy schedule and needs to plan ahead!

To find out events as soon as possible and to get them on your calendar, get on our advanced notice list. Head to the events tab on our website. If you find an event there, and the date doesn’t work out, get on the advanced notice list and you’ll get an email letting you know about future dates.

Our next Belize discovery trip will be August 24-27, and registration is open now! We hope to see you there.

Question: What is the definition of a performing asset?

Matthew in Nacomin, Florida, asks us the shortest question in our inbox!

Simply put, a performing asset is something that puts money in your pocket. The more cash flow, the more equity. If you have something on your balance sheet that doesn’t put money in your pocket, it’s not a performing asset.

When you consider an asset you can go for a fat cow, a performing asset that will come at a premium but continue to deliver, or a skinny cow, a non-performing asset that needs some work to get it performing again.


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.

Ask The Guys – Raising Money, Refinancing, Retirement Funds and More

In our most recent edition of Ask The Guys, we weigh in on topics that are relevant to YOU.

From how to leverage retirement funds to how to get started in real estate without much capital, our questions have been handpicked with our listeners in mind.

Keep in mind that we are not legal or tax professionals. We do not give advice. The ideas in this show are simply that … ideas.

In this edition of Ask The Guys you’ll hear from:

  • Your infinitely wise host, Robert Helms
  • His wise-guy co-host, Russell Gray

Listen



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Question: I want to get started in real estate investing, but I don’t have a lot of capital. What can I do to get started now?

Two of our listeners, Miles from Atlanta, Georgia, and Jose in Mesa, Arizona, asked us this question … and it’s no surprise.

When we think about investing, we think about money. But currency doesn’t always mean dollar bills.

Relationships, opportunities, and knowledge are all valuable currency in the real estate investment game.

Find more experienced investors who have equity but don’t have a lot of time. Unlike them, you have time to be boots on the ground and make things happen.

Find a network where you can gain knowledge. Then, bring ideas to the people with cash and show them how to use YOUR hustle for THEIR benefit.

Here’s a quick example … and remember this is just an idea. Always consult professionals before taking action.

You may find someone who owns a dilapidated house. The owner is equity rich but the cash flow is poor. Maybe you could take the opportunity to partner with him. You could say, “I don’t have the money to fix this up, but if it were fixed up, you could get steady cash flow. You have a good credit score and income, so you can borrow. You get the cash, and I’ll do the deal.”

You do the work and fix up the property. You supply the hustle. You make the deal … and then you both split the profits!

The one thing you can always do … right away, everyday … is build your brand, build your reputation, and build your network.

Question: The market for multifamily properties is so competitive. How do I find a property?

Our listener Sid owns a business in Daphne, Alabama. He’s wondering whether he should give up on his search for a multifamily property and focus on setting up a hard location for his business.

Multifamily is SUPER, SUPER COMPETITIVE. It’s hard to find deals that work and even harder to get one of those deals.

The first question to ask when it comes to multifamily properties is, “Am I in the right space?” If you’re like Sid, and the market is hopping, the answer is probably yes.

If you’re in the right space … but it’s a little picked over … try looking off the beaten path to see if you can find a property that will offer more than just financial returns.

If you own a business, consider buying a building bigger than you need and housing tenants adjacent to you.

Find one-off deals that meet your unique set of needs. Be careful with your numbers and have a good plan.

Keep your business and your real estate investments separate.

This gives you flexibility down the line. You may decide one day that you’re going to sell your business and keep the building because you have nurtured and created great tenants. OR, you may decide to sell the building and get some cash but keep your tenancy to operate your business.

Question: What’s the mock real estate game you reference on your show and recommend playing?

Rob in Circleville, Ohio, wants to know about this game we’re always talking about.

It’s called CASHFLOW 101 and was invented and developed by Robert and Kim Kiyosaki.

Now, it isn’t a real estate game necessarily … but it IS a financial game.

When you play a board game you have mental and emotional reactions. If you take the time to dig in and find out why you are reacting in certain ways, you can discover a lot about your mental makeup … and how to change it.

So, this game isn’t as much about information as it is about transformation. It’s a chance to identify your strengths and weakness and take risks in a low-stakes setting.

Question: I need to learn how to raise money. What would you recommend I do?

Jim in Doylestown, Pennsylvania, was bummed to learn that our next Secrets of Successful Syndication seminar isn’t offered until March 2018.

Jim wants to get started in with residential assisted living, but he feels he needs to learn how to raise money first.

There are plenty of things you can do now to learn this valuable skill.  

Syndication is the most entrepreneurial form of real estate. Entrepreneurs go out into the market and find a problem to solve. Then, they convert that problem into an opportunity.  

To create opportunity as a real estate investor, you need to organize your resources … money, people, and ideas.

Get in an environment where you can learn from people who are already syndicating.

Find someone who is successfully doing syndication and say, “Hey, I love to learn. Is there something that I can do to help you?”

Offer your skills … whether you’re good at market research or social media promotion or building websites. Build relationships.

A key to success is learning how to talk to people one-on-one about money.

To raise money, you need to learn the language of investing AND get really comfortable asking the right questions in order to understand another person’s financial situation.

There are a few things you can do to get started:

  • Come to our event How to Win Funds and Influence People.
  • Pick up a book by Sam Freshman called Principles of Real Estate Syndication. This is NOT a motivational book. It’s literally the textbook on syndication and a great way to learn the nuts and bolts of the topic.
  • Listen to syndication-focused episodes of our show on our website. Simply go to the search bar and type in “syndication.”
  • Listen to general financial podcasts. You need to learn the language of money to communicate with other investors about your projects.
  • Sign up for Secrets of Successful Syndication in March. Get on the advanced notice list here to be the first to know when tickets are available.

Question: How can I be sure I’ll have money to refinance a commercial loan when the balloon is due?

Charles in North Palm Beach, Florida, owns a handful of small apartment buildings and a multi-use building with no mortgage. He plans to purchase a 20-unit building when he finds a deal … and he wants to cash out by refinancing his multi-use building when he does.

But Charles … like many of you … keeps thinking about 2008. Because commercial loans now have short terms of 5 or 10 years, he wants to be sure he’ll have money to refinance when the balloon is due.

There is nothing you can do to completely ensure there will be a loan available 5 or 10 years down the line. But even if there isn’t, you WON’T be lost in the woods.

Private capital is always an option.

In order to take advantage of private capital, you need to make sure you have a strong operating property that is generating good cash flow. Cash flow is the price you pay to get your hands on capital.

The other thing you can do is check your balance sheet and make sure you can cross collateralize your loans.

One perk of private lenders is their flexibility compared to other sources. Lenders are more willing to consider multiple sources of equity. And if a private lender doesn’t bite, consider using syndication to refinance instead.

Don’t sit out of the market. You don’t make money sitting out.

Be proactive. Don’t be paranoid.

Charles also asked how we’ve found our best deals.

The answer is relationships. Build your brand. Build your network. Every great deal we have done is with people who know us and understand us.   

Question: Where can I find the “Prepare” report by Chris Martenson that you mentioned on a recent podcast?

Maryanne from Newburyport, Massachusetts, is referring to a recent show that included a special conference call with Chris Martenson and Brien Lundin.

On that call, we discussed a major announcement from China.

China is proposing to deal in the oil trade using a gold-backed currency. This could be a game changer in a worldwide system that isn’t backed by anything.

At the end of that discussion we addressed what you can do to prepare. Listen in to get access to Chris Martenson’s special report.

Chris Martenson will be on the investor Summit at Sea™ with us this year … we also recommend his book Prosper!

Question: Will there be a Belize discovery trip in summer 2018?

Bob in Rio Rancho, New Mexico, and his wife wanted to know how far out we schedule our Belize discovery trips. They want to include a discovery trip in their anniversary vacation … now that’s a good anniversary!

We don’t have the dates for upcoming Belize discovery trips yet, but we do schedule them several months in advance. For a trip in June, check our website in March or April.

Get on the advanced notice list to be notified as soon as dates are announced!

Question: Can I use money from my retirement accounts to make updates to my house?

Daniel in Livermore, California has both a Roth IRA and a traditional IRA. His goal is to maximize his tax deductions and avoid using cash savings to make updates to his home.

We’re not tax advisors … BUT … our understanding is the answer is no.

When it comes to retirement accounts there are lots of things you CAN do, but one of the prohibited transactions is anything to do with your own personal residence.

We suggest talking with a CPA or a lawyer before making any decisions.  

Question: Do you know of anyone who has purchased training for the Residential Assisted Living Academy, and have you heard about subsequent real world successes?

Our final question comes from Lou in Rancho Palos Verdes, California.

You’ve probably heard us interview Gene Guarino on our program. He’s the founder of RAL Academy and teaches folks how to do residential assisted living.

We have been to his trainings and know dozens of people who have not only taken his classes but also found success in the RAL market.

A reminder … we don’t gain anything from Gene’s success … except happiness for him and everyone else.

We love that Gene actually practices what he preaches. You can tour his properties and meet his staff. He has all sorts of resources and services available on the back end if you’d like more help beyond his classes, too.

If you’re serious about being in this or any space … you need a mentor. If you don’t have a mentor in a particular field, hire someone!


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.

Ask The Guys – Apartments, Retirement, and Offshore Entities

Our listener questions this week run the gamut from extremely practical to extremely theoretical.

As always, we weigh in on topics that are relevant to YOU … listen in to hear our ideas on apartment management basics, diversification, and more … plus some podcast recommendations and a whole lot of info on one of our favorite places, Belize.

Keep in mind that we are not legal or tax professionals. We do not give advice. The ideas in this show are simply that … ideas.

In this edition of Ask The Guys you’ll hear from:

  • Your deal-hunting host, Robert Helms
  • His tag-along co-host, Russell Gray

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Question: What expenses do I need to budget for as an apartment building owner?

Arnie in Minneapolis has a 20-unit apartment building that provides student housing near a university. He asked us to explain what his basic expenses will be. First, the obvious:

  • Utilities. These can get a bit tricky, though, because the tenants may not pay all the utilities directly. You may have to pay for gas and water, for example.
  • Taxes. Make sure you’ve done your research and know how and when taxes are reassessed in your area.
  • Property insurance. This is a must.
  • Management costs. Consider how much staff you’ll need and whether you want to hire third-party management.

And the less obvious:

  • Marketing and advertising costs. Marketing your property helps cut vacancies. For a college property, brochures may be one option.
  • Legal costs. Make sure you have a legal team in place and a process for handling tenants with bad debt.
  • Maintenance. Small but necessary services like pest control and carpet cleaning can add up.

Although apartment owners have to juggle a list of expenses, there are ways they can make some extra income. Apartments geared toward both college students and other types of residents can offer paid laundry services, parking spots, and even furniture rentals.

Question: I’m a new investor. Should I diversify with different product types and markets now, or later?

This Texas listener started investing in the past year and is trying to hone his personal investment philosophy. Ryan said he owns two single-family homes, but is also interested in commercial, agricultural, and lifestyle properties.

He wanted to know whether it’s wise to start diversifying now or smarter to wait.

The simple answer is it’s up to Ryan. How much completely depends on the amount of time, energy, and focus you have to spare.

Having a great team can be the make-or-break factor.

Beginners are starting without the stable of resources that established investors have, and access to a mentor can make all the difference in whether you’re successful with a specific product class or market.

Being in the hottest niche doesn’t matter much if you don’t have a great team to support you.

We recommend Ryan spend some time poking around.

Diversification is great … but it means two markets, two sets of knowledge, two teams.

A single investor can only know a handful of markets really well, so getting well-acquainted with a single market can be a good place to start.

It all comes down to your goals … and passions.

The more you love a market or product type, the longer you’ll stay in the game.

Ryan, search your priorities and keep figuring out what you really want to do. What’s right for you may be honing in on single-family, or it may be finding a mentor to help you get involved in other markets.

Ultimately, the right choice is completely dependent on YOU.

Question: What do I need to know to get involved with a lending deal?

Steven from Havelock, North Carolina got an offer to be part of a private lending deal … but he wants to know how he can educate himself before he says YES … or NO.

Lending deals come in two forms … private loans, or divided private placements.

They all boil down to the same components:

  1. A piece of collateral against which you’re lending.
  2. A borrower to whom you’re lending money.
  3. A servicing process, to collect payments and distribute money to investors.

Although the basic process is pretty simple, it’s become more complicated since 2008. If you’re underwriting the loan, you need to know as much as you can about the following:

  • The management team’s process
    • How they manage and service loans
    • How they deal with default loans
    • What their basic guidelines are for protective equity
  • Projections for how much the market can pull back before the property in question is underwater
  • The debt-to-income ratio … how much income is available to service the loan

If you’re only investing, not underwriting, you don’t need to know every detail … but you do need to know enough to know that the people doing the loan know what they’re doing.

Take a look at the company’s track record, advisors, and business philosophy, policies, and procedures.

Make sure they have a realistic model for getting you a ROI.

And always make sure you have advisors … a smart legal team can tell you in minutes whether a deal is as good as it looks.

Question: Do you have any podcast recommendations?

Robert from Madison, Alabama said he’s obsessed with our podcast (thanks, Robert!) and also listens to Robert Kiyosaki and Peter Schiff.

He wondered whether we had recommendations for other podcasts in line with our thinking and perspective.

First, a caution … don’t seek out a single perspective!

As a real estate investor, you always want to strive to stand on the edge of the coin. Get multiple perspectives and then let those ideas interact with each other.

Peter Schiff and Robert Kiyosaki are absolutely valuable listening, but they don’t necessarily focus on real estate investing. If you’re looking for practical, tactical advice, consider the following:

Almost every real estate niche has experts producing media … if not podcasts, certainly books and courses.

Other wealth-related recommendations include:

We heard of a great technique for reading books, and we think it applies to podcasts too … read three chapters (or listen to three podcasts or so) and see whether the content grabs you.

If it doesn’t, it’s not worth your time!

Question: Do The Real Estate Guys™ provide mentoring services? How do I find a good mentor?

While we’re honored that Grant, from Denver, Colorado, would like to have us as his mentors, The Real Estate Guys™ do not provide individual coaching or mentoring services.

We coach the syndication mentoring club … a group for investors who have gone to our Secrets of Successful Syndication event and have a good baseline for investing and syndication.

That’s it.

However, we think there are lots of great resources out there for coaching.

Interested in a specific product type? Experts like Gene Guarino can coach you in residential assisted living. Other experts can help with everything from apartment buildings to commercial spaces.

Our recommendation … figure out what kind of help you really need.

Do you want someone to make you stick to deadlines and goals? Someone to give you practical resources? Someone to help you make connections?

Once you’ve identified your needs, take a look at who’s out there and do your research. Check in with former students to see if there’s evidence the program was successful.

Question: Do you have any tips on lifestyle investing in the Mediterranean?

Bob lives near dark and stormy Seattle. He and his wife are nearing retirement and want to spend their winters somewhere warmer … preferably the Mediterranean.

They’re looking for a part-time vacation home, part-time rental situation.

He asked whether we had any tips on researching the cost, feasibility, and process for buying a property in this region.

Unfortunately, we don’t have a lot of experience in this specific part of the world.

But we do have a lot of experience investing all over the world … enough to know that legal structures vary incredibly from jurisdiction to jurisdiction.

The key to success? Always get plugged in with someone who knows the market from a local point of view.

It would be a smart idea for Bob to plan a vacation … narrow down his interests to a specific market and work on making strategic relationships while he’s over there.

Yes, we just recommended a vacation!

Bob also needs to work on building a legal and tax team in the U.S. to deal with sometimes complicated foreign legal structures.

The short answer … worry more about acquiring relationships than acquiring knowledge.

Questions: Belize, Belize, Belize!

We had three listeners ask questions about our Belize Discovery Trip.

Travis, from Maple Grove, Minnesota, wondered whether investors have to be extremely wealthy to invest in Belize.

Along the same lines, Brad, from Bakersfield, California wanted to know the type of investments typically available in Belize … and whether potential investors can work around lack of available financing.

We believe there is a ton of opportunity in Belize … and you don’t have to be über wealthy to take advantage of it.

Belize doesn’t offer traditional bank loans. So investors have a few options.

One option is to go in on an investment with a group.

Another is to refinance a property you own in the U.S. and use the equity to fund a deal in Belize.

No matter the route you choose, be smart about it. Understand the supply and demand dynamics.

Ask yourself exactly what you want … whether it’s lifestyle, cash flow, asset protection, equity, or something else … then visit Belize and see whether the market will help you achieve your goals.

If the answer is YES, the next step is to build a team … and you can do that by joining us on our field trips and getting to know the people who will help you put together a great deal.

Our third question about Belize took a slightly different tack … Craig, from Rosemount, Minnesota asked whether an IBC is the only corporate structure two parties would need to go in on a deal together.

This is a legal question. And we’re not legal advisors.

But we can tell you that although people often use entities to buy properties in foreign coutnries, it’s perfectly acceptable to own property in your name.

If you do use an IBC, you’d have to use an IBC from a different country. IBCs can’t be used to do business in their country of origin.

The bigger question is making sure you understand what you’re trying to accomplish, why you’re doing it, and what the possible ramifications are.

Do your homework. You don’t want to learn a lesson by making the wrong mistake.

Yearning for more in-depth information about IBCs, financing, and buying in Belize? Come on our field trip!

Spend time with Robert and other investors, build relationships, investigate the market, and enjoy all Belize has to offer for three and a half days.

We guarantee you’ll learn something … and have fun too!


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.

Ask the Guys – Where to Buy, When to Sell, and Becoming an Entrepreneur

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We love it when we get more questions than we can answer. It means our listeners are paying attention and seeking advice. Keep ‘em coming, guys!

But this time, we had so many questions that we had to narrow it down … so we chose the ones with the most universal themes.

The questions in this edition of Ask The Guys touch on when to sell a property, where to buy one, and how to get educated in the real estate investing world … as a student, a military veteran, and a future syndicator.

Our only disclaimer? We are NOT tax professionals or attorneys. We don’t give advice … just ideas and information!

With that said, please sit back and listen in as we bounce YOUR questions off each other.

Behind the microphones for this all-new edition of Ask The Guys

  • Your full-of-ideas host, Robert Helms
  • His full-of-it co-host, Russell Gray

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Question: I just got an offer on my property. Is now the time to sell?

Tina wrote from Redwood City, California, to ask us about a duplex she’s owned for over twenty years. She gets decent cash flow every month, but she just got an offer, and now she’s wondering whether it’s time to sell.
To any investor wondering whether they should sell a property they’ve owned for a while, we’d say now is definitely a good time to consider it.

But … there are a few things you should think about.

First, the basic math. Ask yourself some simple questions: How much equity do I have? How much equity would I net by selling? What would the tax impact of selling be?

Once you figure out the net amount of cash you could get, divide it by your cash flow to get your return on equity.

The big question when you’re considering the return on equity is “Compared to what?”

As in, how does that number compare to other things you could do … keeping the property, investing in a different market, or refinancing, for example.

The other part of the equation is the hassle factor.

This goes back to your personal investment philosophy. You need to do what YOU really want to do … not what someone else might do.

Is capital gain more important to you, or would you prefer appreciation? The Bay Area in general is a great market for appreciation. It’s not the most landlord friendly, however.

We have a couple of acquaintances in situations similar to Tina’s.

One did the back-of-the-envelope math and decided that because she was focused on cash flow and the market seemed like it might turn the other way soon, she wanted to take all her eggs off the table.

Another friend, also in the Bay Area, was concerned because she had so much equity sitting in her properties. She decided to sell as well.

Maybe your solution will be similar. And maybe it’ll look drastically different.

Ultimately, your final decision is just a matter of sitting down, asking yourself some questions about what YOU want, and doing the math. We also highly recommend you talk things out with your advisors.

Question: I’m a veteran with a big passion for real estate investing but a small chunk of change. How can I get started?

Lewis, from Middlebury, Connecticut, told us he’s obsessed with real estate investing. His three main interests are wholesaling, multi-family properties, and lease options.

Lewis is also a veteran who’s holding on to some debt and doesn’t have much cash to work with.

To Lewis and other new investors with high motivation and empty pockets, we say that desire and passion are WAY MORE important than money.

If you’re starting from nothing … there is absolutely, positively hope that you can succeed!

Our opinion is that the best investment is education.

With that said, you do have to be careful … paying big bucks doesn’t necessarily insure you’ll learn anything worthwhile.

That doesn’t mean good education will come without a price tag.

Watch out for free seminars … most are designed to masterfully separate you from your money. Remember, there’s always an agenda.

Books are a great place to start. If you’re strapped for cash, use your local library or listen to books using Audible.com.

Books and podcasts can help you learn the language so you know what you’re talking about and can join in the dialogue.

Of course, there’s a difference between book knowledge and knowledge gained from experience.

We have a few ideas for Lewis:

  1. Take inventory of the seven essential investor resources: cash, cash flow, equity, credit, time, talent, and relationships. You need to know what you’re working with before you can leverage it.
  2. Talk to a mortgage professional who knows how to do VA loans. Lewis’s veteran status gives him a leg up in getting a no-money-down loan.
  3. Consider jumping into wholesaling. Wholesaling can be a great training ground and is one of the best ways to make money when you don’t have much.
  4. Join a real estate investment club or an investing meetup in your area and meet other investors.
  5. Form relationships with people who can get deals and get you access to deal flow. The best option is to find a mentor.

It’s key for new investors to learn enough that they can go out and do something, but not so much that they get what we call “analysis paralysis.”

Learn the language, then focus on relationships that let you learn by doing and by example.

And remember … you will make mistakes. Don’t be afraid of them. Embrace them!

Figuring out how to turn a tough situation into a successful investment can be quite a bit of fun when you have the right attitude.

Question: What tools can I use to identify markets that have more opportunities for good cash flow?

Our third question is from an investor in Denver, Colorado. Michele’s been listening to the show and has keyed into the concept of identifying investment goals, particularly whether to invest for equity increases or income generation.

Her current goal is to find a multifamily property with cash flows, but she’s realized that the Denver area is strongly equity based, with high prices and low rents.

Michele’s question about how to find good markets for cash flow reminded us of the real estate adage, “Live where you want to live; invest where the numbers make sense.”

Unfortunately, Michele’s realization that the rents in her area don’t gel with the prices tends to be true in many other metropolitan statistical areas across the county as well, especially in regard to multifamily housing.

We are NOT here to talk Michele, or any investor, out of a personal investment decision.

But we would encourage Michele to take a step back and really evaluate why she wants to buy a multifamily property right now.

If you’re just starting out, you’re not locked into an asset class or product type yet. So now is a great time to consider whether a different product type might be better at producing the cash flow you want.

Going back to Michele’s question, if we were looking for a multifamily property right now, there are a few things we’d do.

  • First, get acquainted with the different markets around the country. Go to events, look at properties for sale, and start working on zooming in on a market.
  • Make a checklist for your ideal market … is the population growing? What’s the cost-of-living tax like?
  • It’s a good idea to look for markets with big populations. When you’re checking out a state, evaluate how landlord- and business-friendly that state is.
  • When you’re doing your research, start by looking for clues in the news, then dig a little deeper.
  • Consider broker sites and local apartment associations. Both provide invaluable information for landlords, including rent surveys and other resources and reports.
  • Analyze the numbers in those reports, and eventually, the numbers will start to talk to you.

When a deal that fits all your criteria pops up, be ready. You’ll have to be on it immediately.

It’s a hard time to be a multifamily bidder right now, but we still think there’s opportunity out there.

Find a way to stick your toe in the marketplace … maybe even consider joining a more experienced syndicator as an investor.

Eventually, you’ll gain relationships and get enough exposure that you can do your own thing.

Question: What about the smaller markets?

Listener Jay, from Scottsdale, Arizona, has also heard us tell investors to “invest where the numbers make sense.”

But he noticed that we don’t seem to mention the little markets … Akron, Ohio, for example.

There is a method to our madness. We like big markets for several reasons.

First, there’s a lot of available data, and landlords don’t have to worry about where tenants will come from.

Second, smaller towns tend to come with a host of difficulties … fewer practitioners, contractors, and resources alongside highly variable rents.

Small towns don’t have the infrastructure to support big deals. And they tend to lack good, professional real estate practitioners so you can assemble a team.

They also may not be on the receiving end of potential government support during tough times.

Third, small towns have MUCH less liquidity. Bigger markets are going to have a lot more traction.

Sticking to small towns means operating at the margins. If you’re at the margin when a recession comes around, that margin goes away and you’re in trouble.

It’s the investments at the margins that tend to collapse during downturns while the core markets stay strong.

We won’t say there isn’t any opportunity for success in smaller markets. We will say, however, that we don’t know any truly successful investors operating solely in small markets.

Question: How do I know whether I’m ready to attend the Secrets of Successful Syndication seminar?

Megan, from Santa Ana, CA just attended our Create Your Future goals retreat with her wife and says she is PUMPED about real estate investing.

Since they started listening to our show about a year ago, Megan and her wife have purchased FOUR turnkey single-family homes!

They’re searching for their first apartment building now, but they know they’ll run out of money soon and are interested in syndicating in the future.

But Megan’s worried they’re not ready to ask the right questions at our Secrets of Successful Syndication event.

We will say that the seminar is not for everybody … if you’ve never owned or invested in real estate or only listened to free podcasts to educate yourself, it’s probably not the next logical step.

Our syndication seminar is two days that give attendees the lowdown on what syndication is and where to find deals and money.

We have people who come to the seminar over and over. The beauty of our Secrets of Successful Syndication seminar is that it covers the basics for newbies, but if you keep coming back, you start understanding all the little nuances.

Our take is that someone who recognizes they’ve got the real estate investment bug, is taking action, has a resume, and is goal-oriented and humble is the PERFECT person to attend the seminar. So Megan … you’re exactly what the business needs.

And if you’re still questioning whether you’re ready, ask yourself: how quickly do you want to start preparing? Our view is that sooner is better.

You don’t want to have an opportunity arise and not have the education to identify or take advantage of it.

Even worse, you don’t want to be the person who goes out and does syndication without training.

The only reason NOT to come is if you’re not serious about being in the real estate business … and Megan, it sounds like you’re pretty serious.

Remember … we always regret the things we DIDN’T do a whole lot more than the things we DID do.

Question: As a current student, what can I do to prepare myself to be an entrepreneur?

Our last question comes from Yahoso, who’s been listening in all the way from Benin City, Nigeria.

We think there are a lot of things you can do to prepare to be an entrepreneur while you’re a student. A few:

  1. Listen to podcasts and read books, as many as you can get your hands on. These will help you learn the language you need to speak.
  2. Get involved in a dialogue with people who ARE successful. Have conversations with people who know what they’re doing. Play the student card! Many entrepreneurs will let you interview them simply because you’re a student.
  3. Learn sales skills. Whether you like it or not, you can’t be an entrepreneur without ‘em.

Build your box of tools. When you have confidence in your skillset, you’ll find doors will open for you.

Have a question for the guys? Ask us here, and we’ll try to get you on the show!


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.

Ask The Guys – Seller Financing, Property Inspection Tips, and Negative Cash Flow

 

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We’re back with Ask the Guys!

Today, it’s time to reach into the mailbag for some insightful listener questions.

As always, a disclaimer: We are NOT tax professionals or attorneys (we promise), and we DON’T give advice. We simply provide ideas and information. YOU decide what to do with it.

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

  • Your field-tripping host, Robert Helms
  • His crunch-the-numbers co-host, Russell Gray

Listen

 


 

Subscribe

 

Broadcasting since 1997 with over 300 episodes on iTunes!

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Question: How do I match my personal investment philosophy to actual real estate investment options?

Coming from Little Rock, Arkansas, Mark is working through our book, Equity Happens, to develop his personal investment philosophy. (Good first step, Mark!)

To start, we  say the whole idea of Equity Happens is that every investor is different.

Obviously, YOU have unique goals, interests, and circumstances as an investor.

Once you can be crystal clear about the kind of investor you want to be, you can say no. And NO is a good thing to say!

Russell reminds us that an investment “could be a very good deal, but it might not be a good deal for you.” As we always say, “There are no problem properties, only problem ownerships.”

Mark, and all the other investors out there, we want to remind you that it all goes back to the essential question: What do you want real estate to do for YOU?

To answer this question, you have to think about some variables:

  • Is your primary goal cash flow OR equity growth?
  • Are you more interested in pride of ownership OR managing difficult properties?
  • Do you want to be hands on OR hands off?

Remember, it all starts with your basic investment philosophy.

In Equity Happens, we remind investors that after they get their philosophy down, the steps are always the same: identify your market (or markets), identify your product type within those markets, find your team, and then invest in your property.

When you’re investigating markets and product types, you have to ask yourself some questions:

  • Where is demand in this market coming from?
  • Are supply/demand dynamics stable?
  • Will an investment in this market be good for equity or immediate cash flow?
  • Who do I want to serve?

We won’t tell Mark (or you) what to do. But we can tell you that the investing process in Equity Happens will help you get to a starting place..

Remember our motto: Education for Effective Action™.

Question: Does it make sense to invest in a property with negative cash flow?

New investor Chase, from Dallas, wants to know if it makes sense to keep a rental condo he owns in a rapidly developing area, even though he’s losing about $200 in cash flow a month.

We can’t give you advice, Chase, but we can give you some pretty darn good ideas.

As an investor in this situation, the first question you need to ask yourself is “Do I like this property?”

If the answer is yes, then get to your tax advisor right away!

Chase mentions he qualifies for the mortgage interest deduction. If you’re a new real estate investor, especially an investor converting from owner occupancy to rental property, you may qualify for even more deductions and tax benefits.

The next thing you should ask yourself is whether your property will increase in value over the years.

Think of an investment with negative cash flow like a retirement savings account: you have negative cash flow every month you contribute, but those contributions will give you positive returns later.

If you’re a property owner, and you’re thinking of selling to get equity, consider selling costs first. How do those selling costs compare to the money you’re losing each month?

As we always say … do the math, and the math will tell you what to do!

Question: Is it a good idea to have a third-party inspector look at a newly constructed home before closing?

To Fred from Burlingame, California, we say, “Absolutely, positively YES.”

ALWAYS get a third-party inspection anytime a home changes ownership.

Even the most honest owners and builders don’t always see every little problem.

This is a matter of return on investment. An investment of a few hundred dollars is a cheap price to pay to know exactly what you’re getting when you buy a property.

In our experience, most builders are great about inspections and will bend over backwards to fix any problems found.

Owners of older homes may be less pliable, but you need to know whether you’re making a good investment.

The second part of Fred’s question is “What about getting the inspection after closing? Would the builder be liable to fix issues that are found by the inspector?”

To this we say, WHY WAIT?

Inspect before you buy and you get leverage.

If you’ve already closed, an inspection can’t hurt, but you lose your leverage.

And although most reputable builders will stand by their work, it really just depends.

You can’t rely on your expectations, or you might end up disappointed.

Get the inspection (BEFORE you buy) and you can rely on the facts.

Question: How do I bring up owner financing to an (unlisted) seller?

Another California caller, Jill wanted to know the basics of getting started with owner financing.

Owner financing can be a great, great tool. For buyers, it can mean you don’t have to pay points, can negotiate a great interest rate, and can work with owners familiar with the collateral and possibly less reliant on your credit score.

But if a property isn’t listed, Jill, you may not want to start with owner financing.

First, you have to see if there’s seller motivation.

If an owner is selling because they have an immediate need for the money, you’ll have a hard time negotiating a seller carry.

The key thing here is to get to know what the other party is trying to accomplish, and then position what you want in a way that fits into THEIR agenda.

Forge a relationship, THEN bring up owner financing.

And always make sure your propositions meet the seller’s needs.

We’ll share the rundown of simple secrets to great sales in our sales training event.

Interested in learning more? Email sales (at) realestateguysradio (dot) com.

Question: How can I contact you directly?

This question comes from Jake, in Mooresville, North Carolina.

Jake, talking to people is exactly what you need to do.

Although we’d love to talk to all our listeners, it’s simply impractical.

BUT … that doesn’t mean it’s off limits!

To talk to us, come to one of our live events. You could even join us for a wonderful week on sea,  packed to the brim with the elites of the investing world.

We’ll be there, ready to chat, PLUS you can talk with and learn from the amazing faculty and investors from around the world.

Are you like Jake, itching to talk to someone directly about investing?   You could join a local investment club. Or start your own! It’s how The Real Estate Guys™ got started!

Like we’ve said before, it all goes back to our motto: Education for Effective Action™.

Educate yourself! For a primer on starting your own investment club, email us at club (at) realestateguysradio (dot) com.

Question: Can you put The Real Estate Guys™ podcast on Google Play? (Please?)

To Sonny, in Virginia Beach, Virginia, and all our other Android users, we say:

DONE! You’re welcome.

Question: How do 1031 exchanges work?

Here’s a question from Seattleite, Tamara: “We’re selling a rental property and are interested in doing a 1031 tax-deferred exchange. However, we wanted to add an additional unit to the property so we could have a place to stay when we come to town. We recently found out that the IRS doesn’t allow this. Is that true?”

Before we answer this question, a reminder: we are NOT tax pros! Get real tax advice!

And don’t just go to any tax advisor.

Get an experienced one—someone who actually invests in real estate will be your best bet. (Don’t be shy about asking them their own experience!)

Like our friend Tom Wheelwright exhorts in his book TaxFree Wealth, create a best plan based on what you know, then run it by your advisor.

And instead of asking your tax advisor “Can I?” ask “How can I?”

Unleash your advisor’s creativity instead of asking for a YES or NO answer.

Now, back to the question. The simple answer to Tamara’s question is “No.”

A 1031 tax-deferred exchange basically allows you to exchange like properties for like, PROVIDED you follow the rules.

You have to spend the money on the new property, not the old  property.

Tamara, before you sell this property, ask yourself WHY you’re selling. If it’s to unleash equity, considering refinancing.

Separate the IDEA of what you want to do with the proceeds from the actual ACT of selling the property.

THEN, work with that tax advisor! Figure out the best way to get access to that money and preserve your capital gains.

Question: Can I get some insider tips on investing in Belize?

When we went on our last field trip to Belize, we sadly missed out on having Paula, from DeCobb, Illinois, join us.

Paula went on her own scouting mission before she heard about ours! Paula, that’s okay. Glad to hear you’re proactively checking it out.

Paula had a list of questions for us, including:

  • Construction in Belize can be slow and hampered by politics. What has your experience been of developing from the ground up?
  • Will talk of development of a new international airport be realized? When? And does that mean the north side of Ambergris Caye is more valuable?
  • Does the debris and trash I saw covering the island hamper potential investors?

Both Robert and Russell have answers for Paula, but before we cover those, we absolutely recommend any investor interested in Belize accompany us on our field trips. We have a field trip upcoming in February.

Robert’s basic answers to the questions above:

  • Both the “island-time mentality” and the requirement that plans be approved by the Ministry of Plans AND the San Pedro town council do mean Belize is “not the fastest place in the world for construction.” Some developers have a streamlined process, however.
  • There’s a saying about the airport: If you ask when it’ll be done, you’re not from Belize. Belizeans don’t necessarily have ironclad calendars, but they do get things done … eventually. “Let’s just say I have been visiting for over a decade and am not hold my breath,” says Robert.
  • The trash is not off-putting tourists, to put it simply. Belize is the No. 1 increasing market in all of the Caribbean. Land that’s not developed is where trash accumulates, but locals do put on trash-bash events a few times a year where they go clean up trash.

Investing in another country (or even state) takes homework. But ANY entry to barrier limits competition.

We look for those opportunities because we’re willing to outwork other folks.

If you’re interested in ANY foreign market, Russell reminds us that scouting trips are how you do it.

Robert dragged Russell out to look at actual buildings years ago, when all Russell wanted to do was sit in his office and crunch numbers. That experience was invaluable.

Hope you’ll join us and see for yourself next time we go! Last question: Should I refinance a loan to buy a couple of turnkey properties?

Gary, from Austin, Texas, gave us a little more information: “I owe $100,000 with eight years remaining on a property that is appraised at $167,000. It’s my primary residence and I’m thinking about doing a $30,000 cash-out refinance to buy a couple of turnkey properties in Memphis.”

He said the idea scares him, but he’s also “okay trying to be financially free in this scenario, not debt-free.”

Here are the basics of what happens when you get a loan: early payments go mostly to interest, but as you pay the loan down, more of your money goes to the principal. Every time you refinance, you’re starting over again.

That’s a caution … BUT, starting over is also nothing to be afraid of.

Repositioning equity to put it to work for you is not necessarily a bad thing.

The best options are to either have your property 100% paid for OR 100% leveraged.

To make your property work for you, start by eliminating fear.

Then do the math, and the math will tell you what to do.

Maybe your question will be featured next … Ask us!


 

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.

Tips for Delivering Value to Your Tenants

 

People often think of real estate as an asset, not a business.

But real estate investment is ALL ABOUT the number one tenet of running a business: keep your customers happy.

In the real estate world, your customers are your tenants.

It’s important to remember that you’re not just collecting properties: you’re collecting tenants.

So how do you reach the ideal—low turnover, low vacancies, stable income, and high profitability?

Our guest in our latest show, innovative turn-key developer, Terry Kerr, offers tips gleaned from making ugly 1,500 houses pretty in Memphis. Yes, you read that right. 1,500!

Whether you’re a property manager, a turnkey operator, or someone rehabbing houses in your spare time, our podcast today is chock-full of practical tips for keeping your customers happy.

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

  • Your #keepthecustomerhappy host, Robert Helms
  • His tips-not-tricks co-host, Russell Gray
  • President of Mid South Home Buyers, Terry Kerr

Listen

 


 

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Happy tenants, happy you

What are the best ways to keep tenants engaged? The NUMBER ONE thing tenants want is value.

Our guest, Terry Kerr, offers three insights into what property managers can do to create value for tenants (and for property owners):

  1. Offer nice amenities. Terry says he wants his tenants to be able to say they can’t do any better. He makes sure his properties include new and high-quality fixtures, woodwork, baths, and kitchens.
  1. Keep rents slightly below market rates. In Terry’s case, he rents properties in the $700-$1000/month range. For his customers, $25 or $50 can make a big difference. Terry wants customers to be able to say his properties are the best option for them.
  1. Provide friendly and responsive service to tenants. We’re particularly impressed with Terry’s system for repair requests and fulfillment, which gets problems like a broken water heater fixed within a day.

As a real-estate investor, you’re not just dealing with property. You’re dealing with people who expect the best from you.

Providing them with the best in terms of cost and facilities can make a HUGE difference for them—and for YOU.

The “Wow” Factor: nuts and bolts that make the difference

Before Terry’s prospective tenants even get out of the car, he wants them to be able to say “This is the one I want!” He calls this the “WOW” factor.

A key component of the “Wow” factor? “Everything’s brand new,” says Terry. “We make the house new.”

New floors, light fixtures, counters, sinks, faucets, bathtubs, showers, doors, closet rods, hinges, doorsteps: you name it, and Terry’s thought about it. His houses look like they’ve just been built.

At this point you may be thinking, “That’s a LOT of money!” We agree, but it’s money well spent. It’s an investment. And one that can pay off.

Terry makes his investment count by assembling a team. His company has contractors, technicians, electricians, plumbers … and they’ve worked with these guys for 10 or 15 years. He knows them and they trust them. In fact, they trust their work so much that Mid South Home Buyers can offer a one-year warranty on all homes they sell.

Terry also is able to be efficient by buying high-quality materials in bulk, saving his company, his homeowners, and his tenants money.

This kind of economy of scale saves money for everyone in the long run. The initial investment may be steep, but the long-term cost will be dramatically lower.

Getting the most juice is all about efficiency

We’re particularly impressed with the tips and tricks Terry gave us about increasing efficiency.

Terry’s locked into the best strategies for keeping turnover and cost of maintenance down and occupancy up.

They’ve paid off for him: the 1,500 homes he manages have a 98.7% occupancy rate. That kind of rate is STAGGERINGLY good!

One strategy Terry uses is the cookie-cutter strategy: every house gets the same materials. This has several advantages. Terry buys materials in bulk and saves money. Mid South Home Buyers maintains its own warehouse of materials. This also means that maintenance is incredibly simple and incredibly quick.

Mid South’s philosophy for technicians is unique too.

A technician coordinator manages all materials, repairs, and technician routes, figuring out how technicians can do the least amount of driving and repair reported problems in the most efficient manner.

A property manager should ALWAYS be concerned about maintenance, and Terry’s figured out a strategy that gets problems fixed within a day, always.

Small tweaks make a HUGE difference. For example, easy re-key locks can cost more initially, but they save Terry and his team the $150 they used to spend on a locksmith every time a tenant moved out.

High-quality paint means houses don’t have to be painted as often.

A system that allows tenants to text, email, OR message about needed repairs makes tenants happier and repairs easier.

You get the picture—the better the system, the happier the tenant, and the more successful you are.

Did the above advice get you nodding your head, or wondering what else you can do? You’re in luck: Terry goes in depth on these tips in his special report, Terry’s Tips for Happy Tenants … just for YOU. Send an email to happy (at) realestateguysradio (dot) com to get your own copy.

Capitalism at its finest

We say what Terry’s unique business structure is capitalism at its finest.

When we spoke to him several years ago, he was rehabbing 20 houses a year. Now he’s up to 300.

He’s working hard, making small adjustments to the machinery and process of his business, tweaking his team—finding better ways to get things done.

Terry buys better, rehabs quicker, has a higher occupancy rate, higher retention rate, and offers high-quality customer service. He provides a better deal to his tenants and competitively priced investment properties to investors.

He’s meeting needs and leaving houses (and neighborhoods) better than he found them. He’s creating win-win-wins for himself, his investors, and tenants … and his bottom-line profits are higher, too. Isn’t that the goal?

Terry didn’t get here magically. It all starts with worthy goals. You have a real estate dream? Like the old adage, “A dream not written down is merely a wish.” Put your goals on paper, gather people who can help you, keep keepin’ on … and maybe someday we’ll get to hear about YOUR success on our show!


 

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.

Add a Zero to Your Thinking

 

Businessmanholdingbuildings_615x300

In this mind-expanding episode, we’ve uncovered some great ideas to help YOU think bigger.

Thinking bigger is all about the people you know—your mentors and your team. To step up your game, it’s important to move out of your comfort zone and get comfortable getting uncomfortable.

The key is to step back and look at the bigger picture so you can add a zero … to your bottom line, to your profits, to whatever you’re doing.

We’re not talking about incremental improvements here. We’re talking about expanding what you do EXPONENTIALLY.

To help you get there …

We met with a dynamic investor, world traveler, and creator of website Sovereign Man to talk about how YOU can add a zero to your thinking.

So live from New York … it’s The Real Estate Guys radio show, featuring:

  • Your big-brained host, Robert Helms
  • His zero co-host, Russell Gray
  • Global investor and creator of Sovereign Man, Simon Black

Listen

 


 

Subscribe

 

Broadcasting since 1997 with over 300 episodes on iTunes!

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Introducing dynamic investor, Simon Black: Starting from scratch

Simon Black started investing in real estate when he was just 21. He had just graduated from West Point when he read the life-changing Rich Dad, Poor Dad, by Robert Kiyosaki.

To Simon, buying large properties and investing in real estate had always seemed like things “rich people” did.

He started asking himself “Why not ME?” The book was the kick in the butt he needed to get started.

Driving down the road one day after reading the book, Simon saw a Century 21 office, and he asked himself … “Why not me? Why not NOW?”

He hopped out of the car, still in his military uniform, and told the real estate agent exactly what he wanted. The agent said, “I got just the thing.” And THAT’S how simple it was for Simon to get his start!

Learning to learn: Two ways to figure out what you DON’T know (yet)

When Simon started out in real estate investing, he knew NOTHING.

Maybe you’re at the same place Simon was when he started out? If you feel so fresh you don’t even know what there IS to know … you’re in good company.

Simon admits it was a steep learning curve. He says the most important thing for him was to learn HOW to learn.

How can you transform yourself from a know-nothing into a successful real estate mogul? Simon tells us it starts with just two steps:

  1. Self-assess ruthlessly and constantly.

Self-assessment isn’t a skill, it’s a habit. Get in the habit of asking yourself hard questions about your performance: What did I do poorly? What do I need to learn? What do I need to do differently next time?

Self-assess constantly. And don’t sugarcoat reality. That’s lying to yourself. Be ruthless. It’s the only way you can figure out how to do better the next time.

  1. Find a mentor.

This is THE most important thing you can do as a new (or current!) real estate investor. Seek out people who are smarter and more experienced than you.

When Simon got started, he spent HOURS looking at public listings.

He realized the same names were coming up over and over again, and started keeping his own internal database of all the people who owned a lot of property.

Then he reached out to them.

He told them he was a young guy, new to real estate investing, and asked if he could take them to lunch.

He only got one response … but that’s all he needed. He took the investor to lunch and picked his brain—and kept doing it for years.

“I think I paid twenty dollars to take him to lunch, and I got to suck in all this knowledge that he’d spent years and years accumulating,” Simon says. “It was an incredible return on investment.”

Finding a mentor can be intimidating. It’s easy to look at smart, high-achieving, hard-working people and their accomplishments and feel inadequate. (Right?)

But we have learned the people at the top of their game are more than happy to share. They’re gracious, generous with their time and wisdom … and they’re extremely curious too! They want to learn from you as much as you want to learn from them.

Stepping back so you can add digits, not decimals

At some point, every investor or business owner will get so deep into their own thinking that they stop thinking of the big picture. But Simon reminds us, “We’re only limited by our own thinking.”

To really be successful, you have to step back and self-assess. Ask yourself:

  • How do I apply my experience to leverage this and make it ten times bigger?
  • What resources do I need?
  • Who can help me?
  • How do I add a zero to what I’m doing? How do I turn 100s into 1000s?

Ask yourself those questions, and you start seeing things in terms of projects and procedures. You start building teams. And you step back and stop seeing individual investments. Finding the big picture is a skill EVERYONE can acquire.

People power: Building your own team

Building a team is an ESSENTIAL part of adding a zero. Simon learned quickly that he couldn’t handle everything himself.

Robert reminds us “It’s easy to say yes; it’s hard to say no.”

To be successful, you have to learn to do two things: say no, and delegate.

Once Simon realized his biggest limiting factor was his own time, he starting learned to say no. Now he doesn’t say yes to a project unless there’s a guaranteed, dependable manager that he can hand the ball to.

If you’re juggling twenty opportunities at a time, you’re not getting a lot done. You’re not able to step back and ask yourself how you can add a zero. That’s why taking on people who can juggle those opportunities FOR you is essential.

Everyone has their own way to delegate and build a team, and there isn’t one right way. Some key factors? Maintain very high standards. And experiment!

You DON’T have to have someone on your payroll for them to be part of your team. But you do have to be able to depend on them.

And THEY have to be able to depend on YOU.

As you grow, you will become a mentor too. Spend more time coaching and mentoring so people can take over for you, and you multiply your experts, expanding your impact exponentially.

It takes time and a serious dedicated effort to form a good team. But it’s doable.

Learning from Sovereign Man

Simon Black does a lot of different things to ensure his success … and YOURS. One of those things is his website, Sovereign Man.

Simon says he often doesn’t particularly like what he sees in the world around him. The United States has more than $19 TRILLION in debt. The Federal Reserve isn’t solvent, the FDIC fails to meet minimum capitalization requirements … all these things cause concern.

But Sovereign Man has an optimistic outlook. “We hold the opinion that the path to prosperity is in production and savings and not debt and consumption. We try to help people find the right way forward.”

One way Simon does that is by hosting an entrepreneurial camp, Sovereign Academy, once a year. Fifty people are selected from thousands of applicants to attend a weeklong camp that tries to help people shine a spotlight on what they don’t know and step up their game.

Interested in attending? Visit sovereignman.com learn more and start your application.

Optimism is key!

There are two ways to think: scarcity and abundance. We want YOU to believe that there are an abundance of people who want to connect with you! Create a future where you’re offering the world your best, and that effort will be returned to you.

Your challenge for the week: Add a zero to your thinking. What can YOU do to step back and add a zero to your investments? Who can you reach out to this week?


 

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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