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

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


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.

Better check that foundation …

We know a guy who bought a property with NO foundation.  He didn’t know it because he paid cash … and with no lender forcing an inspection, he skipped it.

Oops.

He figured since the property had been in use for decades, everything was fine.  But just because a building is standing, it doesn’t make it safe or sound.

Similarly, the financial system is the foundation of the economy.  Last time, we noted the U.S. economy is reportedly doing well.  Great!

But … there’s a BIG difference between a strong economy and a strong financial system.

Now before you crawl up in a ball and go full fetal, remember … bad times are good times for the informed, connected, and prepared.  That’s why we do what we do.

So let’s dig a little deeper …

An economy is about ACTIVITY … making, selling, buying things … and saving to create pools of capital for lending to do more of all those activities.

A financial system is the INFRASTRUCTURE which supports the activity … banks, credit, stock and bond markets … even the currency itself.

People can see and feel economic activity. It’s visible all around.  The news reports on it day and night.

But it’s a LOT harder to see the strength or weakness of the financial system.

Most people simply go about doing their economic activity and trust (consciously or unconsciously) that smart, responsible people are maintaining the system.

Others don’t really trust the folks in charge … but aren’t sure how to know whether the financial system operators are doing a good job or not.

So sadly, most people are completely blind-sided when the system fails in some way.  Just think about the millions of people wiped out in 1929, 1971, 1987, 2000, and 2008.

And if you’re not sure why those dates are significant, it’s probably time to allocate some of your financial focus to more than just your economic activity.

We know.  It’s boring.  It’s hard to understand and relate to.  Just like a building’s foundation … most people would rather walk the property than climb under the house.

We get it.  But stick with us … because if you’re riding any part of the boom, it’s wise to consider when, where, and how fast the party ends.  Because parties ALWAYS end.

This is why some of the pundits we follow … guys like Peter Schiff, Robert Kiyosaki, Chris Martenson, Simon Black … sometimes seem a little gloomy.

While mainstream media is telling you how pretty the economy is … these guys are inspecting the foundation and seeing cracks … which are perhaps not obvious to the untrained eye.

Debt

One of the biggest cracks is the obscene amounts of individual, corporate, municipal, national, and global debt.  The world’s NEVER been in debt like it is right now.

The problem is debt needs to be serviced.  And when debt is growing faster than productivity (income), defaults occur.   This leads to the next huge concern …

Derivatives

When Party A borrows from Party B, Party A has a liability … and Party B has an asset.  Party A’s liability is Party B’s asset.

When Party B pledges their “asset” (Party A’s debt) as collateral for a new loan from Party C … now TWO loans depend on the performance of Party A.  Make sense?

Of course, Party B’s loan now becomes Party C’s asset … and Party C can pledge it as collateral for another loan … and on and on.  Party on.

Daisy Chains

These debt parties link balance sheets of financial institutions together like a group of mountain climbers all tethered together.

The obvious problem is because of the linkage … when debts go bad, the entire system is subject to …

Counter-Party Risk

They call this “contagion” and it was the heart of the 2008 financial crisis … even as the Federal Reserve assured everyone things were “contained.”

But asset prices are fragile … based on most players holding their positions and not dumping them.

However, when debt implodes, players sell whatever they have as fast as they can to raise cash to cover the bad debt.

That’s what happened to stocks in 2008.  And even though people weren’t dumping real estate to raise cash, real estate values fell when money stopped flowing into mortgages.

So yes … all of this matters a LOT to real estate investors. 

When credit markets collapse, it chokes lending, crashes asset prices, and stalls economic activity.

That’s bad for everyone who depends on asset prices and credit markets.

(Of course, for the prepared, it’s a shopping spree!)

Central Banks 

Last time the credit markets failed, central banks stepped in and printed TRILLIONS to buy up bad debt, backstop failing banks, and reflate asset prices.

Can they do it again?

Maybe.  But some say interest rates aren’t yet high enough to drop far enough fast enough in a crisis to jump start the economy.

Also, central banks balance sheets are still bloated with bad assets they printed money to buy up in the last crisis.

Will the world stand by as trillions more are printed to do it again on an even grander scale?  Or would the world lose faith in …

The Dollar

As we describe in detail in Future of Money and Wealth, China and Russia have been openly leading a rebellion against dollar dominance.

And while the Chinese currency is arguably some distance from supplanting the dollar globally, it’s picking up steam.

The yuan is now a MUCH more viable dollar alternative than anything else was in 2008.   This is a developing story we’re following closely.  Meanwhile …

Let the Good Times Roll

Don’t get us wrong.  The economy appears to be strong.  There’s a lot of opportunity in the market RIGHT NOW.

If you’re in the right markets and product niches, this is a fun and profitable time to be an investor.

BUT … the financial system these good times are based on hasn’t really changed.  In fact, in some ways the cracks are getting larger.

So while the good times roll, remember things usually roll downhill … and sometimes right off the edge.  Best to stay aware and prepared.

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.

Profitable Niches – Single Family Rentals

In our final episode of our Profitable Niches series, we’re ending where many folks probably thought we would start … with single family rentals.

It’s no mystery why this is the most popular way for new investors to enter into real estate investing. Home ownership and single family homes are something that everyone knows well, and it makes sense to start with what you know.

When it comes to investing in single-family rentals, our guest this week knows her market inside and out and has some tips for picking the best deals that you’ll definitely want to hear.

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

  • Your singular host, Robert Helms
  • His family-friendly co-host, Russell Gray
  • Guest, Jean Gillen, real estate agent in Central Florida

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Why single family rentals make sense

It’s impossible to not interact with the real estate economy in some way. Whether you own your own home, rent, or have investment properties already, you’re participating in the real estate economy.

Single family rentals are a great way to enter into the market and interact as a beneficiary. So, rather than just paying rent or a mortgage, you can collect money from tenants. You’ll get cash flow AND build equity over time.

In the US economy especially, the single family market is given high priority by the government. There are incredible tax benefits and incentives given to people who own housing, even if they are renting it out.

After all, having affordable, accessible housing is an essential need and a key part of the nation’s economy.

But, single family rentals are also accessible to small-time investors or folks just starting out. They aren’t very efficient, so larger investors don’t have the ability to cherry pick individual listings. That’s how smaller investors can do the research to find great deals and still enter the market.

One of the first things we talk about with any kind of investment is understanding your investing philosophy. Then, build a top-notch team … a realtor, lender, and other experts. Finally, find the right property to buy.

Our guest this week is a realtor who specializes in investment properties. She knows all about the importance of building a team and finding investments that make sense.

The secrets of successful single-family rentals

Jean Gillen is a realtor in the Central Florida market. She helps investors get good deals. And, when you’re looking to build an all-star team to help with your investments, you want a realtor like Jean who knows what investors are looking for in a rental.

“The wonderful thing about selling to investors is that it’s all on a piece of paper,” Jean says. “If it doesn’t work out on a piece of paper, don’t buy it.”

One of the pitfalls some new investors and certainly new homeowners make is getting too emotionally attached to a kitchen or other part of a house. It can lead to decisions that don’t make sense on paper.

That’s why Jean works with the types of clients that she does.

“I like working with investors because I don’t have to please the woman or the man,” she says. “It’s more fun to find that great investment for people.”

In fact, Jean says she has clients she has never met, and they’ve purchased properties they’ve never seen in person. While this may be a paradigm shift, it goes to show that taking the emotion out of purchasing a property and seeing it as the investment vehicle it is can be a good philosophy.

One of the other things Jean sees as key to a successful investment is a good property manager. Jean has several management companies she works within her market and suggests her clients interview all of them.

“If you feel you can get along with the manager, then it’s going to make your life much easier,” Jean says. In many cases, your property manager will pay the taxes and HOA fees for you.

And, of course, finding a realtor who understands investment property is worth their weight in gold. They’ll be a valuable resource to find additional properties and even to manage current ones and solve problems with property managers.

Single family rentals in Central Florida

Single family rentals are all about the market. Find a strong market and the right realtor to guide you through, and you can capitalize on what single family rentals have to offer.

Jean specializes in the Central Florida market. She knows the streets and neighborhoods where clients can find the best deals. AND she knows the tenant demographics.

Even though Florida is known as being the place for retirees, she says, the average age of residents in Central Florida is 37. Many tenants today were homeowners before the economic downturn in 2008 and have decided they’d rather rent.

“These are just normal people. They could be school teachers or work in hospitals,” Jean says. “I rented a house to a doctor because he worked at a new hospital and didn’t want to buy for the first two years.”

Jean also prefers Central Florida because it’s landlord friendly. Thanks to Florida’s governor, more businesses are coming to the state and drawing in a larger workforce. It’s a hotbed of activity for aerospace, university students, and many other industries.

In fact, Jean says that home values in Florida are expected to rise 35 percent by 2021, meaning now is a good time to consider looking at the market. With new homes coming into the market by the end of summer, Jean is excited about the new opportunities available.

At the end of the day, Jean believes that the deals worth doing are the ones that make sense on paper. She’s put together a presentation on the Central Florida market including who is renting and how to find properties that will cash flow well. We’d love to send it to you!

Send an email to centralflorida [at] realestateguysradio [dot] com and you’ll receive it right away along with Jean’s contact information to learn 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.

STRONG economy, BUT ….

This may be one of the most interesting times in economic history. 

The pace and amount of change is creating significant challenges and opportunities for both investors and entrepreneurs … not to mention policy makers.

It’s fun to watch, hard to keep up with, and impossible to avoid.

The changing future of money and wealth will affect everyone … believe it or not, like it or not, prepared or not.

Aside from growing threats to dollar dominance in global trade … there’s a tug-of-war going on between stimulating and constraining the flow of dollars through the economy.

We recently said the rollback of Dodd-Frank might increase community lending … especially into real estate.  This stimulates the economy.

But the Fed decided to raise interest rates again … ever so slightly … and toss in some hawk talk (more hikes coming this year).

Obviously, higher rates mean fewer borrowers qualify for loans, and those who do can’t borrow as much.  This constrains the economy … and directly affects real estate investors.

Earlier this year, Uncle Sam implemented tax cuts and a ginormous government budget.  Tax cuts leaves more money in the hands of individuals and corporations, hoping they’ll spend it.

That’s stimulating … IF they really deploy the funds.

Of course, even if individuals and corporations won’t spend, the government is going to (shocker, we know).  This generally stimulates the economy.

Meanwhile, rising prices … led by gas prices and healthcare … and let’s not forget tariffs … mean dollars don’t go as far, so people can’t buy as much.  This constrains economic activity.

Dizzy yet?  It’s like watching a tennis match.  And we’re not done …

The dollar is strengthening because of an improving economy, rising rates, and its safe-haven status in times of geo-political uncertainty (like now).

strong dollar makes foreign products cheaper for Americans.

Domestically, this can stimulate activity … if people buy more stuff … if it’s made overseas … and if it’s not subject to tariffs.

On the other hand, a strong dollar makes exports harder to sell, which is a drag on sales made to foreigners.  This potentially constrains cash coming into the USA.

Meanwhile, a tight U.S. labor market and the rising wages we’re told will follow tends to increase people’s ability to borrow and spend.  This stimulates the economy.

Unsurprisingly, both consumer confidence and small business confidence are VERY strong right now.

People and businesses generally feel good about their economic future.

When people feel good, they spend, borrow, and invest.  All are stimulating to the economy.

So on the surface, the U.S. economy seems to be leaning towards growth and stability.  And because a rising tide lifts all boats, real estate investors should be very happy right now too.

Still, there’s an obvious tug-of-war going on between stimulating and constraining the economy.

The challenge (and opportunity) is that SO much is changing SO fast.  Too much stimulation is a problem and so is too much constraint.

And with so much happening at once, it’s probably dangerous for an investor to put TOO much emphasis on any one thing … or prepare for only one outcome.

After all, the economy is a very complex system.

Investors who bought too much into the sunshine narrative leading up to 2008 weren’t prepared for a storm. When it came, many got washed away.

Those who bought too much of the gloom and doom story missed out on one of the best real estate cycles in recent memory.

So it’s important to listen to a variety of viewpoints … then have a plan for variable outcomes.

For years, we’ve talked about the benefits of healthy tension … opposing forces tugging hard at each other.  Just like an old-fashioned rooftop TV antenna …  it’s the tension between opposing positions that creates stability.

So we like all the debate and chatter in the market right now. It’s less confusing than comforting.  It helps us see both the opportunities AND the risks.

Robert Kiyosaki reminds us all the time to stand on the edge … so you can see both sides of the coin.  And there’s no one-size-fits-all answer.

We think it’s important to keep in mind that strong economy and astrong financial system are two very different things.

It’s like getting into a boat and thinking it’s seaworthy simply because it’s fast.  A bad hull with a slow leak will eventually sink even the fastest boat.

Right now, even though corporate profits are up and more jobs are being created, interest rates are rising in the largest sea of global debt in history.

As we learned in 2008, when debt goes bad, financial ships can sink VERY fast.

But dangerous global debt levels is only one of several concerns about what some consider to be a fragile financial system tasked with supporting robusteconomic activity.

Will it hold up?  What if it doesn’t?  How will you know things are starting to break?  What will you do if it does?

Sunshine is awesome and we should all enjoy it.  But it’s always smart to watch the weather reports … and pack an umbrella just in case.

We’ll have much more to say on this important topic in the near future …

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.

Profitable Niches – Agricultural Investing

Throughout our Profitable Niches series, the message has been clear … there’s more than one way to invest in real estate. It’s so much more than single-family homes and apartment buildings. And, in today’s market, when some of the more traditional investments are stretched, it’s a good idea to think about something new and fresh.

Agricultural investing may not have been on your radar, but that’s about to change! And no, you don’t have to have a green thumb to participate. We’re talking with an expert guest who has blazed a trail into a market that’s energizing AND tasty.

As a sweet bonus, you can support a socially sustainable program as well. Check it out!

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

  • Your cultivating host, Robert Helms
  • His growing co-host, Russell Gray
  • Friend and farmer, David Sewell, Founder of International Coffee Farms

Listen



Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


From beans to mug or bar … picking a crop

Just like everyone needs a roof over their head, everyone has to eat. That means there’s a demand for agricultural products and an opportunity for investors to do well in agriculture.

All it takes is a little education on the language of agricultural investing. In housing, it’s all about markets and demands. Agriculture has the same learning curve. Once you understand the geography, the demand for products, and a little of the science behind growing, you’re on your way to getting a foothold in agriculture.

But, agriculture is a wide world, so we’ll narrow our focus.

Our guest, David Sewell, started in agricultural investing with one product: coffee. It has a long shelf life, doesn’t perish quickly, and there’s enormous demand for specialty coffee with limited supply.

Specialty, socially sustainable coffee has been David’s niche since 2014. He purchases farms that are managed poorly, spends time working on the soil, understanding the climate, planting trees, and building a system that delivers product at a great return.

“Specialty coffee is a unique product that’s managed by the tree,” David says. “Specialty coffee is hand-picked, one cherry at a time.”

One of the best things about specialty coffee is that the limited growing geography drives up demand. But it takes some time to get a farm turned around to producing. Just like any gardening project, it takes patience and skill.

Since David started his business in 2014, he has worked through plenty of challenges and developed an amazing model that is blazing a trail in agricultural investing.

And now, he’s moved into a second crop.

“A good way to start the day is with a good cup of coffee and, in the evening, end it with a couple pieces of chocolate,” David says.

The demand for specialty, fine-flavored cacao is rising, and the supply is even MORE limited than specialty coffee. David’s cacao choice is particularly a specialty in Belize.

David took what he learned from coffee in Panama and rehabbed a few farms in Belize with the same, successful model.

With a little science, ingenuity, and care, David has capitalized on the demand for specialty products. He has 154 farmers who sell their crop exclusively to him, in his centralized processing facility.

“It’s what they needed,” David says. “So, we can control the cacao.”

David has three farms as well as a trading company that buys and sells literal tons of beans every weekend.

They’ve all been trained on organic processes, and together, they use the centralized processing systems he has built to make an efficient product that is ready for market.

Socially Sustainable Investing

Conditions on a coffee farm aren’t known for being great. That is different on David’s farms. He takes care of his 35 farm hands, and it has paid off.

“We’re proud to say that with the compensation program we’re able to provide and with the love and attention we’ve paid them, we haven’t had one turnover in 3 years,” David says. “We take care of the people.”

David’s farms change the way workers live. They receive good rain gear, so they aren’t picking cherries or tending to trees in the rain wearing a trash bag. Kids aren’t allowed on the farm … they attend school.

Families live in provided housing with electricity, flushing toilets, and other amenities that we often take for granted.

And, while these benefits for employees are key to David’s business, it’s not all altruistic. Labor turnover is expensive, and taking care of workers keeps them from leaving.

Beyond just the living conditions, workers are sent to seminars and congresses to build up their skills so they become even more educated and grow with the company.

This dedication to his workers shows by the passion and dedication they bring to the field and to the job every day. His workforce is expert in cacao and coffee, and that drives the superior flavor … and price.

That makes investing in opportunities like David’s even more exciting and sweeter for investors. Not only can you make money, but you can also make a difference.

Small-scale agricultural investing

One of the drawbacks to agricultural investing is understanding the science and process to growing, processing, and distributing a product. It takes time and experience to know a good opportunity and to succeed.

For instance, David learned early on that the biggest hurdle was the deeding process for international property. He warns that it is difficult to do on an individual basis.

But, David has found an interesting way to let people play with agricultural investing.

“We’ve focused on the delivery part of the investment vehicle,” David says. “That’s the hard part and where failure happens in many cases.”

With David’s business, he wanted to use his knowledge of syndication to make agricultural investing more accessible for people, regardless of their knowledge level and even for those who couldn’t buy an entire farm.

David’s farms are broken out into ½ acre parcels that can be bought individually or in groups. The parcel is deeded an individual investor or entity’s name, and it’s essentially a turnkey investment. It’s managed and operated by David’s team and investors not only get the returns, but also the knowledge that they’re participating in a socially sustainable program.

For investors looking for a legacy investment to pass on to their kids, or to invest in a program that’s socially sustainable, this is worth a serious look.

To learn more about David’s coffee and cacao operation and how you can get involved, send an email to beans [at] realestateguysradio [dot] com, and we’ll get you his special report on both opportunities!

And, we’d love to see you in September with David at our Secrets of Successful Syndication seminar. Here’s where to sign up!


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.

Real estate just got a BIG boost …

Something BIG is happening for real estate … and while it’s not a surprise, it’s a development every real estate investor should be aware of.

Here’s some context …

First, remember real estate investing is essentially a business of managing debt, equity, and cashflow.  

That’s YOUR job.  You can get your property managers and team to handle most everything else.

Equity (the difference between the value and the debt) comes from savings (down payment), the market (value increase), or amortization (pay down of loan).

Cashflow is a function of rental income, operating expenses, debt service, and taxes.

Debt is like the air in a jump house.  When it’s flowing in, it props everything up.  When it stops, everything deflates pretty fast.

That’s why real estate investors (should) pay close attention to debt markets.

The 2008 financial crisis devastated the supply chain of debt into real estate. Mortgage companies failed in droves. We know. We owned one.

Real estate went from too-easy-to-finance to nearly impossible.  Lack of lending crashed real estate prices and created a big mess.  The air came out.

It’s why we became such outspoken advocates for syndication.  There was (and still is) a huge need and opportunity to aggregate capital for real estate.

Banks and Wall Street had been the primary channels for capital aggregation and distribution.  But they were broken.  Main Street needed to be empowered.

The government agreed.

So in 2012, the JOBS Act passed. And since September 2013, regulations are in place which make raising private capital MUCH easier.  We like it.

But while the JOBS Act helps investors raise EQUITY …

… earlier legislation (the Dodd-Frank Wall Street Reform and Consumer Protection Act) actually impedes lending … especially at the local level.

But now that’s changing … and it’s an EXCITING development!

You may have seen this headline …

Trump signs bipartisan bill rolling back some Dodd-Frank bank regulations – Los Angeles Times, 5/24/18

“ … with the key support of some Senate Democrats, the legislation focuses relief on small and medium-sized banks …

 “‘This is a great day for Main Street in rural America, and a big testament to what’s possible when members of Congress put partisanship aside and work together to help our communities grow and thrive,’ [Sen. Heidi Heitkamp (D-N.D.)] said in a statement after the signing.” 

Community banks, which enjoy broad support among Republicans and Democrats, will be freed from Dodd-Frank’s mortgage rules if they make fewer than 500 mortgages a year.”

Even in today’s highly charged political environment, this bipartisan effort shows Main Street real estate is very important to politicians.

The Dodd-Frank rollback aims to improve the flow of money into real estate, which is awesome for real estate investors.

Of course, just because politicians aim at something, doesn’t mean they hit it.  Politicians are notoriously bad shots.

So what do LENDERS think of the Dodd-Frank rollback?

Local bankers say reforms to Dodd-Frank are welcome – Herald-Whig, 6/5/18

“Mark Field, president and chairman of Liberty Bank, said most of the benefits from the recent reforms … involve mortgages.”

“… allows banks to give automatic qualified mortgage status to customers they know if the banks are using their own money for loans.”

“‘Character and knowing people counts for something again,’ Field said.”

This is GREAT news … and although time will tell (after all, this is very recent) … we think it will open up capital flows into real estate.

Of course, as we’ve said before, we think more money will be finding its way into real estate lending.  It’s both inevitable and reassuring.

For individual investors and syndicators alike, this new playing field promises to open up new sources of lending … and terms.

Because even though lending has loosened since the depths of the recession …

… it’s remained tight for borrowers and projects that didn’t fit into the tightly-regulated box created by Dodd-Frank.

Not to get too far in the weeds, but the 2008 credit crisis had its roots in Wall Street’s casino mentality.

In its zeal to create more poker chips, Wall Street cast aside sound lending practices because they could bury the risk in complex securities and sell them to unsuspecting investors.

Wall Street didn’t really care if loans went bad … because they wouldn’t be holding them when it happened.

So Dodd-Frank created strict rules attempting to prevent the bad behavior of Wall Street and big banks.  (Good luck with that.)

We could go on … but the point is that Dodd-Frank took professional judgment out of lending … from EVERYONE … including community banks, credit unions, and other portfolio lenders (those who hold loans instead of flip them).

Even though the financial crisis had its roots in Wall Street, not Main Street … Dodd-Frank took many Main Street lenders off-line.

The Dodd-Frank rollback intends to take the shackles off local lenders.

There’s a HUGE difference dealing with a local lender on a PERSONAL basis … one who’s going to hold the loan … and can consider the many factors which don’t fit into some bureaucratic one-size-fits-all checklist.

And while we need to do more research, a side-benefit for syndicators may be that setting up lending funds might get easier too.

In any case, now that local lending laws are loosening, let’s take a look at moves you can make to take advantage of the changes …

Build relationships with community bankers.  If you’ve only been investing since 2008, this is a funding source you’ve probably ignored.  It’s time to fix that.

Open accounts with community banks in markets where you invest. Establish a personal relationship with the bankers.  It’s a VERY different experience than doing business with a too-big-to-jail bank.  You’ll like it.

Use professional selling skills to find out what the banker’s goals and objectives are.  What makes the relationship a win for the banker?

Present yourself as the IDEAL client for the banker.  Do some deals … even if you don’t really need the money.  SHOW the banker you’re a person of character and capability.  Build TRUST.

It’s even BETTER if you’re a syndicator because you can bring bigger deposits, bigger loans, more transaction volume, and maybe even more referrals.

In fact, one of the secrets of successful syndication is having your individual investors make deposits in the community bank you’re borrowing from.

Go with the flow …

When the rules change, so does the flow of money.  Sometimes it works against you.  Sometimes it works FOR you.

And while there are certainly some long term economic trends every investor … real estate or otherwise … should be concerned about …

… this is a development which should have real estate investors smiling.

We think these updates to Dodd-Frank will work FOR real estate investors … at least those careful to pay attention and take effective action.

Of course, you’ve read all the way to the bottom, so you’re already ahead of the game.

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.

Profitable Niches – Real Estate Development

In this episode of our Profitable Niches series, we’re starting from the ground up. Inventory of homes is tight in many US markets, and returns are diminishing. Enter real estate development.

Our guest, Jay Hartley, saw an exciting opportunity to expand his business into the real estate development space, and he’s got a wealth of knowledge to share.

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

  • Your stately host, Robert Helms
  • His developing co-host, Russell Gray
  • Returning guest, Jay Hartley, real estate developer and property manager in Dallas-Fort Worth

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Beginning with the basics

One of the questions we ask in our seminars is which is more risky: buying an existing building and renovating or building from the ground up? The truth is, there isn’t a right answer to that question.

From inheriting problems in an existing property to building too much or building something the market doesn’t want, there’s a lot to consider when deciding whether to build or buy. The key is knowing the market, the demand, and the supply.

One of the most exciting things about real estate development is the number of entry points. Throughout the lifecycle of a property, there is value being added. Taking raw land from a zoned area to a lot with utilities and a finished building are all steps in the process.

For those who find themselves in a market with a lot of demand but a squeeze on supply, real estate development can be a FANTASTIC way to add more houses into the market, whether or not you hold on to that inventory long term.

Shifting your investment mindset

Jay Hartley is known as one of the best property managers in the Dallas-Fort Worth real estate market. He began like many investors with buying and renting fixer uppers.

Eventually, inventory started getting tight, prices escalated, and returns diminished. That’s when Jay took his first steps into development.

“We had to look at the marketplace and see where the opportunity would be to add inventory,” Jay says. “We started looking at acquiring vacant lots that were already in subdivisions and doing what they call infill.”

Infill meant building one or two homes on lots in subdivisions and then either renting or selling those homes to investors as turnkey properties.

It wasn’t long before Jay’s successful turnkey model got plenty of competitors and Jay took it to the next level. He utilized the economies of scale by getting into bigger developments and subdividing tracts of land. That’s also when he started building his network and expanding his education.

“I had some clients in the building business,” Jay says. “I took them to lunch and started picking their brains.”

Jay soon learned it was a smart idea to partner with a few builders early on. But then the key to sustaining his business was to keep his contractors busy with his projects so he didn’t lose them to other projects.

Real estate development doesn’t necessarily mean you’re the one swinging the hammer. In many ways, it’s orchestrating OTHER contractors and moving parts to complete a job. That also means managing labor.

“One of the biggest issues we’re dealing with right now is having labor ready and available,” Jay says. “If we don’t keep them busy, we lose that framer, we lose that concrete guy, we lose that roofer. We try to set them up to go to one job site to the next to keep them busy and on my job.”

As the deals got larger, Jay had to deal with the growth spurt in his business. He was always known as the property management guy, but had to shift his mindset as he shifted into real estate development. One of those moves was toward selling properties rather than buying and holding.

“I’m not afraid to sell them anymore,” Jay says. “I was a collector before, and it was tough for me to wrap my head around selling them.”

But, with some help and guidance, he was able to work through those mental roadblocks and scale up his business!

Get rich in a niche with a network

Rolling with changing markets is what makes an investor successful long term. Even though Jay was doing really well in property management, he saw a need for more inventory in the market. So, he became one of the people to create it! That has also set him up to know about lots of different types of real estate, and it’s another tool in his toolkit.

“It’s not about what I’ve done. It’s about who I’ve met,” Jay says.

Building a network of people with all kinds of unique backgrounds is a way to tap into their experience. Jay says you can take classes and watch videos, but watching flipper shows on television doesn’t mean you know how to flip a house. Partnering with people on a build job, however, is worth its weight in gold.

And that’s the essence of most development. It’s done through syndication and joint ventures. You can partner up with people who have the land, capital, or expertise you need, and you can put together a great deal.

Jay started out financing his own projects, but it wasn’t until he started tapping into syndication that his business really took off. He attended a few of our programs on syndication and sales, and they catapulted him into success.

“I’ve been in real estate all my life,” Jay says. “The training there, I didn’t think I really needed it. It was enlightening … it gave me the tools and the ability and the confidence to talk to clients and investors and pitch!”

Jay’s journey has been propelled by his ability to be ambitious and coachable. The ability to shift and adapt to new markets is how he keeps his skills sharp and his business growing.

If you’d like to learn more about real estate development and property management in the Dallas-Fort Worth market, get on the inside track with Jay. Send an email to dallasdeals (at) realestateguysradio (dot) com, and we’ll connect you with Jay and his expertise!

And, we hope to see you at some upcoming events. Secrets of Successful Syndication and How to Win Funds and Influence People are packed full of information that you won’t want to miss. Register 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.

MANY lessons from Amazon’s HQ2 search …

You’ve probably noticed Amazon is taking over the world.  There’s a lot we could say, but we’ll narrow our focus to lessons for real estate investors …

In the May Housing News Report, there’s an article about Amazon’s ongoing search for their second headquarters (HQ2).

Even from just a real estate perspective, Amazon is a fascinating company to watch.  There are SO many lessons to be gleaned from watching what they’re doing … and how the world is reacting.

In case you’re new to the Amazon HQ2 story …

In 2017, Amazon put out a Request for Proposal (RFP) to bait cities across the U.S. into falling all over themselves to win Amazon’s coveted second headquarters …

… and the 50,000 high-paying jobs (average salary = $100,000 per year) that come with it.  We commented on this story at the time.

At first, there were hundreds of cities in the hunt. We said at the time we think there’s an excellent chance Amazon will pick Atlanta.

Early in 2018, the race narrowed to 20 finalists … and Atlanta’s still on the list.

Which brings us to now …

In the Housing News Report article, there’s a link to an analysis by Daren Blomquist of Attom Data Solutions.  Daren ranked the 20 finalists by comparing the cities on certain criteria defined in Amazon’s original RFP.

It’s the same process we did, except Daren used actual data … we just guessed.

Here’s Daren’s actual chart for your viewing pleasure …

Notice Atlanta’s ranked #2.  So our hunch is holding its own … so far.

Meanwhile, there several useful things to glean from this chart and the story behind it, so let’s dig in …

Single family homes are NOT an asset class

We’ve said it a thousand times, but just look at the median prices.  They range from $130,000 in Indianapolis to $1.445 MILLION in New York.

When people say, “Housing is in a bubble!” … what housing are they talking about?  Indy?  Seems pretty cheap based on median price and affordability.

And when high-priced markets start hitting the top of their affordability range, people MOVE … to more affordable markets.  People ALWAYS need a place to live.

So while it’s true that migration patterns drive prices … demand rises or falls as people move in or out … it’s often economics that drive migration patterns.

So an alert investor can get in front of growing demand and ride a wave up. That’s exactly what the folks who got into Dallas five years ago have done.

Equity happens … but not evenly

Look at the disparity in five-year appreciation rates among these markets … from just 8% in Montgomery County to 246% in Dallas.  HUGE difference!

Even in markets where median prices are similar … say Dallas and Miami… the five-year appreciation variance is substantial … Dallas coming in at 246% and Miami at “only” 71%.

So price doesn’t seem to be the deciding factor for appreciation.

And neither does property tax … as Dallas is second highest behind New Jersey (hey, New Jersey had to win at something), but Dallas is still king of appreciation.

Meanwhile Denver has the lowest property tax … half of Atlanta … yet their appreciation rates were about the same.

And price-to-income ratios don’t seem to make the difference either … as Los Angeles and New York are both equally unaffordable, yet New York has half the appreciation.

Keep it simple …

Obviously, this is just one chart … and it’s easy to get lost in the weeds.  We don’t want paralysis from analysis.  So charts like these are just the start of a deeper dive.

But it doesn’t have to be complicated.  Here’s what we look for …

What do winners have in common?

Dallas and Austin are both triple-digit appreciators … even though Dallas grew at twice the rate of Austin.  Is it just simply they’re both in Texas or is there more to the story?

Of course, 10 years ago, Dallas was coming off being one of the slowest appreciating markets in the country.  So something changed that dramatically…

What’s driving appreciation?

Prices get bid up when supply is growing more slowly than demand with capacity to pay.

So though you can see affordability based on income on this chart, you can’t see supply and demand drivers.  Neither can you see the economic drivers.

But you need to look at them.

That’s why we say you can’t study 20 markets well.  It’s too much.  Use a chart like this to pick your top three … and get to know them very well.

What markets are poised for growth?

Once you understand what makes a market like Dallas tick … and how it went from no growth to explosive growth … you can watch for similar factors in sleepy markets.

When you spot something interesting, you go in for a closer look.  If things go your way, you get there before the masses … and you get to catch a rising star!

What are the big players doing?

Big players can do research you can’t.  But that’s okay because you can piggy-back on their hard work.  It’s like cheating off the smart kid in school, except you don’t get detention.

Amazon is a juggernaut in American business … and their power is impacting real estate of all kinds … retail, industrial, and even office and housing in markets where they have a footprint.

That’s why SO much attention is being paid to their search for HQ2.

But another reason to watch is they’re leaders in business decision making too.  Other employers are watching what Amazon does and being influenced by it.

So when Amazon ultimately picks a city, we’re guessing other companies will cheat off their homework … and pick the same city.

The reason we bet on Atlanta is because many other Fortune 1000 companies had already chosen Atlanta as a great place to set up shop.

We don’t know what process they went through to get there.  We just know they did.  So as Amazon goes through its process … they may reach similar conclusions.

Of course, Raleigh is also home to a comparable number of big companies.

But based on the world-class airport, huge labor pool, access to higher education, major distribution, and a business-friendly environment … though it’s close, we still think Atlanta has the edge.

Then again, Jeff Bezos isn’t consulting with us, so we’ll just have to wait and see like everyone else.

Meanwhile, as the field narrows, we’ll continue to learn where corporate leaders think the best location is for their businesses, employees, and new job creation.

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.

Ask The Guys – Unraveling the Mysteries of Real Estate

It’s one of our favorite segments … answering YOUR real-world questions about real estate investing.

In this batch of mail, we run through where to start with syndication and investing to how to think about self-directed retirement funds and everything in between.

As a reminder, our show is about offering ideas and information, but we are not legal or tax professionals and do not give advice. Always see a pro for advice on your specific situation.

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

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

Listen



Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Question: I’m a real estate agent and would like to start investing for myself. How do I get started?

Kristen in Seattle, Washington, brought us this wonderful question. First of all, hats off to you for wanting to be your own best client!

Starting with the right education is so important and so is developing your network. You might consider joining an investment club, but you could also think even bigger and start your own!

Starting a syndication or investment club can be very successful if you surround yourself with the right people and experts. Here’s a few people you’ll probably want to include:

✓  A CPA to help with understanding tax benefits

✓  A mortgage broker to extract excess equity

✓  Other real estate agents … especially those with investment knowledge

You can convert your pursuit of education into a profitable business. Start by going to events with meetups and investment clubs. Remember, it’s not just the presenters who have a great story. It’s also the people in the seats. Make lasting connections with other attendees, and bring them into your network.

Question: Which materials … books and blogs should I read for getting educated in investing?

Our best advice to Luca in Croatia, who submitted this question, is to not just read a book … STUDY a book. Prepare your mindset to start thinking like an entrepreneur.

What does this mean? Find a group of people who are interested in investing, and get together and discuss a book.

You’ll learn by listening to what others have to say AND teaching different concepts. Repeat the process of learn, study, teach, and use these discussion groups to build your network.

Recruit people who are further along in the investment process than you to learn from them. You want to discover not only the technical aspects of what they do, but also how they think. Explore their mindset and examine how it makes them successful.

Question: I want to self-direct my retirement funds after I leave my job. How can I use this money to invest in real estate?

This question comes from Jason in Stokesdale, North Carolina. Some aspects of this type of investing can get a little tricky, so remember to always seek advice from a tax and legal professional.

For money that’s in a 401k from an employer, you might have access to what’s called an in-service withdrawal. You might also consider taking out a loan on your 401k.

As with any investment, make sure that the numbers add up, especially since there are important tax considerations to make when you’re investing borrowed money. This is also where a CPA will come in handy.

The vast majority of custodians do not allow for traditional investing and don’t charge a lot in fees and maintenance charges because they make a piece of what you’re investing in. Non-traditional custodians may charge more fees upfront because they do not make a piece of anything you invest in, but they can offer more flexibility in what you invest in.

If you want to know more on this topic, we have a couple reports that might be helpful on Qualified Retirement Plans (QRP) and Individual Retirement Accounts (IRA). You can get both of those by emailing QRP (at) realestateguysradio (dot) com AND IRA (at) realestateguysradio (dot) com.

Question: For those who don’t like all the work of real estate investing, how do you find a trusted syndicator?

Roy in Bridgewater, New Jersey, and Patrick in San Diego, California had similar questions about passive investing through a syndicator. They both want to break into the bigger real estate deals, but are worried about putting their money into the wrong hands. Syndication is a powerful tool that we’re big fans of here on the podcast, but vetting your syndicator is key!

First, look up all the info you can on your sponsor and know who you’re dealing with. Ask them upfront if there’s anything important you should know about them or their business, and then, go searching.

Referrals are a good way to get to know your sponsor. Careful Google searching (watch out for false information on the internet!) and looking up professional licenses and potential trouble with regulators are also essential before doing a deal.

Also, make sure their attorneys and legal documentation all checks out.

As we’ve said many times before … develop a relationship with the sponsor. Take the time to get to know them and the types of deals they do to make sure it’s a good match.

We’d love to talk to you more about syndication at our Secrets of Successful Syndication event on September 13-14. Register now!

Question: I have a commercial property near the end of its lease. Should I sell it or keep the passive income?

Colleen in Savannah, Georgia, has had a triple-net (commercial) property for 13 years, but the lease will be up in 4 years. She enjoys the passive income from the property, but wants to know if it might be time to let it go.

We discussed the advantages of commercial property in detail with Tom Wilson in our Profitable Niches series, and the longer leases and steady income are definitely big pluses!

Lease negotiation can happen before a lease is up, so that’s an option to make the deal sweeter for a potential buyer. But, here are a couple questions we would ask to determine if selling is the right choice:

✓  Knowing what you know now, would you buy it?

✓  If you did sell it, what would you do with the money?

Ultimately, the decision to sell or keep the property is up to you, but evaluating the lease with fresh eyes is a good way to keep your investments in line with your goals!

Question: How can I make some of my assets more liquid to prepare for an economic downturn?

Marty in Richmond, Virginia, has some real estate investment experience, but he’s concerned about a possible negative turn in the economy and how to protect some of his assets he’s received after selling a property.

We discussed the state of the economy and how to protect and grow wealth at great length in our video series: The Future of Money & Wealth. Take a look at that seminar for valuable insights from incredible experts.

To answer the question, if you think the market is going to downturn, you’ll want to play your investments differently. There are pros and cons for stock market investment and even bank investment, and they all carry different risks.

If you want something that is liquid and fairly stable in relation to the dollar, you could consider a couple options like currencies, precious metals like gold, or putting your money in the bank or a safe.

Some other creative strategies are looking into a private mortgage or note or even paying cash outright for a property. As long as you’re able to cover property taxes, having a property in a stable market is a good way to keep cash flowing in a down market. Even in a poor economy, people need a place to live.

Question: How many times a year is your syndication class given?

This was an easy one from Floyd in Las Vegas, Nevada. We do our Secrets of Successful Syndication podcast twice a year. The next one is coming up in September, and we’d love to see you there!


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.

Beware of bubble genius …

Hard to believe it’s nearly 10 years since Fannie Mae and Freddie Mac collapsed and were taken over by Uncle Sam.

Time flies when you’re getting rich.

It’s been a GREAT run for residential real estate investors … especially apartment investors.  Free money in the punch bowl can really juice up a profit party.

But after 10 years of equity happening to real estate bull market riders … it’s a good time to think about where we are, where things are headed, and what to do next.

And looking forward comes in two parts:  external and internal.

The external is the world of variables outside your control.  Like driving down the freeway, there are lots of other drivers whose actions affect YOUR safety and progress.

But the key to your success isn’t what’s going externally. It’s how YOU navigate those external circumstances … based on what’s going on inside of you.

It’s about financial and emotional intelligence.

Because what you think and believe affects what you do … and what YOU do has the greatest impact on the results YOU experience.

One of the biggest dangers of riding a wave of easy money into gobs of equity is thinking you’re an investing genius.

We know … because it’s happened to us … and we see it happen all the time.

It’s much harder to be humble, curious, teachable and innovative when you already think you’re smart.

It’s important to know the difference between luck and skill.

True financial genius is being able to make money when everything externally is falling apart … like a pro race car driver deftly navigating a multi-car melee at 180 miles an hour.

That’s REAL skill.  Anyone can rocket down an open road.

Fannie Mae’s chief economist Doug Duncan told the audience at Future of Money and Wealth he thinks recession is likely in the not-too-distant future.

And Doug made those comments after reminding everyone his last year’s Summit predictions were all essentially spot on.

So based on both his pedigree and track record, Doug’s qualified to have an opinion.  And we’re listening.

“The time to repair the roof is when the sun is shining.” 
– John F. Kennedy

The sun’s been shining on real estate investors for ten years now.  Maybe you’re one of the many who’ve made tons of money.  We hope that trend continues.

But as our friend Brad “The Apartment King” Sumrok reminds us … it’s time to approach today’s market with a little more sobriety.

Money and margins are both getting tighter.

This means paying better attention to detail, increasing your financial education, and being careful not to rationalize marginal investments to bet on positive externals.

In other words, beware of being a bubble market genius … and thinking what worked in a bull market will work when things change.

Better to work on sharpening your skills at finding and creating value.

Of course, real estate is FULL of pockets of opportunity … the polar opposite of a commodity or asset class where everything’s the same and moves together.

Real estate’s quirkiness befuddles Wall Street investors … but thrills Main Street investors.

A case in point are apartments …

On the one hand, lots of brand new inventory is coming on the market … and it’s putting pressure on landlords to offer profit reducing concessions.

On the other hand, more affordable existing stock is attracting lots of interest… from both tenants and investors.

So “housing” isn’t hot or cold.  And neither are “apartments”.  Real estate defies that kind of simplistic description.

Of course, it takes financial education to recognize the difference between momentum and value.

It also takes time, effort, and relationships to actually find the markets, team and properties to invest in.

For most people, that’s way too much trouble.  They’d rather sit in their crib with their trading app … or turn their financial future over to a paper asset advisor.

That’s all peachy until rates rise, recession hits, and paper prices plunge.

History … and Doug Duncan … says the inevitable bear market is getting closer.

Of course, as we’ve previously commented … when paper investors get nervous, one of their favorite places to seek safety with return is real estate.

So for active and aspiring syndicators … it really doesn’t get any better than right now.

Think about it …

MILLIONS of baby-boomers are retiring.  They need to invest for INCOME.

And they’re sitting on stock market equity, home equity, and retirement accounts …

… holding many TRILLIONS of wealth needing to (literally) find a home withreliable income and inflation protection.

Their paper asset providers will try to meet the need, but their toolbox isn’t properly stocked.  They can’t do private real estate.

But as boomers struggle at squeezing spendable money out of sideways or stagnant stock markets, they’ll look towards dividends and interest.  Cash flow.

The challenge with dividend stocks is … in a volatile market, investors face capital loss on share prices.  Worse, dividends can be cancelled.

Compare this to rental real estate, which produces far MORE reliable income than dividends with LESS price volatility.  And no one is cancelling the rent.

So dividend stock investors would LOVE income property … IF it just wasn’t so darned hard to find, buy, and manage.

What about bonds and bank accounts for income?  (Try not to laugh out loud)

Remember, a deposit is a LIABILITY to a bank.  When you deposit money in the bank, the bank needs to create an offsetting ASSET … a loan.

But the Fed has stuffed banks full of reserves … and there aren’t enough good borrowers to lend to.

Banks don’t need to offer higher interest to attract deposits.  So they don’t.

As for bonds …

Yes, it’s true bond yields are edging up, which means bond holders earn a little more income … but at a what price?

Rising bond yields also mean falling bond values.  So bond buyers are understandably very nervous about capital loss on their bonds.

WORSE …, bonds carry the added risk of default or “counter-party risk.”

A bond default is TOTAL loss. Yikes.

Real estate to the rescue …

The relative safety and performance of income property or income producing mortgages secured by real estate is extremely attractive right now.

The biggest problem for passive paper investors is real estate is hard to buy, messy to manage, and takes more financial education than just knowing how to click around an online trading app.

And THAT is the BIG opportunity for skilled real estate investors to go bigger faster with syndication.

Whether you decide to explore the opportunities in syndication or not … it’s important to stay curious, alert and proactive.

Most real estate investors we know are preparing for the next recession … because that’s when true financial genius pays the biggest rewards.

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.

Next Page »