Jerome Powell has spoken … now what?

In our last edition, we discussed what gold might be revealing that the Fed isn’t … while waiting to see what Fed Chair Jerome Powell would say to Congress.

But now the great and powerful Powell has spoken … and there are a couple of notable nuggets worthy of an inquisitive real estate investor’s attention.

According to this report by CNBC, the Wizard of the Emerald Printing Press told Congress …

“… the relationship between … unemployment and inflation … has gone away.”

If you’re not a faithful Fed watcher (and therefore have a life), you might not know about the Phillips curve. It’s been a guiding principle for the Fed interest rate policy for a long time.

It goes without saying (but we’re saying it anyway) that interest rates are important to real estate investors.

After all, debt is arguably the most powerful tool in the real estate investor’s toolbox. And interest rates profoundly affect both cash flows and pricing.

Many investors rely on their mortgage pro for interest rate guidance. Most mortgage pros watch the 10-year Treasury. But Treasury prices are strongly impacted by Fed jawboning and open market activities.

By watching further up the food chain you can get more advance notice of the direction of rates … and better position yourself to capture opportunity and avoid problems.

Through their comments, Fed spokespeople … chief among them Chairman Powell … send signals to those in the market who care to pay attention.

Of course, sometimes a little interpretation is needed. In this case, it seems to us Powell is being pretty clear.

The Phillips curve … which presumes that full employment leads to higher wages which leads to high inflation (prompting rate hikes to preempt it) … “has gone away”.

In other words, don’t assume high employment will trigger the Fed to raise rates.

But just in case the message wasn’t clear enough, Powell also added …

“… we are learning that the neutral interest rate is lower than we had thought …”

In other words, there’s a NEW normal in town … and the Fed is abandoning (just like Peter Schiff has been telling us they would) rate hikes and tightening.

But unlike Peter Schiff, the Fed is just now figuring this out.

So the great and powerful Wizard pulled not one, but TWO doves out of his hat.

(For the un-initiated, when the Fed is “hawkish”, it means tightening the currency supply by raising rates … while “dovish” is easing … like quantitative easing … and lowering rates)

It seems the Fed looked over the economic landscape … (and over their shoulder at the real estate guy in the White House) …

… and concluded the punch bowl fueling the longest recovery in history needs to be spiked again.

You might agree or disagree.

But it doesn’t matter what YOU think the Fed SHOULD do. We’re pretty sure they’re not asking you. They’re sure not asking us.

They think what they think. They do what they do. And THEY are the ones behind the curtain with their hands on the levers.

Our mission as a real estate investors (accumulators of mass quantities of debt used to control assets and cash flows), is to watch and react appropriately.

So here’s some food for thought …

Fed “dovishness” usually translates into higher asset prices … primarily stocks and real estate. Equity happens!

It’s EASY to get enamored of equity growth based on momentum (price changes) and not fundamentals (income). Be careful.

Sometimes the Fed loses control or misses a major problem until it rolls over the market.

If your portfolio is anchored with strong fundamentals, you’re more resilient.

Equity is wonderful, but fickle and unproductive.

If your balance sheet is telling you you’re rich, but your cash flow statement doesn’t agree, you’re not really rich.

Read that again.

The key to resilient real wealth is durable passive income. And rental real estate of all kinds is a time-proven vehicle for building durable passive income.

But wait! There’s more …

It’s no secret President Trump wants to weaken the dollar … and has been pressuring the Fed to make it happen.

Based on the Fed’s recent shift of direction, it seems it’s not just interest rates headed down … but the dollar too. The currency war could be about to escalate.

And remember … the dollar has a 100+ year history of losing purchasing power.

So if you’re betting on the direction of the dollar long term … we think DOWN is the safer bet. And right now it seems that what the Wizards are planning.

This is where real estate REALLY shines.

That’s because an investor can use real estate to acquire enormous sums of dollars TODAY (via a mortgage) which effectively shorts the dollar.

Those dollars are used to buy tangible, tax-advantaged, income-producing, real assets which not only pays back the loans from their own income …

… but unlike debt, grows nominally (in dollars) in both income and price as the purchasing power of the dollar falls (inflation).

That’s why we say, “Equity Happens!”

And when it does, it’s a good idea to consider converting equity into cash using low-cost long-term debt, and then investing the proceeds in acquiring additional income streams and assets.

Of course, you can only do that when the stars of equity, lending, and interest rates all align. Right now, it seems they are.

We think last week signaled an important change of direction. And while the financial system is arguably still weak, it’s working …

… so it might be a good idea to do some portfolio optimization while the wheels are still on.

Until next time … good investing!


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Finding Turnkey Rentals in Positive Cash-Flow Markets

When it comes to positive cash-flow, there are two things more important than your investment property … your market and your team. 

Our good friend Terry Kerr at Mid South Home Buyers knows this better than anyone. 

Terry and his team have cracked the code for consistent cash-flow from rental homes in one market … and are expanding into another!

We sat down with this world-class investor to find out why, where, and how he is creating positive cash-flows with turnkey rentals. 

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

  • Your cash-flow crazy host, Robert Helms
  • His go-with-the-flow co-host, Russell Gray 
  • Owner and founder of Mid South Home Buyers, Terry Kerr
  • New investor contact at Mid South Home Buyers, Liz Nowlin

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Market, team, and cash-flow

We’re talking about a resilient market that has been a great cash-flow area for YEARS … Memphis, Tennessee. 

When we first looked into the Memphis market it was a little blue-collar town and the bankruptcy capital of the United States. 

Price points were low … and on paper it looked like cash-flow was solid. 

Many investors are suspicious of high cash-flow markets … they often mean high expenses, high turnover, tough demographics, and difficult management. 

But when markets get overheated and financing goes away, what really matters is cash-flow.

You can make money in these types of markets … you just need to have the right team. 

A team that has … for us … stood head and shoulders above the rest has been Terry Kerr and the experts at Mid South Home Buyers. 

Terry and his associate Liz Nowlin run the gold standard investment operation in the Memphis area. They have over 2,500 homes … and a waitlist of eager investors hoping to partner with them. 

So, Mid South Home Buyers is expanding into a new market … and they’re here to share what they’ve learned in Memphis … and their predictions for future opportunities. 

Creating turnkey investments

Terry is Memphis born and Memphis raised. He started buying and flipping properties … and ended up forming a property management business. 

Now, his team at Mid South Home Buyers purchases homes, renovates them, leases them to residents, and sells them to investors. 

Terry and his team have some creative approaches to the process. 

Homes are outfitted with the same fixtures … saving time and purchasing power. 

And they now purchase materials directly from suppliers … basically building their own personal hardware store … opening budgets to more rehab for each property. 

Essentially, they’re creating turnkey investments. They find the property, figure out what needs to be done, do it, and find a tenant. 

Not to mention that they manage about 2,700 houses in Memphis, too!

It’s all about becoming more efficient … and efficiency leads to cash-flow. 

The biggest … and really only … complaint we hear from investors is that Terry and his team only operate in Memphis … but now they’re delving into another market. 

They’re moving to … Little Rock!

Making the move to Little Rock

We’ve had our eyes on Little Rock for a while now. It’s definitely a market on the move. 

Little Rock is about two hours away from Memphis … and it’s a greater population that covers a greater area. 

The Little Rock properties will look just like those in Memphis … the same renovation materials, same fantastic price-to-rent ratios, and the same long warranties and occupancy guarantees. 

“We’re going to be doing the same top of the line rehab with slightly under market rents to give us the best occupancy rate. Right now in Memphis, we’re at 99.4 percent occupancy,” Terry says. 

But in any venture … it’s important to expand to meet investor demand without compromising quality. 

“It took us several years to make the jump to Little Rock, because we wanted to make sure that our systems and foundations were built correctly,” Terry says. 

If the rehab is high quality … then the resident is happy. When the property doesn’t break down for the owner … then the owner’s happy … and they buy more properties!

Since Little Rock is so close to Memphis … Mid South Home Buyers can keep central command in the same location.

Arkansas has excellent tenant-landlord law and tons of houses in the “goldilocks construction style” … not too big, not too small. 

“We’ve got a lot of beautiful brick houses between 1,000 and 1,500 square feet, three bedroom, two bath, ranch-style homes built on a slab. It’s a good, low-maintenance construction style,” Liz says. 

And the really great thing? All of these Little Rock properties will be offered straight down the waitlist … music to investors’ ears!

Advantages of a turnkey operation

There are several advantages to considering a turnkey operation … one where everything is done for you. 

First, you have a quality renovation every time. 

When you work with a company like Mid South, which holds every renovation to an identical standard, you know what you’re getting. 

Mid South homes have a brand new 30-year roof, new water heater, new furnace, new air condenser, and everything from door knob handles to ceiling fans with bumper to bumper one-year warranties. 

Second, it’s easier to keep accountability in one place. 

Since Mid South is there from start to finish, they can offer you a lifetime occupancy guarantee … if your property is vacant for more than 90 days, they start paying you rent on day 91. 

“And we’re proud to say we’ve never spent a penny on that. because our properties don’t stay vacant that long,” Liz says. 

Third, you can see what you’re getting … in every phase of the process … before you invest. 

When Mid South clients take advantage of viewing the inventory in person before buying … it pushes their confidence through the roof. 

“I give potential investors a tour of our offices and show them houses in four stages of renovation, so they walk away with a great understanding of our business model,” Liz says. 

And, they get a taste of some world class barbecue … it is Memphis after all. 

Whether it’s your first investment or your 400th … turnkey rentals could be the positive cash-flow solution you’re looking for. 

Listen in to the full episode to learn more!


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Senior Housing and Opportunity Zones – A Winning Formula

The only thing better than one investment opportunity … is two investment opportunities!

We’ve talked about senior housing and opportunity zones before … but what happens when you combine the two?

The combined demographics and tax incentives of these investment niches create exciting possibilities!

We sat down with a successful real estate entrepreneur who is putting senior housing and opportunity zones together into a creative … and profitable … investment play. 

Discover how to ride the wave of demand and capital to create a WINNING investment strategy. 

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

  • Your riding-high host, Robert Helms
  • His here-for-the-ride co-host, Russell Gray 
  • CEO of Sage Oak Assisted Living, Loe Hornbuckle
  • Loe’s partner and construction developer, Austin Good

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Opportunity zones sweeten the deal

We’ve been talking a lot lately about opportunity zones … but today we’re going to focus on taking the idea into the real world. 

You may have heard Loe Hornbuckle on our show before. He specializes in senior housing. 

Loe recently began a new project … and discovered that the land was inside an opportunity zone.  

His team began to pay attention to how they could structure the deal around opportunity zone incentives … and he’s here to share what he has learned from the process so far. 

A word of caution before we dive in … be careful about picking an investment purely for the tax breaks and overlooking the real fundamentals of the deal. 

Loe sought out a location that was a good place to do business, fit in his niche, and gave him a unique selling proposition. The opportunity zone just sweetened the deal. 

Prepare for the silver tsunami

Let’s start with the silver tsunami. In a few years, baby boomers will be looking for assisted living … and the industry needs to be prepared. 

But that’s still a ways off. Loe says his average client is 87 years old. The oldest baby boomers are still about 75. 

That means there is time to get in the game and get prepared. 

A lot of times when people talk about senior housing, they’re really talking about active adult communities, independent living, assisted living, dementia care, and skilled nursing facilities all under one umbrella. 

But it’s important to look at each of these areas as its own asset class. 

The type of person that wants to live with other people 55 and up and play golf with their buddies is totally different than a person who may not be able to walk independently anymore. 

And when the baby boomers come looking for senior housing, they’re going to demand things that their predecessors didn’t.

Baby boomers want smaller, more intimate environments where they are around people that are like-minded in some way. 

Maybe they like the same music … or have the same cultural heritage … or even have the same medical condition. 

In Loe’s case, he began Sage Oak Assisted Living and Memory Care in 2015. It’s basically a boutique assisted living and memory care company. 

“What we do is focus on small facilities that are designed to make people feel more comfortable in a homelike environment,” Loe says. 

When most people think of assisted living, they picture a nursing home. But Sage Oak’s facilities are light, airy homes designed for anywhere from 8 to 16 people. 

Loe currently operates five of these locations in Dallas. 

But with the silver tsunami on the horizon, Loe is looking to expand his idea … more beds but preserving the intimate setting. 

For Loe and his team, the answer is raw land development into planned care communities. 

Think of it like a residential neighborhood … but instead of 3000 square foot homes that house single families, these are 9,000 square foot homes designed for 16 seniors. 

These independently owned houses operate as independently licensed facilities … some as assisted living and luxury assisted living and others as dementia care.  

And these houses can be tailored and changed over time to provide the personalized environment residents are looking for … allowing you to operate in any niche you feel the market is lacking. 

Obviously you would never exclude anyone, but you could help them find a house that they are most interested in. 

“One house might be for people with diabetes. Another might be kosher, with a kosher chef and visits from the local rabbi. The house next-door to that one could have a Korean chef and Korean newspapers delivered daily,” Loe says. 

Sage Oak has two such projects underway right now … one in Texas and one in Louisiana. 

A natural partnership

Loe’s partner, Austin Good, hails from the construction development side of real estate. 

Austin is a single family, build-to-rent developer … and that’s essentially what Loe and his team are creating. 

Starting from the ground up in building these campuses offers the advantage of control … controlling the process of creating the campus and controlling the end experience offered to residents. 

And now, the Texas development has the added advantage of being in an opportunity zone. 

“We selected a piece of land in Denton, Texas, to build a campus and discovered it was in an opportunity zone,” Austin says. “So, we had to rework our model a bit.

For example, Austin says they weren’t necessarily looking at a 10 year hold period at the start … but now they are making changes to gain the biggest tax advantages. 

An opportunity zone location also gives Loe and Austin the ability to offer investors a chance at making some money tax free … quite the incentive to come on board!

Senior housing is a natural companion to the opportunity zone structure for a lot of reasons. 

Since opportunity zones are typically in lower income or rural areas, you probably aren’t going to build a luxury hotel there. 

But if you create a reputation as the “go-to” place for senior housing, most people won’t mind driving a bit further … because the outcomes are so much better at your location!

“Our Denton project is about 10 minutes away from the luxury assisted living facilities in the area, so it’s not a difficult pitch for us to say, ‘Drive a few more minutes and be in a more intimate environment with a better caregiver ratio,’” Austin says. 

Another major opportunity zone benefit … access to an untapped workforce of caregivers. 

The number one problem CEOs in the senior housing space are facing is access to good caregivers. 

Opportunity zones located in lower income or more rural areas tap into a workforce that may live too far away to work at other facilities.

Find your winning opportunity

For people who are concerned about taxes and wanting to maximize their return, investing in a niche opportunity zone project can be … well … a great opportunity. 

You still get all the advantages of real estate … like bonus depreciation … and now you can get your capital back. 

It essentially allows you to make a better return on a post tax basis. 

As always, check with your tax professional to find out what will work best for your portfolio. 

And listen in to the full episode for more on how senior housing and opportunity zones can be a winning formula!


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Simple Passive Income through Self-Storage Investing

Self-storage. It’s simple. It’s proven. For many investors, it’s the dream. 

Investing in self-storage gives you the best parts of income property investing without the hassle … life can be breezy when your tenants are boxes. 

But all investments have pros and cons. 

We invited Dave Zook … successful business owner and experienced real estate investor … to share his insights and experience in the self-storage sector.

Get ready for high yields and low drama!

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

  • Your hassle-free host, Robert Helms
  • His hassling co-host, Russell Gray 
  • Founder and CEO of The Real Asset Investor, Dave Zook

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The skinny on self-storage

Some of the best tenants in the world are boxes. 

Self-storage is one of the coolest niches in real estate. We’re all familiar with the concept … at some point, we all have more stuff than we have space. 

What can we say … we’re sentimental people.

Maybe it’s Baby Boomers downsizing … or maybe it’s corporations that would rather store documents off-site than pay more for premium office space. 

The importance of the stuff in boxes is in the eye of the beholder … but the potential income from the boxes is golden in the eye of the investor.

Self-storage comes in many forms. Some investors go for climate-controlled self-storage units. Others specialize in space for vehicles like boats and RVs. 

No matter what route an investor takes, the self-storage model is really pretty simple. 

And there are few people who know as much about this particular business model as our good friend Dave Zook. 

Dave is a successful business owner who started in syndication and has done all kinds of different real estate deals including … you guessed it … self-storage. 

And boy does Dave have stories to tell. 

Dave first got interested in self-storage about 20 years ago. He delivered modular buildings from his family business to a dealer who had a self-storage business. 

“I would ask him questions about how this works, and he told me it was the easiest way to make money ever,” Dave says. 

Pros, cons, and strategy

When you invest in self-storage, who are your tenants?

Dave says he has seen a flow of people moving to the apartment space. 

When you move from a home to an apartment, you don’t have as much space for storage … most apartments don’t have a backyard shed. 

People feel comfortable keeping their stuff in self-storage spaces … many facilities are guarded, gated, and secure … some are even climate-controlled. Some keep their stuff in storage for a very long time. 

Dave says many people enter into self-storage planning to use it short term … but the pain from the monthly fee isn’t great enough to spur action to move the stuff out immediately. 

Some tenants move stuff in thinking it will be there for three to six months … and end up being a tenant for three to six years. 

Dave shares that another big benefit of self-storage is that tenant-landlord law is a lot different. 

When you’re dealing with boxes instead of people, everything becomes a lot easier. 

“The government isn’t as concerned about how our boxes get treated as how people get treated,” Dave says. 

But like any investment, self-storage does have its downsides

One of those is size and scale. 

Most self-storage facilities tend to be bigger. Smaller sites do exist, but they are much rarer. Dave says he typically goes after sites with 400 to500 units. 

Sometimes, Dave and his partners buy an existing facility and then expand it to add more units or add climate-controlled units to up the value and cash flow of the property. 

This strategy takes time and additional money … but it can pay off well. 

The process of taking an existing property and turning it into an attractive storage facility usually takes about a year. 

“It depends on the market and the time that it takes to get permits, but typically we can go in and 12 months later have a certificate of occupancy, and we’re in business,” Dave says. 

Making the most of the market

Are there markets that make more sense for self-storage than others?

Dave says he and his partners focus on secondary and tertiary markets. Right now, they really like the Southeast. 

“We’re in places like Tennessee, Alabama, and Florida, because that’s where the growth is going,” Dave says. 

Boosting your occupancy means boosting your income. 

Dave says that when it comes to self-storage, 100 percent occupancy isn’t a good thing … that means your rent is too low. 

If you’re in the 85 percent occupancy range, on the other hand … you’re doing really well. 

Historically, self-storage has been a very recession-resistant asset class. It handles disruption very well. 

Looking back on 2008, 2009, and 2010, self-storage as an asset class outperformed any other commercial real estate asset class. 

Dave says he feels like we are at a high point in the cycle … which means we’re due for a recession. Self-storage may be a good asset class over the next several years. 

“Think about it. If I have to move or lose my job, I don’t want to get rid of my stuff. I’ll store it for a couple of years instead,” Dave says. 

Learn more, earn more

If you think self-storage may be the asset class for you, you need to find a team. 

“I would say that 50 percent of the success of self-storage is based on your operator and your management team,” Dave says. 

When you have someone who is going to be in charge of the investment, you want to make sure that this type of investment is something they have done. 

Your operator and management team should be so dedicated to self-storage that they are unconsciously competent. 

Like any investment … relationships matter. Find someone who knows more than you do and get educated. 

There’s always more to learn … and more money to be made. 


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Where We Are in the Cycle and What You Can Do About It

What goes up, must come down. 

It’s true in gravity … elevators … and the real estate market. 

The constant ups and downs can give investors anxiety. It’s hard to enjoy a boom when you’re always wondering … is it all about to come crashing back down?

The good news is that markets rise and fall in cyclical motion. 

History repeats itself … and there are signs and patterns to look for that signal when you need to move and when it is best to sit back and wait it out. 

Listen in as we discuss where we are in this infamous cycle … and what you can do about it.

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

  • Your upstanding host, Robert Helms
  • His downright delightful co-host, Russell Gray 

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Riding and driving the cycle

Real estate markets work in cycles … we’re either at the bottom, in the middle, or at the top. 

So, where are we at? And what can investors do about it?

First off, it’s important to remember that real estate isn’t an asset class itself … there are so many different categories. 

Each of those categories operates in its own market … and the cycles don’t always align. 

Office buildings could be up while residential is down … and agricultural could be sitting right in the middle … ALL AT THE SAME TIME. 

So, when you think about where you are in a cycle, you need to think of both macro and micro levels. 

Part of what’s going on will be influenced by the macro … like interest rates, what’s going on with the Fed, tax breaks, and Opportunity Zones. 

The other part deals with the micro … what’s going on in a particular industry and the demographics it serves.

The challenge for a real estate investor is that there is no one key indicator for where the market is heading. In fact, it’s so confusing that nobody gets it completely right. 

But there are things you can look for … and things you can do … to set yourself up for the best chance of success. 

Understanding the big picture

One of the big picture items to look for, understand, and act on is interest rates. 

When we talk about real estate investing, it’s really all a derivative of income … of cash flow. 

Someone can only afford to pay a price for a house based on their income and how much income that will mortgage into the purchase price of a house. 

If you take a look at the major inputs going into a mortgage, you’ll find interest rates and tax consequences. 

So, if you can lower interest rates and lower taxes … the same amount of income will buy more houses. 

With the new tax code and incentives like Opportunity Zones, there is a good chance that the upside of the cycle will be extended for a few more years … but is it sustainable?

Understand that every day we’re closer to the next market top. 

So, what can you do as we get near the top?

Don’t sit on the sidelines

What you don’t want to do is sit on the sidelines. You do need to act. 

If you take prudent moves to protect yourself in the case of a downturn … and there isn’t one … you aren’t any worse off. 

The good news is that real estate investors and markets move slowly … we’re not flash traders. 

Your tenants don’t look at the newspaper, see a headline, and move the next day. 

As investors, it’s a balance of being aware of those macro events and keeping specific trends in mind. 

Right now, mortgage rates are low, and the dollar is relatively strong. Interest rates are dropping in treasuries … and people are buying there looking for a safe place to ride out market dips. 

This gives real estate investors the opportunity to go into the market and lock that low pricing and low interest rate long term. It’s like having a sale on money. 

And if you buy a property that has good cash flow with that low interest locked in, you’re putting yourself in a great spot to hold through any downturn in the cycle. 

People who sit on the sidelines are guaranteed to make zero return. Instead, look at the idea of recession resistant price points. 

Recession resistant means you are renting to a clientele that is likely to always be there … and the price point is typically something just below the median home price. 

Many of these recession resistant price points work great in a good economy AND they’ll also be a little more protective in a down cycle. 

This is a time to be super prudent when it comes to underwriting … both the analysis of the market and the performance of the property. 

When it comes to the performance of the property, there are a couple of big picture things to keep in mind. 

You want to live in a landlord friendly state. If there’s a problem, you want laws that favor a landlord and can help you get a tenant out quickly. 

You’ll also want to talk to your property manager about rental trends. 

What have people been paying in rent recently? How many people are applying for leases now compared to other years? Have they had to change the kind of tenant they accept?

Another way you can make the most of the market cycle is to focus on top markets. 

There are lots of investment funds and real estate investment trusts that focus only on the top 50 metropolitan statistical areas (MSAs). 

These are the top cities in the U.S. where there is always real estate movement and a depth of demand. 

When you go into a market that has already proven itself with solid infrastructure, there’s a greater probability that in tough times people will gravitate there. 

Changing your strategy for success

We’re certainly proponents of continuing to invest through cycles … just change your strategy a bit. 

It makes a lot of sense to have some cash when you are nearing the top of a market cycle for a lot of reasons. 

If you end up having problems with properties that perform differently than you expect during a downturn, you want to be prepared for that. 

But downturns are also often where opportunities are … opportunities to buy. 

As real estate investors, we make our money when we buy … so it is good to keep some cash in reserves if the right opportunity presents itself to invest in a property with promise.

One last idea to consider when it comes to being at the top of the market is that there are certain demographics that don’t suffer as much in a downturn. 

Generally, this is affluent groups of people. When times get bad … they get bad for the middle and bottom part of the socioeconomic ladder. 

So, it’s always an interesting strategy to market to the affluent. One of the ways we love to market to this demographic is through residential assisted living. 

Remember, your customer is not the person staying in the facility. It’s the family members who look out for them and place them there. 

Another strategic investment is hospitality. In downturns … the rich still go on vacation. 

Many times in an economic slump, entertainment does well because people are trying to get away from the doom and gloom. 

If you believe we’re at the top of the market, there are proven things to think through. 

Analyze your portfolio and ask yourself, “What happens if pricing and demand were to go down?” Take a look at your financing. Are you getting the best, lowest rates?

If you take proven steps now, when the market cycle starts heading downward … you’ll be glad you did.

Tune in over the next several weeks as we dive into more strategies you can take to thrive even when the market isn’t doing the same.


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How to Find a Mentor and Make It Work

If we’ve said it once, we’ve said it a thousand times … a mentor makes a difference.

Finding, vetting, and thriving, with a mentor is one of the quickest shortcuts to success.

Talk to a successful real estate investor, and chances are that they can point to one or more people whose example and encouragement helped them along their way.

But finding a great mentor … and making the relationship work through real world challenges … isn’t always easy. We’re here to share our tips with you!

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

  • Your master mentor host, Robert Helms
  • His mental co-host, Russell Gray

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What makes a mentor

Your success in real estate is going to come down to a few critical things … and one of those things is your relationships.

We never would have had the success that we’ve had in our lives … in business and personally … without input from the people we consider mentors.

Real estate investing is a people business.

Yes, you need to know numbers, property, and markets … but you also need a team. One of the most critical members of that team is a mentor.

A mentor is an experienced and trusted advisor … a guide, a confidant, and a counselor. And a mentor is different than a coach.

Coaching relationships are finite. They’re focused on specific behaviors and needs.

A mentor is a long-term relationship that supports you in your development. They’re interested … but not financially tied necessarily … to your results.

If you do it right, you’re going to have a lot of mentors in your career. You should always have people in your life who are further down the path.

A mentor doesn’t have to be older than you … but they do need to have more experience and more success in the area you are interested in.

A lot of people think of a mentor as a technical teacher … but that’s not necessarily true.

If you really think about what investing is, it comes down to exercising good judgment.

Judgment is something you learn by being in close proximity to someone … seeing why they make the decisions they make and absorbing what they’ve gleaned from their life experience.

Your mentor should be an example … a role model … of what you aspire to be.

What you bring to a mentoring relationship

There are lots of people that believe they can learn everything they need to learn from the internet, webinars, books, and podcasts … but that’s not our experience.

Those types of learning are a great starting point … but you’ve got to get into conversations with people that have been there, done that … in the REAL WORLD.

It’s very tempting to align yourself with people who are just like you … but you actually want to align with people who are a little bit different than you.

Take a look at yourself and ask, “What is it about my personality that’s holding me back? Where am I not being effective?”

You know what your weaknesses are. Your mentor can be someone who is strong in areas where you struggle.

By being around people with attributes that don’t come as easily for you … you will improve!

You also want to consider your strengths. The best mentor relationships are equitable … each side brings something to the party.

Brainstorm ways that you can be a value add to the mentor you have in mind.

Mentoring is also a cyclical relationship. You may be green around the ears today … but a few years from now you could be a mentor yourself.

Finding a mentor in the real world

One way to get a mentor is to hire one. There ARE organized mentor programs … we have one ourselves.

Before you pay money for a mentor relationship, check out the reviews. Just remember that the results people get have a lot more to do with how they react to the advice their mentor gives.

Paying for a mentor collapses the timeframe it takes to find one … but often … in our experience … the best mentor relationships happen organically.

This type of strategy DOES take more time and effort. You have to be in the right environment to meet the right person … that’s a lot of trips, events, and social engagements.

Beyond that, your mentor relationship is really what you make of it. You have to have the mindset that you are going to be one of the top people out there when you’re done.

If you’re looking to be average and ordinary … to just go with the flow … you might get a trophy for being on the team, but you’re not going to get the paycheck.

So, keep asking yourself, “What are the people at the TOP doing? How can I be more like them?”

Begin to think the way they think … and you’ll begin to do what they do. And ultimately, you can find yourself producing the same results.

A great mentor knows exactly what you need and what you have to go through to get there … and they create an environment for that to play out.

You mentor can’t make your success happen for you. You have to make it happen.

Our motto has always been, “Education for effective action.” Finding a mentor is one of the most educational … and effective … paths you can pursue.


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Ask The Guys – Getting Started, Analyzing Deals, and Understanding Cycles

One of the best parts of our job is hearing from our amazing audience … and in this week’s episode we have more great questions from all of you.

That’s right, it’s Ask The Guys!

We’re talking about getting started in real estate investing, analyzing deals, understanding how economic cycles affect real estate investing … and more.

Remember, we are not legal or tax professionals. We don’t give advice … just ideas. Join our quest to answer your questions!

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

  • Your book-smart host, Robert Helms
  • His street-smart co-host, Russell Gray

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Getting started in real estate investing

Our first question comes from Daryl in Boonville, Missouri.

Daryl wants to know the best ways to get started investing in real estate.

Lots of folks find themselves interested in real estate investing … but they don’t really know where to start.

There are so many books, blogs, podcasts, and seminars on the subject. It can be a little overwhelming … yet the basics of real estate are pretty simple.

What’s the best way to get started? Well, it depends on what you have to start with, where you want to go, and what you want to do.

But generally speaking, real estate is done with debt.

The first place to start is to take an assessment of where you’re at in terms of debt. Begin work on preparing yourself to be an efficient, effective borrower.

Go meet with a mortgage professional. Find out what your credit score is as far as real estate is concerned, what your documentable income is, and what types of loan programs you would qualify for.

Figure out what you need to invest.

Typically you need credit, a down payment, and technical advisors … like a football coach, you need to build your team.

Next, think about what you’re trying to accomplish. Most people want to grow … so it really starts with education and understanding your borrowing power.

Education doesn’t have to cost you a lot of money … but it will take your time.

Set aside and budget your time to be serious about investing. Go to a seminar or class. Join a local real estate investment club. Read books about the type of real estate that you’re interested in.

A great way to get started if you don’t have a lot of capital is to offer to help someone who is busy doing the thing that YOU want to be doing.

A lot of folks who are successful in real estate investing have more money than time … you might have more time than money.

The opportunity to lend a hand in exchange for learning can be huge.

You might even consider your first deal as a partnership in some way. One of our favorite ways to partner is through real estate syndication.

Syndication simply means a lot of people putting their money and their time together to do something.

Make sure that the person … or people … you are partnering with honestly know what they are doing.

Analyzing and understanding deals

Chris in Sun Valley, California, wants to know how to better analyze and understand deals.

First of all, there’s no such thing as a bad question … except the one you don’t ask.

Everybody who is at the front of the line was once at the back of the line … everybody who owns real estate today started with their first property.

It’s true that analyzing deals is one of investing’s critical skill sets.

If you’re analyzing deals for income, you need to understand an income statement for a piece of property.

One way to do this is to look at other deals. They’ll come with pro formas. You’ll be able to look at the financials … and then go out and look at other real world deals.

You’ll learn by doing that research … and once you feel like you’ve got the fundamentals down and understand the basics of financial analysis, you can take things to the next level.

The other side of the coin is actually analyzing the market, analyzing the physical construction of the property, and analyzing the condition of the neighborhood.

Like so many things in real estate investing, if you can find somebody who is active in the space and learn by helping them … you’ll pick up a lot.

You can’t get really good at analyzing deals by reading textbooks and taking classes … you will also need hands on experience.

So, start with basic education … and then, find a mentor.

Learning about the economic cycle

Laura in Austin, Texas, is looking to learn more about how real estate plays into the economic cycle … and how it’s affected by ebbs and flows. She wants to know what resources and topics we can recommend.

First up is a book by our dear friend Peter Schiff called How an Economy Grows and Why It Crashes.

It’s a simple book that is done in a way that makes the economy easy for everyone to understand … but it is also super, super powerful.

It has taken us years to wrap our minds around this stuff. The reason we cover broader picture economics and not just real estate is that every real estate investor is first and foremost an investor.

We all swim in the economic sea of the financial system that we are blessed … or cursed … with. So, it is imperative that we understand it.

There is definitely a lot you can learn by listening to people who have different opinions.

The Summit at Seais a great place to do that. We get people who come in with so many different backgrounds and from many different niches and markets all over the world.

We also recommend studying the Federal Reserve and the bond markets … because that is where interest rates derive from.

Study demographics … because that dictates where the people are.

Then, understand the way CEOs think about business … and where they want to be and don’t want to be.

Taxes are another area you’ll want to learn about.

In the United States, we’ve now made real estate arguably the most tax advantaged investment anyone can make … which should attract even more money into real estate going forward.

Like any ecosystem, there are lots and lots of components … and you’re not going to master them all. But if you can understand the relationships between them, then you can get into conversations with the masters in each area.

There are lots of great books, podcasts, and conferences to expand your knowledge. Be sure to check out the resources available on our website. We particularly recommend a video series we did called “The Future of Money and Wealth.”

Brian Tracy says that if you read an hour a day in whatever area of interest you have, in 10 years you’ll become a nationally known expert.

We believe that’s true. It happened to us.

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.


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Tariffs, Taxes and Trade Wars – Insights for Real Estate Investors

There’s a lot of talk in the media about tariffs, taxes, and trade … what does all of that really mean for real estate investors?

As a real estate investor, you need to understand what is going on economically. What’s happening at an international level can trickle down to your local playing field.

To help you navigate the news, we brought in our good friend Peter Schiff. Peter is an author, stock broker, and financial commentator … and he has some strong ideas to share.

Learn to more successfully sail the economic sea and weather financial storms.

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

  • Your financial seafaring host, Robert Helms
  • His economically seasick co-host, Russell Gray
  • Author, stock broker, and financial commentator, Peter Schiff

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Tariffs and the big picture

If you’re the type of investor who reads the headlines … and you should be … then you’ve probably seen lots of talk about tariffs, taxes, and trade.

But most investors don’t understand what these headlines mean for their money.

What’s the deal with these three big “Ts” … What are they? How do they work? And why do they impact your business?

As a real estate investor, you’ve got to understand the economic and financial sea that you swim in.

You need a basic understanding of all things economic.

Tariffs … in particular … are a great place to start.

Before 1913, the United States didn’t have an income tax. Instead, we funded our federal government through tariffs.

A tariff is a tax on people that want to sell in our markets … and today, President Trump is using tariffs as leverage in negotiations to level the international playing field.

You may agree or disagree with these politics … but whatever your personal opinions, you still need to know what such action really means for you.

Any kind of tax or tariff affects how much things cost in our economy … and it can also affect where jobs are created … which affects where people live.

By instituting tariffs, the federal government hopes to bring more manufacturing jobs back to the United States … potentially resurrecting manufacturing ghost towns.

Real estate investors need to look out at the horizon and see the bigger picture. You want to be riding the wave … not chasing the trend.

That’s why we asked our good friend Peter Schiff to share his knowledge and experience with us.

The US-China trade relationship

Peter says a great place to start increasing your understanding of the current economy is to look at the US relationship with China.

According to Peter, China does TWO big things for the US … they supply us with real goods, and they lend us money.

We get everything from China. It’s all manufactured products that make our lives better.

People go to Walmart and buy cheap stuff … and where is it coming from? China, of course.

China is also the biggest buyer of US bonds … which means they are our lender. They are lending us money that we would otherwise not have.

While the federal government talks about losing $500 billion a year to China, Peter thinks the US is still getting the better end of the deal.

China supplies us with real goods … and in exchange the US gives them a stack of paper that is arguably worth less every day that they hang on to it.

So, if the US places tariffs on China and enters a trade war, who is worse off in the end?

Peter says the Chinese will still have all their stuff … and we’ll just have a stack of paper.

The US government hopes that by instituting tariffs, companies will make their products in the US instead. Peter says that is easier said than done.

Pulling together the infrastructure, raw goods, and man power to manufacture these products in the US could take years … and it will cost businesses more money … not to mention a major shortage of goods in the meantime.

Peter explains that switching the US back over to a more manufacturing-based economy would require tremendous changes … and most likely result in a huge depression until the new economic flow was established.

“When we were a big manufacturer in the past, we had limited government, lower taxes, fewer regulations, a lot of savings, and a skilled workforce. We don’t have that stuff now,” Peter says.

Peter does mention that the US is probably going to have to make some of these changes eventually … but proposed tariffs and trade wars would accelerate the timeline in a painful way.

And the United States doesn’t realize how painful it will be.

If tariffs make it harder for the Chinese to sell stuff to America … they’ll sell it domestically instead.

As the Americans get poorer … the Chinese would be getting richer.

Right now, the Chinese labor, and we get the fruits. Suddenly, they would get both.

And what about our intellectual property?

“They’re going to keep ripping off our intellectual property because we can’t stop it, but now they’re not going to be giving us this big subsidy by loaning us money and supplying us with goods,” Peter says.

Preparing for a drop in the dollar with gold

Another notable headline today … the Chinese and Russian governments are buying gold and putting it away.

Peter says that the Chinese and Russian governments recognize that the dollar’s day as the reserve currency are numbered.

Nobody knows when the dollar’s time will be up … but if it loses its role as the primary reserve asset for central banks, what will take its place?

Right now, what gives a currency value are the foreign reserves … we’ve got this huge pile of US dollars that gives currency value.

Before central banks used other currencies as their reserves, everybody used gold. That’s what backed up your paper.

Originally, the transition from the gold standard to the dollar standard happened because the dollar was as good as gold.

US Federal Reserve notes were obligations of the Federal Reserve to pay. So, foreign central banks held Federal Reserve notes, which were redeemable on demand in gold.

Then, in 1971 the US said it would not give other countries gold for these reserves. The value of the dollar went down … and the value of gold went up.

All the central banks kept holding the dollar as a reserve even though it wasn’t backed by gold anymore.

Peter says that the US has borrowed so much money … and printed so much money … that it is heading for a currency crisis.

“In that environment, central banks are going to have to show that their currency is backed by something,” Peter says.

Some banks are buying more of other currencies … like the euro or the yen … but if people lose confidence in the dollar, the same could go for other currencies.

“I think that central banks are thinking they better have actual money in gold, because in the future, gold could be a much more important component of their reserves,” Peter says.

And if the price of gold continues to rise, the appreciation alone is going to increase the percentage of their reserves that are in gold.

Preparing yourself for the future

So what’s an investor to do?

Peter recommends getting out of US stocks in general … and bonds are way over-priced right now.

“If you’ve been fortunate enough to have invested in US stocks and seen a big gain, you need to cash in. Take that gain before the market takes it away from you,” Peter says.

That doesn’t mean you shouldn’t own stocks … Peter says it just means to think about moving out of dollar-dominated US stocks.

Consider taking a look at foreign stocks … emerging markets and developed markets are looking really good right now.

These stocks are international and derive their revenues outside of the US. If the dollar crashes … these stocks will rise in proportion to that decline.

Peter also believes that investors should have some sort of gold in their portfolio. It’s a good way to get diversified.

There’s no sure way to know what will happen in the future. We can only do our due diligence and make an educated guess.

Remember that not every strategy works for every investor. Find what works best for you. Always talk to an expert that understands your financial needs and situation.


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Opportunity Zones Update – Defer, Reduce, and Even Eliminate Taxes

Everybody is talking about Opportunity Zones … and they should be. They can be a great opportunity (just like the name says)!

But many investors have found themselves scratching their heads. How exactly does someone take full advantage of Opportunity Zones?

Recently released guidelines are giving investors and syndicators much needed clarity for moving forward … and making the most of their Opportunity Zone investments.

We sat down with attorney Mauricio Rauld to discuss how Opportunity Zones can help investors like you defer, reduce, or even completely eliminate capital gains taxes.

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

  • Your zoned-in host, Robert Helms
  • His zoned-out co-host, Russell Gray
  • The “Anti Lawyer” attorney, Mauricio Rauld

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Zoning in on Opportunity Zones

The wait is finally over.

The rules for investing in Opportunity Zones … and the potential tax breaks that come from it … are out.

In case you haven’t heard, Opportunity Zones are basically a capitalist version of wealth redistribution. They provide tax incentives to get rich people to voluntarily put their money where the government wants it to be.

Opportunity Zones exist in every state and in Puerto Rico. These areas tend to be blighted with some issues … they need some gentrification.

Each governor in the United States was taxed with the job of figuring out what areas in their states needed the most help … and where private enterprise could step up, do the work, and get benefits.

We’re not legal experts … but we know someone who is.

Mauricio Rauld is known around here as the “Anti Lawyer” … but he is actually a practicing lawyer who helps people primarily with syndications.

Since we first learned about Opportunity Zones last year, Mauricio has spent his time discovering the good, the bad, and the ugly sides of these types of investments.

The good side of Opportunity Zones

Let’s start with the good.

Opportunity Zones offer huge tax benefits … four in particular.

The first is that you get to defer the tax from whatever capital gains you’re investment is coming out of.

For example, if you have a piece of real estate … or any other asset, like precious metals, stocks, bonds, even your collectible car … you can take those gains and reinvest within 180 days into a qualified Opportunity Zone fund and defer the tax.

You aren’t deferring the tax indefinitely like a 1031 … but you will get to defer for at least the next seven years … until December 31, 2026.

The second benefit is that if you hold onto your new investment for a period of five years, you get a 10 percent discount on the capital gains you would have paid on the original investment.

Benefit number three kicks in if you hold onto your investment for seven years. Now, you’ll qualify for a 15 percent discount on your capital gains.

The biggest benefit of all … number four on our list … applies after holding your asset for a decade. After 10 years or more, the entire gain from your investment is tax free.

It’s all about taking an appreciated asset, putting it into an Opportunity Zone fund, and not paying taxes right away. The longer you wait … the less tax you pay.

One important thing to highlight once again is that the money you place into these Opportunity Zones doesn’t have to be in real estate to begin with.

A lot of the money we foresee coming into Opportunity Zones hasn’t historically been in real estate. They’re in other types of investments where there are big gains to be paid … like the stock market or precious metals.

As always, talk to your tax professional before making any decisions … but if you are sitting on a big tax gain, Opportunity Zones could be an attractive option.

Another positive … there is very little government interference and regulation on this project.

It’s a self-certification … meaning that whoever is putting together the fund simply checks a box on the first year tax returns to certify that it qualifies as an Opportunity Zone.

During your holding period, the government will check with you every so often to ensure you comply with program … but it won’t be dealing with the SCC or going through an approval and registration process.

The bad side of Opportunity Zones

There are some downsides … the bad … of getting into Opportunity Zones … and really it isn’t so much “bad” as it is things to consider fully before diving in.

The first is a rush for time.

In order to fully gain the benefits … to get seven years under your belt before December 31, 2026 … you need to make the investment before the end of 2019.

That means you will need to liquidate your asset and invest in a fund pretty quickly to get the 15 percent discount.

If you don’t make that deadline, you can always go for the 10 percent … and either way you should want to hold the investment for 10 years or more to make it tax free. If that’s your plan, there is less of a rush.

The other important consideration is the substantial improvement requirement.

This requirement means that if you buy a price of property you must put the same amount of money that you purchased the property for into renovations. The government wants you to improve the property.

This requirement only applies to vertical construction … meaning the buildings, not the land.

So, if you buy a property for $1 million and 20 percent of that is in the land with 80 percent in the building … then you only need to invest $800,000 in improvements.

There are a few exceptions to this rule. If you purchase a piece of property that has been vacant for the last five years … the substantial improvement requirement doesn’t apply.

Remember, the whole idea behind Opportunity Zones is for folks to put private capital to work in revitalizing these areas.

The other important requirement for your property to qualify is that it must involve an active trade or business. This is still a bit of a gray area … but we expect more guidance from the Treasury Department soon.

The ugly side of Opportunity Zones

Mauricio says that when it comes to “the ugly” of Opportunity Zones … a lot of personal opinion comes into play.

Much of the work Mauricio does is with syndicators, and there are pros and cons for them in this type of investment

Syndicators can promote Opportunity Zones as a great chance for investors because of the extensive tax benefits.

But syndicators themselves don’t get the tax benefit for the carried interest.

If this is a traditional syndication, the syndicator will get a cut for sweat equity … let’s say 20 percent.

The investors get 80 percent AND all the tax benefits … but the syndicator will have to pay taxes on the 20 percent they made. They can’t defer that.

This could be ugly … because as a passive investor you want an incentive for your syndicator who is running the project to be excited about the deal.

But on the other hand, most syndicators aren’t going after these deals for tax benefits for themselves. Instead they see them as an opportunity to court capital from a completely new and different source.

Someone who has been in the stock market or private equity or in precious metals that has avoided selling because they didn’t want to pay tax can now work with syndicators in real estate and find a win-win situation.

Another ugly truth … you can’t get into Opportunity Zones alone.

You have to put together a fund … some kind of entity. It doesn’t have to be a syndication … but it has to be a partnership. You need at least two people to get started.

Mauricio also cautions investors to be aware of artificial demand.

Opportunity Zones are designed so that people are investing in areas that they wouldn’t have originally invested in. You’ve got to make sure the investment still stands on its own merits.

Because it is an artificial demand, you could be potentially overpaying for the property in the long run. At some point you could be paying so much more that the tax benefits may not make sense.

Talk to an expert

Think Opportunity Zones might be the right opportunity for you? Talk to your tax professional.

At the end of the day, it’s a tax matter. There are forms to check and rules to follow. You want a tax expert to keep you on track.

And you’ll need an attorney to help you put together a fund, make sure it is structured properly, and ensure the investment itself is eligible.

There are no guarantees in investing … but doing your due diligence gives you the best chance at success.


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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