At this rate, something’s gotta give …

Real estate investors tend to like low interest rates.  

After all, low rates mean lower payments for the same size mortgage … or a bigger mortgage for the same payments.  Nice.

The current Wizard of Rates is Fed chair Jerome Powell.  And he just showed up on 60 Minutes and told everyone …

“‘We don’t feel any hurry’ to raise rates this year.”

Many Fed followers consider this a bit of an about face.

And those who use the Fed’s actions as a barometer of economic health and stability are asking what this more dovish stance means.

After all, isn’t the motive of low rates to goose a sluggish economy?  So then what’s all that healthy economy talk?

Also weird is that just over six months ago, Powell stood at a podium and defended his plan to RAISE rates.

Then two months ago he said, ‘The case for raising rates has weakened …”

Last summer, he apparently couldn’t see six months ahead … and now all of the sudden he’s clear for a year? 

Maybe the answer is here …

Fed Chair Powell: ‘The US federal government is on an unsustainable fiscal path’
– Yahoo Finance, 2/26/19

Summit faculty member Peter Schiff constantly reminds us … the economy is addicted to cheap money and Uncle Sam is addicted to spending.

Of course, addicts … and their enablers … sometimes take extreme steps to keep the party going.

So that could mean more money printing … because that’s how the Fed keeps rates down.  And as any debt-ridden household knows, lower interest rates help make a giant debt load a little easier to service.

That’s probably more important than anyone’s letting on.

Because with record corporate, consumer, and government debt … there’s a lot of cheap money junkies out there.

So … maybe the Fed’s just trying to keep them all supplied?

Of course, we have no way of really knowing what data or philosophy is driving Jerome Powell’s decisions.  We just watch and react.

But based on all the green lights flashing across stocks, bonds, oil, and precious metals … it looks like asset price inflation is the bet du jour.

At least for now.

But even though it’s party time in the Wall Street casinos, real estate investors need to play the game differently.

We don’t have the luxury of jumping in and out of positions on a moment’s notice.  Besides, that’s not our game.

We’re not trying to buy low and sell high.  Real estate investors work to find a spread between the cost of capital and the cash flow on capital invested.

So let’s switch from the macro view and get a little closer to Main Street … and glean some lessons from self-storage investors.

But before you tune out, this isn’t about self-storage … it’s about how real estate investors are reacting to an big influx of capital. 

Because as cheap capital floods any market (niche, geography, asset class) it affects prices and yields.   So sooner or later, investors move around searching for opportunities.

And that’s what’s happening in self-storage … 

Self-Storage Investors Start Looking at Smaller Markets to Capture Higher Yields
National Real Estate Investor, 3/11/19

This headline caught our attention because of what the Fed is doing with interest rates.  And as we dug deeper, we found some notable excerpts …

“Investors are being more careful about which assets to bet on …”

“ … worried about the number of new … properties …”

 “To avoid competition from new properties coming on-line … buyers have turned their attention to secondary markets …”

“ … buyers in overbuilt markets are taking more time to underwrite their deals, double-checking assumptions about future leasing and rent growth.”

There’s more, but let’s stop and process these thoughts …

First, these are lessons investors in ANY income-property niche should take note of.  So it’s not just about what’s happening in self-storage.

Notice the attention to supply and demand. 

We see lots of rookie real estate investors crunch the numbers of the property … but completely ignore the inventory pipeline of the market.

And of course, there’s also the supply of prospective renters in a market.  That’s why we also look at population and migration trends.

The article also highlights something we’ve been talking about for a while …

People, businesses, and investors will “overflow” from mature primary markets into emerging secondary markets in search of affordability.

The danger is getting into an emerging market ahead of a migrating problem.

Think about it …

If investors are moving into secondary markets to find better opportunities than in an over-built market … what happens when builders move in for the same reason?

Cheap money makes building easy.  Developers love it.

But Austrian economists warn of “malinvestment” … when bad investments look good primarily because money is cheap.

All long-term debt needs stable long-term cash-flow to service it.  If supply exceeds demand, and rents and cash flows fall … debt can go bad fast.

So when looking at markets, pay attention to the capacity of market to absorb more inventory without collapsing rents.

Because if you go in with optimistic underwriting (tight cash flow) and supply expands faster than demand and rents fall … you could be in trouble.

That’s why self-storage investors are “taking more time to underwrite their deals”.  Maybe you should too.

Hot markets can be intoxicating for investors.  It’s easy to jump on a hot trend hoping to catch a nice ride …

Despite these worries … investors keep paying higher and higher prices … relative to income.  Cap rates … are at their lowest point on record.”

“They continue to trend lower even though interest rates have begun to rise …”

“There is a tremendous amount of capital chasing yield.

That’s what happens when interest rates are low.

Don’t get us wrong.  We’re not complaining.  We like low-cut interest rates as much as the next guy.  But hot markets can be fickle. 

So the moral of this muse is to stay sober and diligent about your underwriting … and be very wary of using short term money to invest long.

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Rent control … a sign of the times?

A very big real estate story splashed across mainstream news recently, but got buried underneath (insert the sensational political headline you’re sick of) …

Oregon Okays First Statewide Mandatory Rent Control Law

 Associated Press, 2/28/19 

Okay, we admit this is a government policy … so it’s political.

But politics is easy to laugh at when it’s happening in cyberspace.  It’s a little less funny when it hits hard on Main Street.

For thousands of Main Street landlords in Oregon, politics just landed hard … right in their portfolio.

Of course, as is often the case, there’s more to the story than meets the eye.

So even if you don’t own property in Oregon … or won’t for much longer 😉 … there’s a lot to glean from this watershed legislation.

We could debate whether or not government should step into a “free” market and regulate the price of anything … from housing to healthcare to haircuts.

But it doesn’t matter if WE think they should or shouldn’t.  They do.

And as a broken financial system keeps growing a wedge between haves and have-nots … we’re guessing more politicians will try to legislate affordability.

So like it or not (we don’t), rent control is something every investor everywhere should be watching out for.

Let’s take a look at how rent control works in the real world …

Real estate investors buy property to produce income and build long-term wealth.  The more income a property produces, the more it’s worth.

In order to create more wealth, real estate investors need to create more income … which means creating more value that a tenant is willing and able to pay for.

The essence of real estate investing is using capital to acquire long-term cash flow.  This is how real estate investors think.

Make sense so far?

Politicians, whom we’re guessing are NOT real estate investors, think investment starts and ends at acquisition.

Unless you’re Warren Buffet, paper asset investors don’t buy stocks with the intention of improving the cash flow.

You just buy, own, and sell.  Maybe collect some dividends along the way.

But when value-add real estate investors buy properties in poor condition with lousy amenities …

… they’re excited about the potential to make further investments into the property AFTER the acquisition.

For example, a property without a washer and dryer might rent for $50 a month less than one with that amenity included.

So for perhaps $600 per unit additional capital invested, a landlord could acquire $600 per year cash flow.

That’s a good ROI.  It’s also a nice amenity for the tenant.

You could say the same about covered parking, self-storage, a laundry room, a workout room, free wi-fi, and on and on.

Rent control caps the owner’s ability to create positive returns by improving properties.  So guess what?  They don’t.

So crappy properties stay crappy … because the incentive to improve them is removed.

And as nicer properties deteriorate, there’s not much incentive to maintain them above the bare minimum.

With profit potential capped on the revenue side … and no cap on the fixed expense side …

… as margins get squeezed, property owners have no choice but to cut services and defer maintenance.

So rent control makes both landlords and properties cheap.  In a bad way.

And because there’s always more people on the low-end of the economic scale (part of the reason Oregon is doing this) …

… there will always be a line of people waiting to get into these “affordable” rentals … even though they’re crappy.

And with little market pressure on landlords to compete for tenants, there’s even less incentive to improve properties, add services and amenities, or lower rents.

But it gets “better” … or actually worse …

As property values decline … or stagnate relative to rising costs of labor and materials … incentives for developers to build new inventory declines too.

Rising values are what attract developers to create more supply … which is the answer to moderating rising values.

Yes, it’s sad when marginal tenants’ incomes don’t grow as fast as rents … or other inflating necessities.

But capping the property’s growth doesn’t pull the tenants up.  It pulls the properties down.

It’s a bad scene. That’s why nearly every investor we know stays away from rent control areas.

But it’s also important to consider WHY this is happening …

The Fed dropped interest rates to zero for nearly a decade, then pumped trillions of dollars into the financial system … primarily to inflate asset values (stocks, bonds, real estate).

It worked … at least for some people.

Those paying attention, with both resources and financial education … snapped up the money, rode the equity train, and got much richer.

You might be one of them … or hope to join them.  We hope you succeed.

You can’t blame people for playing the game using the rules and circumstances in their own best interests. But politicians do.

But the real issue is the financial policy wizards thought these now richer folks would then spend the money … and build businesses … and prosperity would trickle down to Joe six-pack and Larry lunch-bucket. 

In many ways, it worked.  The problem is the wealth didn’t allocate very evenly.  It never does.

Certain markets got a disproportionate share of the goodies. 

And even though Oregon wasn’t really on the list … it was nearby … and so became a collateral beneficiary /victim.

Lots of cheap money ended up in tech stocks, which blew up real estate values in tech hubs like Seattle and Silicon Valley.

As prices shot up, folks in those uber high-priced markets got pushed off the back of the bus … and gravitated to nearby “affordable” places like Oregon, Nevada, and Arizona.

Of course, the folks already in those nearby affordable areas end up competing with the new people who see everything as cheap … and easily bid things up.

It’s a regional variation of gentrification … with its roots in paper asset bubbles blown up by cheap stimulus money.

But politicians are notoriously myopic when it comes to “fixing” things … especially financial problems.

As Peter Schiff says, “Good economics is bad politics, and good politics is bad economics.  That’s why you always get bad economics from politicians.”

Sadly, there are signs it could get worse as politicians try to contain the consequences of an over-financialized economy.

So even though we tout the opportunity to invest in affordable areas ahead of the crowds, it’s REALLY important to stay aware of the political climate.

If you bought into Oregon ahead of the migration …

… you’re now the proud owner of a property where the state government views you more as a public utility to be regulated than a free entrepreneur to be incentivized.

So you’ll either need to get out while the getting’s good … or not as bad as it could get … or start brushing up on your C-class property management skills.

Until next time … good investing.


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Main Street needs Main Street investors …

When the 2008 financial crisis hit, the mortgage industry was at the epicenter … and the disruption of funding feeding real estate crushed housing values.

But it’s important to remember, the problem was NOT real estate.

After all, people still needed and wanted places to live.  So the demand for housing remained stable.

It was credit markets that failed.  And in a credit-based economy, everything stops when credit markets seize up … including home loans.

Without a steady influx of fresh debt to fund demand, prices collapsed … taking trillions in equity with it.  And it wasn’t just real estate.  Stocks tanked too.

Mortgage and real estate is just where it started.

The double-whammy of teaser rate resets … and the resulting big monthly payment hikes which sunk a lot of homeowners …

… and then the negative equity led to a rash of defaults by even prime borrowers …

… all of which caused a credit market contagion that scorched financial markets world-wide.

Of course, this all created huge problems for Wall Street, the banks … and for Main Street.

So Uncle Sam and the Federal Reserve got heavily involved to “help” … and to no surprise … Wall Street and the banks came out on top.

The banks needed relief from realizing their losses on their financial statements, while finding a fast path to re-inflating values.

After all, property values are the collateral for all those mortgages.  And when values drop, borrowers walk … along with the prospects of loss-recovery.

So Wall Street rallied and raised many billions of dollars to buy up Main Street houses …

… even as millions of homeowners were being demoted to the rank of tenant.

So now instead of collecting mortgage payments, they collected rent.

As a real estate investor, you probably think that’s better.  Who wants to be a lender, when you can be an owner … enjoying tax breaks and building equity.

But Wall Street doesn’t think like you … and that’s our point.

Today, those Wall Street buyers are landlords.  And by some accounts, they’re not doing a very good job for the Main Street tenants.

Shocker.

Don’t get us wrong.  We’re all for investors stepping in to clean up a mess.

Investors are like the white corpuscles of the economy … bringing capital to damaged areas and healing blight and distress.

It’s one of the reasons we’re excited about Opportunity Zones.

We just hope Main Street investors and syndicators don’t get pushed aside again by the wolves of Wall Street.

The issue is there’s a BIG difference between the way Wall Street money and Main Street money behaves.  And it’s not about savvy … it’s about heart.

Big money guys (and gals, we suppose) have a way of looking at things.

Remember this classic 2012 quote from mega-multi-billionaire and legendary investor Warren Buffett …

“I’d buy up ‘a couple hundred thousand’ single-family homes if I could.” 

Of course, we all know money’s not the gating issue for Buffet.  He can buy anything he wants.  So what could his hesitancy be?

Maybe he agrees with Sam Zell, who’s been quoted as saying this in 2013 …

“An individual investor can buy 25 houses and monitor them. I don’t know how anybody can monitor thousands of houses.”

Really?  We know Main Street investors like Terry Kerr at MidSouth Homebuyers who successfully manage thousands of houses.

So it’s not impossible to manage a big portfolio well. You just need to be committed to doing it … one tenant at a time.

The folks we know who excel at single-family property management really care about their tenants as human beings … and deal with them as individuals.

They’re focused on creating cash-flow as the PRIMARY investment result … as opposed to simply a necessary evil to offset holding costs until a capital gain can be realized at sale.

Buffett and Zell are smart guys.  Buffett saw the opportunity in single-family homes … but had the good sense to know he wasn’t the right guy for the job.  Ditto for Zell.

Big money moves in broad strokes, which is fine when you’re dealing with commoditized assets and you can buy and sell in bulk.

But real estate … especially single-family homes … is not an asset class and can’t be effectively commoditized.  And neither can property management.

We think Main Street tenants are much better served by Main Street landlords … like YOU … so long as you remember the main thing is happy tenants.

Happy tenants means longer tenancy, less turnover and vacancy, and better real-world cash flows.

Of course, you don’t need to be a small-time investor to build a portfolio of single-family homes.

When you learn to syndicate, you can combine bulk money with individual property investing … and build a portfolio of hundreds or even thousands of homes.

Being big isn’t bad.  Wall Street’s problem isn’t its size.  It’s its mindset.

As the legendary Tom Hopkins says …

“Don’t use people and serve money.  Use money and serve people.” 

Because when you do, you’ll end up with both.

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Put all your eggs in one basket … then diversify

The blessing and curse of real estate is that trends develop slowly. 

This makes them easy to catch, but also easy to miss … unless you make it a priority to pay consistent attention.

We scour the news daily.  We’re always looking for opportunities, lessons, and trends.  But they’re not always obvious.  In fact, they usually aren’t.

So it’s not answers we’re looking for.  It’s better questions.  The clues in the news simply capture our attention so we can dig deeper.

And because real estate trends move slowly, there’s often plenty of time to investigate … and then move into position to take effective action.

This recent headline reminds us of the process, and some great lessons for real estate investors …

Salt Lake City Tops U.S. In Diversity of Jobs; Las Vegas is Last 
– Bloomberg 2/15/19

Now Salt Lake City isn’t necessarily a market normally associated with diversity, but according to this report, it’s tops for diverse job opportunities.

Of course, jobs are uber important to real estate investors.  After all, jobs are the best way for tenants to get the money to pay rent.

Plus, any market with abundant jobs is going to attract more people … adding to the demand for rental properties.

Perhaps even more importantly … a diverse selection of job types is probably a good indication an area has multiple economic drivers.

Economic diversity is a very important component of stability and resilience.

This should be obvious, but it’s amazing how many investors rush into markets chasing a trend driven by only one big story.

Of course, if that one big story changes for whatever reason, then so does the trend in the market.

Consider how things worked out for real estate investors who rushed in for the oil boom in North Dakota’s Bakken or the Amazon HQ2 boom in New York.

Time will tell, but we’re guessing while some Opportunity Zones will be fantastic successes … some will end up being big busts too.

One story usually isn’t enough.  And there’s no need to move too fast when it comes to catching an uptrend in a real estate market.

Sure, when you take a measured approach, you might miss out on quick gains gleaned from front-running the fast-to-act speculators.

But if you view real estate as a long-term investment, then you’re looking for long-term trends.  Best to let the trend strengthen before getting in too deep.

Besides, there’s plenty to do while you’re watching the trend develop.

Consider our approach to Salt Lake City … since this is the focal point of the headline we’re talking about today.

Salt Lake City popped up on our radar a few years back and we started watching.  The more we saw, the better it looked.

In 2017, Salt Lake City appeared in a report of metros with a low percentage of rent burdened population.

In a related commentary about why we think this metric matters, we pointed out …

“… markets with increasing affordability, and stable rents and occupancies, should probably end up on a short list of markets to pay a visit to.”

We suggested to …

“Look for metros which are affordable locally based on a low percentage of rent burdened population, with increasing affordability … and also affordable nationally when compared to the average rents of other metros.”

Markets that looked interesting based on this metric were Kansas City … along with Oklahoma City, Cincinnati, Louisville, and Salt Lake City.

Since then, and perhaps to no surprise, we’ve built relationships with boots-on-the-ground teams in both Kansas City and Salt Lake City.

Sometimes it takes time to identify and study a market, then get to know the right people … rather than just jumping into a “good” deal in a “hot” market.

Sure, when the market ends up being great, you’ll always wish you moved faster …

… so it’s wise to get good at seeing opportunity, doing your homework, and building relationships sooner.

But again … the blessing of real estate is it moves slowly.  So you don’t have to be a racehorse to win the real estate investing derby.

Nonetheless, you do need to move.  You can’t win or finish a race if you’re still standing at the starting gate.

So when you see a positive market metric, be quick to start the process of exploration … but cautious about leaping into a deal before you look.

And as you explore a market’s potential, whether you’re just starting out or already have a sizable portfolio, consider how to use diversification as a tool for building resilient wealth.

There are several ways to diversify …

Choose economically diverse economies to reduce your exposure to any one industry or sector of the economy.

Invest in multiple units when you can.  More doors provide multiple streams of income and less dependency on any one tenant.

Invest in multiple markets.  Even diverse individual economies can suffer setbacks, so being in more than one market can help mitigate the risk.

Syndicate or invest in syndications to become even more diverse faster.

Syndication pools your money with others’ … and provides scale you might not have on your own … so you can own more units, in more places, with professional management.

The bottom line is real estate is a great “basket” to put all your eggs in … while also providing the ability to create resilient wealth through strategic diversification. 

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Real estate is NOT an asset class …

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

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

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

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

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

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

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

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

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

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

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

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

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

But real estate is different.

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

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

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

– February 5, 2019 

We like equity, so naturally this caught our attention. 

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

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

But as ATTOM points out …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And those opportunities are often found in unlikely places.  

Here’s another ATTOM article …

Top 10 Seriously Underwater Metro Areas – February 8, 2019

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

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

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

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

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

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

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

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

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

Not so fast.

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

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

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

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

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

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

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

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

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

Our main point today is …

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Tracking trends and making smart moves …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For us, that comes in two forms …

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

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

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

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

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

When it comes to investing outside the box …

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

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

You’ve probably heard of it. 😉

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

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

They each have pros and cons.

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

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

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

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

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

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

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

Think about it …

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

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

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

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

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

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

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

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

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

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

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

This Bloomberg article elaborates …

Cuomo Blames Trump Tax Plan for Reduced New York Tax Collections

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

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

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

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

So here’s the point …

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Out of control debt is a problem … and an opportunity

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

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

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

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

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

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

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

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

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

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

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

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

His pet worry?   According to this Time.com article

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

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

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

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

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

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

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

But this isn’t about politics or personal preferences. 

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

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

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

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

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

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

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

Depressed?  Don’t be. 

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

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

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

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

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

But it begs the question … HOW?

Debt. 

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

Consider this truism …

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

 – Herbert Stein 

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

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

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

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

And real estate is the collateral of choice …

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

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

That’s important because …

Out-of-control debt virtually assures currency debasement.

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

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

And one last thing …

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

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

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

Growing debt requires growing supplies of resources.

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

What this legendary real estate investor is buying NOW …

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

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

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

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

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

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

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

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

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

We think that’s REALLY interesting.

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

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

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

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

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

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

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

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

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

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

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

So Zell must see gold demand holding … or increasing.

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

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

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

Which begs the question …

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

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

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

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

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

Sam Zell is buying gold as a “hedge.”

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

Investopedia defines a hedge this way …

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

Well, THAT’S interesting.

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

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

Which begs yet another question …

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

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

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

Zell is bullish on oil.

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

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

Um, probably not.

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

So why oil?

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

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

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

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

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

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

Until next time … good investing!

More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Preparing for the mega-trends of the next decade …

We realize it’s only the START of 2019 …

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

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

Perhaps you should too …

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

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

Consider this recent headline …

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

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

Think about that.

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

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

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

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

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

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

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

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

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

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

We think that’s a mistake.

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

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

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

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

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

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

Artificial intelligence is another.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The good news is mega-trends move slowly.

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

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

Not all investments can say that.

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

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

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

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

Of course, we hope you’ll join us.

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

A potentially big real estate story for 2019 …

While most Americans are fixated on the brouhaha surrounding the government shutdown, we’re thinking about something even MORE slimy …

Oil.

Long time followers know we’ve been watching oil for quite a while … and for a variety of reasons over and above the amazing tax breaks.

Oil and energy have a substantial impact on the economy, inflation, geo-politics … even the health of the financial system. 

We’ve observed that as oil prices rise and fall, the specific area of their impact shifts.   There are important clues and opportunities to be gleaned from watching these dynamics.

When oil prices rise, it’s a drag on economic growth and can also be a sign of inflation.   It’s no secret President Trump wants to lower cost inputs to help fuel economic growth.

The Trump formula is lower taxes, lower oil, lower interest rates, a weaker dollar, and less regulation.  Labor is the only input he wants to see rise.

You may agree or disagree, but that’s what Trump wants.  Of course, there are some conflicting goals in the Trump recipe …

Specifically, low interest rates and a weaker dollar generally mean rising prices (inflation) … and oil is one of the first places it shows up.

Also, more economic activity leads to more energy consumption, which means higher demand … and rising prices.

So … the only way to keep oil prices low in an environment like this is to increase oil production to where supply overwhelms both higher demand and a weaker dollar … and pushes oil prices down anyway.

Perhaps obviously,  a domestic agenda which needs lower energy costs will affect U.S. relations with oil rich nations.

We think Trump’s stance towards Saudi Arabia … in spite of denials … makes it clear low oil prices are a high priority for the White House.

It’s consistent with what Trump told us when we asked him about his vision for housing and real estate.  He said, “Jobs”.

Remember, oil and energy were the largest drivers of job growth in the United States coming out of the 2008 financial crisis.

Many real estate investors who recognized this trend and got involved in Texas real estate in 2009 …and  have done very well over the last 10 years.

We think that party’s probably not even close to over.

One less obvious, but very important connection between oil and real estate is in the financial system … specifically, the debt markets.

As we’ve discussed several times over the years, LOTS of loans were made to oil companies when oil prices were over $100 per barrel.

But when interest rates rise and oil prices fall … it’s the worst of both worlds for heavily indebted domestic oil producers.

MANY billions of oil-related debt has the potential to go bad … and crater the financial system just like bad mortgage debt did in 2008.

And when credit markets seize for whatever reason, liberal users of debt, such as real estate investors … are directly affected.

We don’t think it will happen.

First, there’s too much upward pressure on oil prices.

Second, as we’re about to discuss, there’s BIG motivation to stimulate domestic production … which provides a lot of cash flow to service debt.

Of course, we could be wrong … as Ben Bernanke was about the dangers of sub-prime … so real estate investors should pay attention to oil.

Using the gas pump as an indicator, you probably already know oil prices have been a little soft.

Of course, businesses and consumers (including your tenants) LOVE this because it makes everything more affordable.

U.S. car manufacturers love it because it means they can sell more gas guzzling SUVs and trucks.

But bigger picture … oil and energy are major cost inputs on virtually all products.

After all, it takes energy to manufacture and transport everything.

And many products are made from petroleum derivatives, such as plastic, roof shingles, and asphalt.

So even though energy is left out of the “core inflation” index, the effects of changes to oil pricing are still reflected in it.

And so partly due to subdued oil prices, concerns about excessive inflation have been muted … even in the midst of a red-hot economy.

Obviously, sellers of oil would prefer higher prices. 

But you can only charge what the market will bear … which is a factor of supplydemand, and capacity to pay.

It’s also important to note that energy, like real estate and food, isn’t a discretionary purchase.

People MUST have energy to survive and thrive.  Therefore, demand for energy is ever-present.

So when it comes to oil … the thing to watch is supply and capacity to pay.

Breaking out capacity to pay from the traditional supply and demand model is something we started doing a long time ago … because there’s no effective demand without it.

Just because you want something, doesn’t mean you can afford it.  Think of it like debt-to-income ratios and interest rates in real estate.

Just because someone makes an offer on a house (demand), if they can’t quality for the loan (capacity to pay), there’s no sale.

And when mortgage rates rise, but wages don’t, the dynamic negatively impacts qualifying ratios … thereby decreasing capacity to pay and ultimately, effective demand.

That’s why observers often expect rising interest rates to lead to decreased housing demand.

It’s similar with oil.

When oil prices rise and wages don’t, then lack of  “real” wage growth (incomes outpacing inflation) makes it hard for the market to bear price increases.

That’s why the recent blowout jobs report was notable.

Not only were lots of jobs created, but wages grew at the best rate since 2008.

That means capacity to pay improved.

As you may recall, Saudi Arabia (the leader of the middle-eastern oil cartel OPEC and one of the largest oil producers in the world) INCREASED production …

… which meant MORE supply and LOWER prices (and thanks from President Trump).

But just recently, Saudi Arabia reversed course, calling for a target price of $80 per barrel … and a REDUCTION in production to make it happen.

Now before your A.D.D. kicks in … remember, this ALL has ramifications for real estate investors …

The point is there’s some real pressure on oil prices to rise … and a lot of motivation by President Trump to take steps to push prices down.

We think BOTH will happen and lead to interesting opportunities for real estate investors … in spite of the pressure higher oil prices puts on your paycheck-to-paycheck tenants.

If you invest in oil for the tax breaks and oil prices go up … there’s big potential for a double dip … tax breaks and profits.

Nice.  You can use both for your next down payment.

Higher oil prices reduce the risk of oil debt imploding credit markets.  Healthy credit markets are essential to vibrant real estate markets.

If oil prices rise on the international stage, we’d bet President Trump will do whatever he can to further stimulate domestic production to counteract it.

And that means more U.S. jobs and robust regional economies … with increased demand for real estate to in those areas.

All this to say, we think it’s smart to pay attention to oil … as an investment, as an economic gauge, and as a treasure map to potentially hot markets.

Oil will be a big topic of discussion on our upcoming Investor Summit at Sea™.

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Next Page »