Tax Changes Real Estate Investors Need to Know About

We’re back with one of our favorite people … CPA Tom Wheelwright!

Tom is here to share important updates on current and proposed changes to U.S. tax law as part of the war against COVID-19. 

We’re also discussing the details … and potential repercussions … of proposals currently being floated around during this controversial election year. 

There are changes that real estate investors like YOU need to know about. 

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

  • Your up-to-date host, Robert Helms
  • His taxing co-host, Russell Gray
  • CPA and tax expert, Tom Wheelwright

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Let’s talk about taxes

One of the biggest elements that affects cash flow and overall return of real estate investments is taxation. 

And yet … nobody really likes to talk about it. That needs to change! There’s lots you can do to reduce taxes and make more money. 

Our good friend, CPA Tom Wheelwright, always says, “If you study a nation’s tax code, you can see exactly the behavior they want, because they reward it.”

The tax code is a series of incentives. 

There’s so much going on right now in the world … and in an election year, a lot can happen. 

We don’t have a political argument to make of any kind … but when you start talking about tax policy and you have different parties with different opinions, politics are going to come up. 

We’re here to wrap our minds around some of the proposed tax changes that real estate investors must understand. 

New tax changes you should know about

Going all the way back to Obamacare, there was a tax impact for real estate. Then, the Trump administration came in and made the first major overhaul. 

It’s no secret that with a real estate guy in the White House … we got some very favorable breaks for real estate investors. 

Then, the COVID-19 crisis impacted the tax code. 

Basically, since 2008, the tax code has been a roller coaster. There have been extreme changes in public policy, public behavior, and financial markets. 

All of that means that as a real estate investor, you’ve got to be looking a little bit farther down the road. And, you need to be well-advised by a great tax professional. 

Tom Wheelwright is here to get that conversation started … but remember to sit down with your own tax advisor and get their expert views for your personal situation. 

There have been some really important changes recently for real estate investors. The most obvious one was the qualified improvement property change. 

This was in the Cares Act correcting a mistake in a 2017 act in which the government didn’t include leasehold improvements on commercial property as qualifying for bonus depreciation. 

The Cares Act now said that they do … and you can take advantage of that retroactively all the way back to 2018. You can amend your return, and there can be a lot of money in that. 

The Cares Act also said that if you had to reduce your hours … either business hours or working hours … because of the pandemic, you can pull out up to $100K from all your accounts put together. 

Then, you have two choices. You can either pay tax on that money over three years or you can put that money back in three years and not be taxed at all. 

“You could literally take money out, buy a property, take care of the property, sell the property, and put the money back. Or, you could keep the property and borrow against the property and put the money back,” Tom says. 

Tom adds that anybody who is a real estate investor and seriously doesn’t want their money tied up in their IRA or their 401K should really look into this and see if they qualify. 

The other big change involved the net operating loss carryback. 

In 2017, real estate investors lost the ability to carry back net operating losses. In 2020, we gain that ability … and we gain it for 2018, 2019, and 2020. 

And, now it’s a five-year carryback. We’re talking about going back to 2013, 2014, 2015 … years that were really good years for a lot of people. 

And let’s say you weren’t a real estate professional in those years and now you are … you’ve got bonus depreciation. You can carry back to when you weren’t a real estate professional to offset your income and get a refund. 

Tom says that this particular benefit isn’t popular in the House of Representatives … so you better look into it quickly if you’re interested. 

The other tax benefit that people don’t often talk about is the charitable deduction tax benefit. 

Typically, individuals can only deduct up to 60% of charitable contributions … in 2020, it’s a hundred percent. 

“If you want to give all your money away this year, the government says to go for it. They’ll give you a deduction for it,” Tom says. 

Tax changes that could be coming

The tax changes that real estate investors got under the Trump administration were favorable to a lot of folks. 

Now, with an election year, Joe Biden has come out with his own tax plan and ideas. 

“Biden’s tax plan is basically a tax everything tax plan,” Tom says. “Really, he would eviscerate the tax law if he had his choice, which leads me to personally wonder if he understands the tax law at all.” 

Tom says that, for example, all the real estate benefits would go away. It wouldn’t eliminate cost segregation, but it would eliminate bonus depreciation. 

Biden has also proposed eliminating 1031 exchanges, the basis step up when you die, and oil and gas tax benefits. 

But remember, President Obama also proposed eliminating a lot of these tax breaks. Just because they are proposed doesn’t mean they’ll get enacted. 

Either way, it’s important for real estate investors to be vigilant and stay tuned in. 

For more on tax changes and how they can affect you … listen in to the full episode!


More From The Real Estate Guys™…

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


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

Podcast: Tax Changes Real Estate Investors Need to Know About

CPA Tom Wheelwright joins us with important updates on current and proposed changes to U.S. tax law as part of the war against COVID-19.

We also discuss the details and potential repercussions of proposals being floated in a controversial election year.

So tune in as we talk tax changes real estate investors need to know about with CPA Tom Wheelwright.


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 skyrocketing silver prices means to real estate investors …

It sounds BAD… but it can be VERY good …

As we write, silver is soaring … from $18 to $23 (a 27% gain) in just a few days.

Equity happens … in metals too!

We’ve been talking about precious metals for years. Watching metals is one of the important lessons from the 2008 crisis.

What do rising silver prices mean to real estate investors?

First, silver and gold are important financial system gauges … providing valuable clues about the future of money and wealth.

Precious metals are considered attractive alternatives to dollars in the bank … and to equity in real estate as vehicles to store wealth.

Precious metals tend to combine the best features of both cash and real estate equity. There’s a LOT more to say on this, but we’ll save it for another day.

For now, remember real estate equity is illiquid … exposed to creditors and predators … and hard to protect in a foreclosure.

Meanwhile, dollars have a long history of losing value. It’s a big reason why equity happens and leveraged real estate is a great investment.

Also, dollars stored in a bank are subject to nasty things called counterparty risk and bail-ins … which few depositors are aware of. It’s a reward-free risk.

Of course, converting real estate equity and dollars into precious metals mitigates many of these risks. And done right, this strategy can significantly outgrow inflation and help you build resilient wealth.

This is a hot topic right now, so we’re preparing a tutorial on it. To be notified when it’s ready, email [email protected].

Meanwhile, back to the clues in the news and soaring silver prices …

Gold and silver are considered “monetary” metals. They’re money.

Many people confuse “money” with “currency” because they used to be one and the same.

But money and currency are divorced now. Strategies which worked when they were married don’t work so well today.

The lesson is … when fundamental parts of the financial system change, strategies, and tactics should be updated.

Right now, rising silver prices could be foreshadowing a fundamental shift we’ve been watching for.

Gold’s already there, which makes silver’s move noteworthy because …

Gold and silver are similar … but different.

It’s kind of like the penthouse and the warehouse.

While gold gets to prance around at the “monetary metal” ball … hobnobbing with central banks and uber-rich investors …

… silver is often relegated to working-class status as an “industrial metal”.

This is because silver is cheaper than gold and is an essential component in many products, including solar panels and cell phones.

So while gold finds its way into fancy jewelry and safe deposit boxes … silver ends up conducting electrical current before being buried in a landfill.

But sometimes Cinderella silver gets invited to the monetary ball. And it looks like it just happened.

It’s a safe bet industry is suppressed. Lock-downs do that. So the big spike in silver probably isn’t due to industrial demand.

Of course, we’re not precious metals experts, but we know several.

One of our favorite commentators monitors an esoteric metric which helps distinguish paper trading from physical demand. It’s an important distinction we’ll delve into shortly.

In a recent article, Keith Weiner writes …

“… the [silver] buying which drove the price up so much was … buying of physical metal.”

What does this mean and why does it matter?

Seems to us if physical demand is up, and it’s not from industrial demand, then it may be silver is now on the MONETARY metal bandwagon.

That is, people and institutions could be buying silver to stack in their safes.

Perhaps a clue that dollar holders are losing faith in the dollar. And there are several trillion reasons why this would be.

Of course, gold’s surge supports this. Gold is quickly approaching the all-time high last reached in 2011.

As we noted then, central banks bought physical gold in record amounts in 2019. As the ultimate currency insiders, maybe they knew something?

In any case, it seems today more people are trading in dollars for gold.

If true, you’d expect dollar weakness … and along comes this Reuters headline …

Battered U.S. dollar ‘hanging by a thread’ as coronavirus cases grow

Here’s the concern … something we’ve watched for a while …

The primary reason the Federal Reserve can create unlimited dollars without disaster (think Zimbabwe or Venezuela) is the U.S. dollar reigns as the world’s reserve currency.

This “exorbitant privilege” creates huge demand for dollars all over the world.

So although those newbie dollars might be Made in the USA (who says we don’t make anything?) …

… but they’re funneled around the globe through federal spending on military, foreign aid, international loans, and a host of the things.

Even those stimulus dollars deposited directly into citizens’ checkbooks find their way to China … as consumers buy Chinese stuff from Wal-Mart and Amazon. U.S. trade deficits funnel dollars overseas.

This means Americans don’t feel the full devaluation of their dollars … the rest of the world soaks up much of the excess.

But consider this …

If sending dollars overseas suppresses domestic inflation, what happens if (when) those excess dollars come back?

Ironically, as chronicled in our Real Asset Investing Report … China is leading the charge to de-dollarize the world. Russia’s on board too.

Rising gold prices … and now soaring silver prices combined with physical demand … could be indicators of a growing migration out of dollars.

This is a big deal when set against the backdrop of unprecedented Fed printing … and public officials’ denials. Pay no attention to that man behind the curtain!

In 2008, we were told the sub-prime problem was contained … how’d that work out?

‘We want a stable dollar,’ says U.S. Treasury Secretary Mnuchin: ‘It is the reserve currency of the world and we’re going to protect that’

– MarketWatch, 7/23/20

Here’s the problem …

The way we understand it, to save a struggling financial system, the Fed MUST create MANY TRILLIONS of fresh dollars … more than ever.

Those new dollars buy bonds to suppress interest rates … another topic we’ve addressed before.

Of course, as long as enough people trust and accept all these brand-new dollars, it’s business as usual.

BUT if dollar-holders revolt, then a lot of SHIFT HAPPENS …

Interest rates could rise. When lenders think they’ll get paid back with highly depreciated dollars, they’ll demand compensation.

Are you prepared for the possibility of spiking interest rates?

Credit markets could implode. Think 2008 on steroids. Rising rates are kryptonite to the mighty-but-leveraged balance sheets of nearly every financial player.

Are you prepared for a world without cheap and abundant credit?

Commodity and energy prices could rise faster from inflation than they drop from depreciation based on depressed demand.

Are you prepared for tenants to have more of their income consumed by food and energy?

We’re not saying all of this will happen … maybe none of it will. But there are rational reasons to think it could.

As we often say …

“Better to be prepared and not have a crisis, than to have a crisis and not be prepared.”

Except this time, a crisis isn’t a “maybe”. It’s here … moving methodically through a progression of crises aimed at a currency crisis.

Ironically, the Fed’s attempts to stop it could cause it. Peter Schiff has been warning of this for years. Now we’re here.

Of course, we certainly don’t have all the answers. But we’re paying attention and working hard to stay ahead of it.

And it’s not all bad.

In fact, there should be a lot of opportunity. We’re sad for those who get blind-sided but excited for those of us who are aware and prepared.

Quality properties will likely be available at great bargains … IF you’re in a position to purchase them.

Many affluent folks could be looking for syndicators to help them move money out of Wall Street onto Main Street.

The landscape for syndication just got better.

NOW is the time to prepare for these possibilities. But it may require thinking outside the box you’ve been in for the last decade.

The world is changing in BIG ways … and very fast. Your investing strategy and tactics probably need to change too.

So stay tuned … and we’ll keep the ideas and insights coming.

Preparing for the New Realities of Real Estate

We’re chatting with Ken McElroy … Robert Kiyosaki’s very own real estate guy … for a reality check of investing heading into a potential crisis unfolding before our eyes. 

The world is changing … and when it changes, your investment strategy should too. 

We’re all preparing for the new realities of real estate … and we’ve got ideas to share with YOU. 

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

  • Your unreal host, Robert Helms
  • His unprepared co-host, Russell Gray
  • Robert Kiyosaki’s Rich Dad Advisor for Real Estate, Ken McElroy

Listen


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Marching toward a new normal

So much is changing in the world, and that permeates into real estate. 

What is the new normal going to look like? And how can YOU prepare for what’s coming next?

We’re chatting with our good friend, Ken McElroy. He’s the Rich Dad advisor for real estate. 

When Kenny has something to say, we have ears to listen … because we’ve seen over the years that he has been right A LOT more than he has been wrong. 

Ken brings a couple of special talents and perspectives to the party … so to speak. 

One is his tactical experience. He has been in the game for a long time. He has ridden a lot of up and down market cycles, and he is a really down-to-earth, practical guy who can explain things in plain English. 

Kenny is a hands-on guy who runs a team of hands-on people … and he brings with him the big picture insight of his relationship with Robert Kiyosaki. 

Too many people in real estate get dogmatically focused on just real estate … THEIR market or THEIR niche. 

While you do want to know about the markets that you’re in, you also need to get your head out of the weeds and look up at the horizon. 

Ken’s core investing philosophy comes from being a property manager over the years, specializing in B class apartments. 

When he takes these properties on, they’re not in great financial shape … and sometimes not great physical shape either. They need some work to help increase rents and property value. 

Over the years, Kenny’s taught us a bunch of clever ways to increase your net operating income. 

Now, with the normal status quo of things on the fritz in so many ways when it comes to being a landlord … we thought it was definitely time to pick Ken’s brain. 

The effects of COVID-19

If you’ve been listening to us for a while, you probably know a bit of Ken’s background … property management and ownership of thousands of apartment units. 

There’s certainly a lot of concern over tenants losing their jobs, not being able to pay rent, and eviction moratoriums. 

“The truth is, this is part of management,” Ken says. “Management is really easy when tenants are coming in and rents are going up, but when hard times hit is when your true skill and technique gets exposed.”

Right now, Ken says his company has about 8,000 tenants … so when COVID-19 shutdowns happened in March, it hit them pretty hard. 

No one wants to experience a downturn … but it’s part of the game. When downturns happen, you hope that you planned accordingly in the good times to be able to withstand. 

Ken says that about 80% off his tenants were able to continue to make payments. 

Then, about 15% of tenants anticipated having issues paying rent, communicated those issues and were put onto a promise to pay (PTP) program as a way of working with property management. 

The remaining 5% or so were people who didn’t communicate and assumed with what they were hearing from the news that they just didn’t have to pay. 

“We are really trying to work with people. The last thing we want to do is boot anybody out and ruin their credit. The people that are working with us and communicating we know are good people, and so we are doing all we can,” Ken says. 

Moving from renters to property owners, about 5 million people are having trouble with their mortgages. 

Ken says we haven’t even begun to see the potential effects of the virus on this sector … because people with homes are going to fight to stay in them for as long as they can. 

Depending on how long all of this drags on, it could be quite some time before we can visualize the real impact. 

Strategies for the future

Back in 2008 or 2009, we spoke with Ken about how he was strategically trying to pick markets that were B class and geographically near jobs that couldn’t be moved. 

Has his strategic plan changed for when we come out of this height of the pandemic bubble and start to look for opportunities?

“I haven’t seen any statistics yet for 2020, but the patterns of population migration have been very interesting to watch over the last several years. That will definitely play a part,” Ken says. 

If you look at a location like New York City, for example, from many standpoints … housing listing, reduction in pricing, employment … it looks like this area is going to get hit pretty hard. 

We were already seeing pre-pandemic that listings in New York City were down about 57%. People are leaving and going to other places like Florida where they can spend less for more space. 

In general, many people are leaving the city to move further out of town to smaller communities. That may be a big opportunity for the future. 

With remote work, many tenants will no longer be held down to these employment centers and will have the luxury to choose where they want to live. 

So, as we go through and find opportunities after the virus, how do investors make sure they keep their heads on straight?

You have to be practical and realistic about what’s happening. But at the same time, there is going to be a ton of potential for redevelopment. 

Ken predicts that many regional malls and small shopping centers aren’t going to make it … and there will be a lot of single-family homes on the market a year from now. 

That will drive prices down … and push us into a renter economy.

For more on how you can prepare for the new normal in real estate … listen to the full episode!


More From The Real Estate Guys™…

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We’re not in Kansas anymore …


Editor’s Note: It seems there was a delivery problem with our last muse … either spam filters found the content delicious … or the thought police didn’t like our attitude. 😉

Great read! I’m looking forward to the crisis investing webinar!” – Ben B.

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Love your info … and your humor!” – Douglas L.

This is a great one. Is there an online version to share?” – Jason O.

If you happened to miss it and are curious, click here to read now >>

Of course, if you love it … first, tell us (it helps feed our enormous egos) …

… then share with your family, friends, colleagues, neighbors, ex-lovers, personal shoppers, and random strangers walking their dogs past your house.


On to our current hot topic of consideration …

Actually, there are too many hot topics to pick a clear winner, so while we’re busy ramping up our content creation schedule (that’s a tease) …

… here are some notable headlines with short commentary on why we think they’re useful for real estate investors.

(You can file all these under “We’re not in Kansas anymore.”)

According to both World Bank and IMF, as reported by Statista, China is now top of the list of Biggest Economies in the World 

Yes, we realize there are debates about whose is bigger depending on how you measure. But that’s majoring in minors.

It’s really not size that matters, but quality.

An industrialized economy puts people to work making things. Look around at the labels on just about everything Amazon delivers to you. Made in … where?

financialized economy puts people to “work” recycling currency … using paychecks to make loan payments, and borrowing to consume … products made somewhere else.

Of course, it’s the exorbitant privilege of the dollar’s reserve currency status that keeps the financialization game alive. But we’ll save that for future discussion.

Meanwhile, if politicians can break the Wall Street wizards’ spell over them … (maybe the recent shortage of medicine and masks in a crisis will do the trick)

… there might be a serious effort to re-industrialize the United States.

IF that happens … some markets left for dead after the great manufacturing exodus might be resurrected … or new ones will emerge.

If you can spot the trend early, you can make your move ahead of the influx of capital and people.

Meanwhile, the financial system is starting to show signs of stress …

‘This is not a normal recession’: 3 large US banks set aside $28 billion to cover potential loan defaults due to the coronavirus pandemic

-Business Insider, 7/14/20

Mariners in pre-tech seafaring kept a lookout perched in the Crow’s Nest.

The lookout keeps a 360 degree view out to the horizon, and warns of looming threats like storms, obstacles, or hostile vessels.

In today’s world, there are hundreds of financial lookouts … all perched higher than we mere mortal Main Street investors.

If we’re correct that the world is only in Act 1 of a 4-part cascading crisis (Act 1 – health crisis, Act 2 – economic crisis) …

Then Act 3 is a financial system crisis … major problems in credit markets and banks.

A financial system crisis happens when debt does bad faster than the system can absorb. It’s like when a virus overwhelms your immune system.

The first to know are the borrowers. But unlike public companies, most people and private businesses keep financial woes to themselves.

Next in the “bad debt early notification” food chain are lenders … most notably banks. They see payments coming in late or not at all … long before it’s reported.

And according to this Business Insider reportthe biggest banks just beefed up loss reserves … by more than any time since 2008.

(Hmmmm …. that date rings a bell … something about a financial crisis …)

“This is not a normal recession.” 
– Jamie Dimon, CEO of JP Morgan Chase

Dimon points out that the recessionary piper whose can was kicked down the road by the Fed … is still up ahead on the road we’re on. He wants to be paid.

We’re not saying Dimon’s right. But he’s got a vantage point we don’t … and clearly, big banks see bad debt rising. Actions speak loudly.

Of course, when debt goes bad, prices collapse … which can be good or bad depending on whether you’re a prepared buyer or an unprepared seller.

And it seems savvy investors are starting to smell opportunity …

Non-listed REIT fundraising shows early signs of recovery
– Real Assets Advisor, July 14, 2020

This headline is a little off the mainstream, but sometimes that’s where you need to go for news about Main Street real estate investing.

In this case, the news is straight-forward … and not too surprising for anyone who understands shift happens.

After a gruesome May took the shine off a near record first quarter, June inflows into private REITs spiked back up by 83 percent.

Reading between the lines, it seems passive real estate investors see opportunity … and perhaps some safety … in real estate.

Of course, for many years we’ve been proponents of private syndications …

… for both real estate entrepreneurs as well as passive investors who want the benefits of real estate without getting their hands dirty.

It’s notable that private money is already making the move back into real estate.

And speaking of shift happening …

Coronavirus Accelerates Secular Shifts in Structured Finance
– Fitch Ratings, 7/9/20

Okay, this one’s a little wonky. But you don’t need a PhD to understand.

Remember, we live in a financialized world, so the first place opportunity and problems manifest are in financial markets.

And because we think the financial markets are next in line to feel the wrath of COVID-19 (or the reaction thereto) …

… we’re monitoring some of the more esoteric corners of the eco-system.

This Fitch report presents conclusions that are worthy of a closer look …

Home price growth is likely to increase in areas where home sales and new mortgages are driven by migration to smaller cities or suburban and rural areas.

“Sustained elevated unemployment and economic uncertainty may also mean fewer mortgage applications, particularly for first time buyers. This may increase demand for multifamily and single- family rental properties.”

Yes, it’s true these people aren’t real estate investors … and they’re not writing for real estate investors.

They’re addressing the research needs of debt investors … people and institutions who invest in derivatives of debt against real estate.

But because they know the debts they invest in are only as good as the ultimate collateral … the property and borrower … they pay attention to the same things you should.

The difference is they have big budgets, fancy computers, super-studious analysts … and they write these reports.

So for simpletons and cheapskates like us, it’s easier to cheat off their homework.

Of course, it’s certainly not crystal clear. In fact …

Payment forbearance measures are clouding the credit picture, and high levels of loan modifications or payment holidays are posing challenges …”

Soooo … the bottom line of this commentary … which we conveniently placed at the bottom is …

At both the global macro level and the micro Main Street level, the world is changing bigly and quickly.

But with politicians and bankers manipulating financial markets, currencies, contracts, landlord-tenant law, tax codes, and even the personal freedom to make a living …

… NOTHING is clear. Yet.

It kind of feels like sailing on a big ocean liner operated by an allegedly competent crew … through a sea of icebergs and thick layers of fog.

But not to worry. The nation, the currency, the system are unsinkable. What could go wrong? Right?

Which way to the lifeboats? Just in case …

 

This ONE chart tells a BIG story …

Most investors don’t really know what it means … or what to do about it …

Real estate investors are more likely to be interested in grading slopes than yield curves. And the Fed’s balance sheet? That’s REALLY esoteric and boring.

BUT … the Fed is the most powerful and influential financial force in the world … affecting the stock and bond markets (where mortgage rates are set), the economy, and even geo-politics.

The Fed seems to prefer hiding in the shadows …

… except when diverting attention from charts like the one below with cryptic congressional testimony and occasional PR appearances on TV.

This chart shows the Fed’s ballooning balance sheet 

Source: St. Louis Federal Reserve

The numbers might be too small to read, but they’re too big to comprehend … with over $7 trillion of assets (nearly double from just 4 months ago).

You may or may not know what it means, but set that aside right now … and just look at the slow and stable trajectory leading into the end of 2008 …

… and the “big” spike at the beginning of 2009.

Bring back any memories?

We found flipping the chart over helps …

Source: St. Louis Federal Reserve

Now, instead of looking like a positive, happy, upward trend … it looks more like the way it felt …

… like you were paddling along on a river until late 2008 when … whoosh! You went into a rough patch of white waters.

Then after a bit of a bumpy ride, you settled into a deep but slow descent into “the eye of the storm” (yes, we just mixed the metaphor) where it seemed stable and trending up.

Then some headwind … you might say your momentum was tapering … and then a little teaser turbulence right before …

WHOOSH!!! Over the waterfall.

This is what it FEELS like for investors riding waves of Fed liquidity via “quantitative easing” (Fedspeak for printing unfathomable amounts of dollars).

Of course, the Fed doesn’t really “print” … that’s so 20th century.

Here’s the official explanation straight from Fed Chairman Jerome Powell’s appearance on 60 minutes:

60 MINUTES: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That’s another way to think about it. We did.

*** (ANOTHER way to think about it? What’s the first way???) ***

60 MINUTES: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply.

Hopefully, that’s VERY clear.

The Fed, by their own admission, simply conjures dollars out of thin air and uses them to buy government-backed debt.

Keep this in mind when you’re perplexed about why the government not only grows its own debt but seems all too willing to guarantee private debt also.

But don’t think about all that too much now. Let’s focus on the discussion at hand …

The Fed’s balance sheet shows HOW MUCH digital money the Fed conjures out of thin air … as reflected by how much government-backed debt they own.

Think about this …

The Fed creates dollars out of thin air at no cost. At this point, it has no value because it cost nothing to create.

Those fresh dollars only become valuable later when someone who did real work and produced a real product or service is willing to trade their product for those previously worthless dollars.

Doesn’t seem quite fair to the person doing real work. But that’s a rant for another day.

Of course, the Fed doesn’t actually put the money directly into circulation. They loan it to the government, who then must spend it into circulation.

Seems like a pretty good deal for the government. They get to spend lots of money to buy nice things … like votes.

If we didn’t know better, we’d be tempted to think the Fed and Uncle Sam have a bit of a racket going.

Nah.

So if the Fed prints dollars for free and then loans them to the government, wouldn’t this make them separate parties?

Good catch. Yes, they are. Of course, that’s also another rant for another day, and not our point right now.

Today, we’re less concerned with who the Fed is … and more focused on what they’re doing and what it REALLY means to Main Street real estate investors.

It’s a bit more complicated than just interest rates and inflation. Sorry. But it’s important because what’s brewing isn’t your run-of-the-mill financial crisis.

Back to our story …

So the Fed prints money from nothing and lends it to Uncle Sam. But when the government borrows money, who pays it back … and how?

Hint: The Federal Reserve, the income tax, and the IRS were all created at the same time as part of the 16th amendment in 1913.

Why?

Well, it seems there was a financial crisis in 1907, and the politicians and their funders decided to “fix” the situation.

Of course, “fix” is a word subject to interpretation …

“Repair, mend” … OR … “to influence the actions, outcome, or effect by improper or illegal methods”.
– Merriam-Webster Dictionary

And since we’re quoting …

“Never let a crisis go to waste.” 
– Saul Alinsky

“Never let a good crisis go to waste.”
– Winston Churchill

“You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”
– Rahm Emanuel

You get the idea. Exploitation of a crisis is a standard operating political principle that’s been around a long time. And the consequences often land on Main Street.

And speaking of principles that have been around a long time …

“The rich rules over the poor; and the borrower is servant to the lender.” 
Proverbs 22:7

Interesting.

We’re guessing you’re smart enough to put all that together for yourself. Must be nice to print money out of thin air and buy up trillions in debt.

Meanwhile, back on Main Street …

You don’t need to be a rocket surgeon to know you can only extract so much tribute … even at zero interest … before the burden is simply too much.

As we noticed last September, there were signs of severe systemic stress BEFORE the COVID-19 crisis hit.

Now everything is moving much faster … so it’s important to pay close attention and be ready to react to both the approaching dangers and opportunities.

Obviously, dollars are nearly free right now. It’s probably not a bad idea to grab all you can while credit markets are still functioning.

We’re noticing small businesses and commercial properties coming on the market at an increased pace … and with “price reduced!” in the pitch.

That’s a clue the crisis sale might be starting.

You also may have noticed precious metals are catching a bid in dollar terms. That’s talking head jargon for gold and silver prices are going UP on dollar price.

This indicates more dollar-denominated investors are choosing to keep some liquidity in precious metals versus currency.

This makes sense as every other currency in the world is already at all-time lows versus gold (i.e., gold is at all-time highs in every currency except the dollar).

When the Fed is printing trillions of dollars each year … and Uncle Sam is aggressively putting them into circulation … the historical result is a falling dollar.

And despite what you may hear on financial TV … we think it can be strongly argued this is setting up a perfect storm for leveraged income-producing real estate.

Remember, Wall Street and the TV gurus who promote them believe investing is “buy low, sell high”.

But real estate investors think “cash flow” … which is the only reliable source of equity. Income creates real equity.

Meanwhile, strategic real asset investors put it all together into a bigger picture …

Real estate (especially residential) is a sector strongly supported by the most powerful constituencies … politicians, bankers, and voters.

That’s a lot of love … and a great place in line when emergency help is doled out.

More importantly, debt is the real investment.

Income property mortgages are essentially a big short of the dollar with a great feature: the income from the property makes the payments.

So while you may not be able to print money like the Fed, using the right real estate debt is pretty close. And …

… the Fed is ALWAYS working on making debtors winners.

And when you use debt to convert real estate equity into precious metals, you have a very powerful shield against a falling dollar.

Yes, it’s true the dollar is catching the “best last paper currency standing bid” …

… but the dollar’s relative strength against other paper currencies at the same time it’s showing weakness against gold …

… is a major clue there’s some real-world weakness likely coming for the dollar in the not-too-distant future.

Yes, we know this is a lot to absorb. It’s why we keep repeating ourselves.

But rather than getting bored, we hope you’re getting inspired to study and prepare. This is a whole new ballgame.

This four-phase cascading crisis is still very early in its life-cycle.

It’s not the time to succumb to a short attention span.

Freedom, responsibility, opportunity and hard work …

We’re a little late with this week’s muse … we’ve been busy finishing up an EPIC collection of interviews for our soon-to-be-released COVID-19 Crisis Investing Webinar Series.

The original plan was to do a simple webinar with a collection of our big-brained friends. It turned into a MUCH bigger undertaking … in a GREAT way.

Obviously, there’s a LOT happening in the economy and financial system right now …

… and the issues are much deeper than debates about wearing masks … or whether tearing down statues falls under the heading of peaceful protests.

Meanwhile, as Americans head into our Independence Day celebration, there’s a lot to think about … both at the macro-policy level and the micro-investing strategy level.

Remember … your business and investments operate inside a complex, yet delicate ecology made up of people, resources, organizations, policies, procedures, and a physical environment which sometimes tosses a curveball.

Like your body, this ecology is a finely tuned machine … and though it’s often flexible and resilient … it has its limits.

Injury, disfigurement or worse are often on the other side of exceeding limits. Pain is usually the telltale sign you’re approaching the danger zone.

Ignoring the warning signs almost always ends badly. Yet even mature adults revert to childlike “covering their eyes” trying to hide from scary realities.

You can ignore reality, but you can’t ignore the consequences of ignoring reality.

Of course, pessimists only see the downside and are often paralyzed.

Optimists see only the upside … and sometimes get blindsided by dangers which are obvious in hindsight. We know. We’ve done it.

As real estate investing legend, Sam Zell says … the secret to success is the ability to pursue the upside while keeping the downside in view so it can be managed.

In other words, Sam Zell is a realist … which is probably an appropriate word for a successful real estate investor.

Our world is FULL of downside right now. Pain is everywhere.

It’s fairly obvious that people, businesses, markets, financial systems, and even society itself are all approaching their limits.

Will they bend or will they break? If they break, what does that look like? Do YOU have a plan?

Not only are those frightening contemplations, they’re hard work.

But if you love the freedom to pursue opportunity, own property, build wealth, and retain and enjoy the fruits of your efforts, it’s hard work you’ll need to do.

“Most people do not really want freedom, because freedom involves responsibility, and most people are frightened of responsibility.”
– Sigmund Freud

“If you don’t design your own life plan, chances are you’ll fall into someone else’s plan. And guess what they have planned for you? Not much.”
– Jim Rohn

“Power over a man’s subsistence is power over his will.”
– Alexander Hamilton

(That last one is a little disturbing in a “lockdown” world …)

The challenges all freedom-loving entrepreneurs and investors face in this current crisis are multi-faceted but can be distilled into a few macro and micro components.

In the macro, this could be the endgame for the 49-year experiment of a global debt-based financial system.

Or maybe it’s just a bigger crash on the way to some future endgame.

Most of the bright folks we’ve talked to think the system most of us have operated in for virtually our entire lives is dangerously close to collapse and reset (again) …

… or perhaps even full-blown replacement.

All of which begs the questions … what’s going to happen in the macro and how do you prepare in the micro?

Of course, no one knows what’s going to happen, so it’s important to analyze and anticipate possibilities and probabilities.

It may seem complicated, but it’s really a simple, though potentially catastrophic, sequence of events.

It’s important to be mindful of where we are in the process … and how likely we are to advance the next level of “yikes”.

The health crisis led to the economic shutdown, which has the potential to create a financial system crisis or collapse.

So the Federal Reserve is risking a currency crisis (or collapse) by printing many trillions of dollars trying to stop it.

Will they succeed? And if they don’t, when will we know and how will it impact all of us?

More importantly, what can we each do to prepare for a worst-case scenario?

These are the issues concerned investors are wrestling with … and the subject of our conversations both on and off the mic with our COVID-19 Crisis Investing Webinar Series faculty.

For now, here are some important concepts and actions to consider …

Incomes, whether active or passive, are based on economic activity. When commerce stops, so does revenue, and consequently rents and loan payments.

You might be a little late to the party, but if you don’t have solid liquid reserves, it’s something you probably want to get in place quickly.

The longer this crisis continues, the more likely your revenue will be negatively impacted. Liquidity is essential when revenue wanes.

Liquidity is also a VERY powerful tool when credit markets seize … often taking asset prices down with them.

The best bargains are often found by brave, bold, and liquid investors in the pit of a financial crisis.

Meanwhile, at the macro level, all those missed payments could create major problems not just in credit markets, but the banking system too.

Remember … there were already symptoms of a sick banking system just a few months before the COVID-19 crisis came to light.

And now with big debtors like Chesapeake Energy and Hertz leading a parade of bad debt and corporate bankruptcies …

… the Federal Reserve is printing dollars to not only buy up corporate debtmunicipal debtmortgages …

… but some allege the Fed is indirectly supplying freshly printed dollars to prop up stock prices.

We don’t know. But it seems like there’s a WHOLE lot of printing going on. The big question is whether the dollar is strong enough to endure this severe dilution.

Meanwhile, it seems clear credit markets are full of potentially toxic assets no one but the Fed will buy. That’s a significant warning sign.

So, at the micro-level, consider your dependence on and exposure to credit markets and the banking system.

You might find your credit lines being cut off or reduced without warning through no fault of your own. That’s what happened in the lead up to 2008.

And if you’re not familiar with the concepts of “counterparty risk” and “bail-ins”, this is a good time to expand your financial vocabulary. You may have both in your future.

Remember … these are unprecedented times.

Unimaginable things may not be likely (yet), but they’re definitely moving up the ladder of possibility.

Ignoring the possibilities doesn’t make them go away.

But unless the preparation itself is exorbitantly costly or complicated, it’s better to be prepared and not have a crisis than to have a crisis and not be prepared.

After all, inconvenient or novel isn’t the same as costly or complicated.

Many people are counting on their “leaders” and “advisors” to tackle the tough tasks, stand the night watch, and provide adequate warnings.

Maybe not such a good plan.

So as we consider what America’s founders sought to accomplish when creating the United States of America, it’s important to remember …

… the American system was built by and designed for people who wanted massive freedom and are willing to accept massive responsibility to obtain and retain it.

“Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.”
– Benjamin Franklin

This freedom … to own businesses and property, speak freely and debate ideas, succeed and fail based on individual effort and ingenuity versus a pedigree or birthright …

… are all based on one singular foundation: individual freedom and personal responsibility.

We can debate whether this is the best system, but the founders made it clear …

“Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.”
– John Adams

Of course, the freedom we have allows us to debate the details of what morals and religions are best … and those are debates worth having.

But the core basis of both morals and religion are generally accepted to be personal responsibility.

We think it’s clear we’re in Act Two of a four phase cascading crisis.

And while we’re all in this together, we’re each individually responsible to mind our own business first. Just like when the oxygen masks drop in a crisis on an airplane.

So JOB ONE is to get into and stay in a position of excess strength, wisdom, time, and capacity so you can help those in your sphere.

Because if everyone is waiting for somebody to do something then nobody does anything. That’s obviously not good … and a weak, desperate society is often taken advantage of.

So we encourage you to work diligently on what you can control so you’re better positioned to respond strongly to the many things you can’t control.

Study, think, act, learn, and then share your wisdom with the people around you.

This isn’t the time to be passive.

Encore – The Godfather’s Tips for Working with Investment Specialists

When you’re in need of valuable advice … you talk to a Dad. 

In this Father’s Day encore episode, we are revisiting the sage wisdom provided by the late, great Godfather of Real Estate, Robert’s father, friend, and partner … Bob Helms. 

Listen in as Bob shares his top tips for working with real estate brokers who understand what it means to work with investment property. 

To contribute to the Godfather Scholarship Fund in honor of Bob’s life and legacy, send an email request to [email protected] We’ll get you the details!

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

  • The father and host of The Real Estate Guys Radio Show, Robert Helms
  • The father of outtakes and co-host, Russell Gray
  • The father of Robert Helms and The Godfather of Real Estate, the late, great Bob Helms

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Advice from The Godfather of Real Estate himself

In honor of Father’s Day, we’d like to share some wisdom from the archives. 

We’re throwing back to late 2018 when The Godfather of Real Estate, Bob Helms, shared his best tips for working with real estate agents that understand investment property. 

That’s the thing about advice from world-class dads … it never gets old! 

Bob Helms spent many, many years actively brokering properties, teaching agents, and managing agents. He knew firsthand why it was so important to find and work with great real estate professionals. 

Our philosophy has always been that you should align yourself with professionals in every category … lawyers, CPAs, real estate brokers, and agents. 

Cooperation, not competition

Real estate is a relationship business … and when it comes to the brokerage community, it seems awfully competitive out there.

But here’s the first secret … The brokerage business and the real estate sales business are really ones of cooperation rather than competition.

More often than not, we need other agents in the community to be out there providing the inventory that we need.

You may have heard of the 80/20 rule. That rule says that 80% of the real estate in a market is sold by 20% of the agents.

“The most active agents in the network know each other,” Bob says. “They’re in deals together. They understand both sides have to win. It’s urgently important that you not practice your business by trying to take advantage of the person on the other side of the transaction.”

Many investors think they have to squeeze every last dime out of the deal. But the best transactions are whenthe deal closes and everyone looks around, high fives, and says, “That’s awesome!”

“When that happens, people also tend to say, ‘Let’s do it again!’” Bob says. “This is a relationship business. It’s a long-term business.”

The typical homeowner moves every four to seven years. When they move, they usually move out of the area completely.

That means, when you help somebody sell their house … they’re not coming back to buy a property from you … and that’s why it is so important to have a great relationship with other agents.

Working with your agent

Let’s talk a little bit about working with your agent.

Bob says that one of his biggest tips is to pay your agents … insist that your agents get paid top dollar.

Why wouldn’t you want to negotiate that fee?

“I’m going to suggest that you do negotiate the fee,” Bob says, “and the minute an agent agrees to take a discount, you know not to work with that agent.”

An agent that takes a discount on their fee will roll over when it comes to trying to save or make you money.

You want to work with someone that is firm in their value, understands what they’re worth, and will fight for it.

The reality is that the vast majority of real estate agents don’t really work with investors … not because they have anything against it but because they’ve simply never done it or been taught how to do it.

The difference between working with a typical agent and someone who specializes in working with investors is gigantic.

And, if you’re a real estate agent wondering how you can make more money … working with investors is the answer.

Investors are clients that buy properties again and again and again. The pricing of those properties can also be higher.

Investors tend to purchase larger properties as their portfolio grows … which means larger commissions for the agent.

Resources for getting ahead

Bob’s book, Be in the Top 1%: A Real Estate Agent’s Guide to Getting Rich in the Investment Property Niche, is a great resource for agents looking to get ahead and for investors hoping to understand more about where their agent is coming from.

Bob’s biggest tips for agents are to recognize there is no limit on how much commissioned income you can make … and that you don’t have to stop doing what is already working for you.

If you’re selling single family homes and doing well … you can keep doing it! Just add investment property as a new segment of your business.

As an investor, the person who benefits most from agents who take on investment property is YOU.

As you develop your relationships with agents across markets, they will bring you great deals.

For more tips from The Godfather of Real Estate … Bob Helms … listen to the full episode!


More From The Real Estate Guys™…

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Passive Investing through Real Estate Investment Funds

There are plenty of people out there who want the benefits of real estate but don’t want to get their hands dirty. 

For those folks, private funds can be a great option. 

While it can be expensive to send your money on the long round trip to Wall Street … Main Street funds are a lot leaner and a lot more transparent. 

We’re visiting with a Main Street real estate fund manager and exploring the benefits of passive investing through real estate investment funds. 

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

  • Your hyperactive host, Robert Helms
  • His passive-aggressive co-host, Russell Gray
  • Real estate investment fund manager, Paul Moore

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A space for passive investment

You can be an active investor that does all the work … finds the market, puts together the team, rolls up your sleeves, even paints and carpets. 

Or, you might leave that work to somebody else and invest passively in real estate. 

Today we are talking about one of the many ways to passively invest … real estate investment funds. 

A real estate investment fund has a specific purpose. It invests in a particular type of real estate …  maybe in a geographic area, maybe a specific product type. 

The difference is that a fund isn’t typically going to invest in just a single property. And, it’s not a single investor … multiple investors come together to share both the risks and the rewards. 

In today’s environment with the volatility we’ve had in the stock market, many people are looking at other ways to invest. 

Real estate investment funds usually invest in commercial properties, because they’re playing at scale. So, you become a Main Street investor investing in Main Street. 

If you drive around your community and see a new apartment building or self-storage facility going up … it’s likely those aren’t owned by individual investors. But they aren’t usually owned by institutional investors either. 

There is a middle space. 

That space used to be a good old boys club … you could only find them if you knew the right people. 

But things have changed. Depending on the type of investor you are, a fund can make sense for you in so many ways. 

The basics of real estate investment funds 

Our guest today has a multitude of real estate investment funds and is here to show his approach to that business. 

Paul Moore is a fund investor and manager from Wellings Capital. Before COVID-19 hit, Paul and his team raised a record amount of money. By the end of March, they decided to hit pause on the fund. 

“We pressed pause to evaluate opportunities in this new light,” Paul says. “We’ve been evaluating syndicators for years and have a short list of people who meet our criteria to invest with.” 

The fact that the fund is made of passive investors means that Paul had this luxury … it’s not like they were stuck in escrow and wondering if things would work out. 

Let’s talk about what makes the type of funds Paul works with different than your average syndication deal. 

Often, syndication is a single property. You find investors that fit the criteria of your deal and your investment fits them. 

What Paul does in a fund is bigger than that. Funds have multiple properties … which offers great diversity. 

With funds, you’ll see diversification across five or six different metrics. 

You’re diversifying across operators … across geographies … across asset types. You’re also diversifying across strategies and time.

All of that diversity helps create opportunities that are recession proof and still offer promising returns. 

Diversification across time is a particularly intriguing part of a real estate investment fund. 

An investor that joined a fund … say in June 2020 … would get the benefit of assets that have already been purchased by that fund. 

Basically, you’re buying into a portfolio, and about three quarters of the assets have already essentially been de-risked. 

Because a fund is diverse, you’re going to have a home run or two, a grand slam … and maybe a few base hits. 

In Paul’s current funds, you’ll find multifamily properties, mobile home parks, and even self-storage. 

Nothing in investment is guaranteed … but funds are pretty well protected pieces of collateral. 

Understanding operators and managers

When you talk about funds, you have managers and operators. Some people act as both. They have a property management company and they manage portfolios. 

That’s not how Paul’s team operates. They search out properties and operators. 

“We spend a lot of time getting to know the operators,” Paul says. “We get to know everything about them, about their company, about the way they treat their employees. That due diligence really pays off for us in the long run.” 

Paul says that the team is always more important than the property. Once you have a great operator, they can lead you to potential properties. 

The right operator can stay with you and shepherd you through whatever comes in the market. 

Paul’s job as a fund manager is managing and interfacing with these operators on behalf of all the investors who take part in the fund. 

“We have such good operators that we never want to try and take control, but we do stay in close touch with them and get regular updates on what is happening in the market,” Paul says. 

For more information on passive investing through real estate funds and what you could expect from working with Paul and his team … listen to the full episode!


More From The Real Estate Guys™…

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Which rabbit to chase?

The person who chases two rabbits catches neither …

Another week and a thousand sub-plots and angles to the COVID-19 story and how all this might affect real estate investors.

In a run-of-the-mill market gyration, those are usually fun and relevant rabbit-trails to go down. But there will be plenty of time for that later.

Sometimes it’s more important to stay focused on the main thing … even if it’s a little boring, redundant, or even (gasp!) political.

This is one of those times.

Think about it …

Virtually all major factors impacting the future of the economy, financial system, and currency that your portfolio and financial security depend on are being driven by policy.

Market participants like buyers, sellers, investors, tenants, and businesses all seem to be left out … or perhaps “locked down” is more accurate … of the process.

And the “gauges” most people focus on to determine the national, state, corporate, and individual health are questionable at best.

Whatever is going on right now is a far cry from “free” markets. It’s all driven by Federal Reserve and government (again, they’re not the same thing) policy.

So are we here to critique policy or rant about what “should” be?

Heaven forbid.

We’re not that smart … or brave. Besides, no one in charge is asking us what we think, so our opinions don’t count much in the real world anyway.

But with a thousand things to distract you, we’re simply pointing out that policy matters … and it’s a good idea to pay attention to policy so you can pivot to avoid problems and capitalize on opportunities.

As of this writing, we’re waiting to see what the Fed will say and do. They’re the makers of those important monetary policies which affect everyone everywhere.

For the uninitiated, the Federal Reserve is the issuer of U.S. dollars. The U.S. dollar currently serves as the reserve currency of the world.

Even though a lot of people know this … very few really understand it … and that’s a problem for both individuals and societies …

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

– John Maynard Keynes

The Fed expands and contracts the amount of dollars in the system to directly or indirectly manipulate interest rates, inflation, asset prices … including stocks and real estate.

If you’re paying attention, you’re watching a hyper-active Fed operate in real-time.

The Fed underwrites the United States government’s debt and deficits … including all the stimulus spending, bailouts, and vote-buying handouts by both parties.

If you think of dollars like blood … a currency that flows through the body of the economy supplying nutrition to individual cells (people) and organs (organizations) …

… then it’s easier to understand the impact of the quantity, quality, and velocity of those dollars.

There are MANY issues at play in today’s world. But we think the dollar may well be the most important developing story.

Of course, long-time followers of The Real Estate Guys™ know we’ve been watching the dollar for quite some time.

The long-term demise of the dollar is a mega-trend which began in 1913 …

SO much we could say about this one chart, but we’ll save it for future rants.

Profiting from the dollar’s persistent decline is the essence of leveraged real estate investing and the main thesis of Equity Happens.

Yes, we know we need to re-release Equity Happens. It’s on the to-do list. But it’s kind of flattering to see used copies trading for hundreds of dollars.

In fact, let’s use Equity Happens as a quick case study in inflation …

Right now, the supply of Equity Happens books is small. Apparently, the demand is high, so the price has been bid up.

(Note: We don’t get any of that premium. We wish. But it goes to the used booksellers. We’re still rummaging around the garage looking for copies so we can get in on the action.)

But the high price of Equity Happens isn’t the result of inflation. It’s the result of limited supply against relatively high demand. A copy of Equity Happens is rare.

Compare that to Rich Dad Poor Dad, the best-selling financial book in history.

At the same time Equity Happens is selling for over $400 per copy … nearly a 20x premium to the retail price …

… Rich Dad Poor Dad is selling for $5.39.

Does that mean Equity Happens is the better book? Or the demand for Equity Happens is higher than Rich Dad Poor Dad?

Not at all. In fact, far from it.

Now stick with us because this is the important lesson …

The disparity in price between Equity Happens and Rich Dad Poor Dad is a function of how many copies of Rich Dad Poor Dad have been printed.

While we only printed less than 100,000 copies of Equity Happens … untold millions of copies of Rich Dad Poor Dad are in the marketplace.

As a product, abundant supply is fantastic for the consumer. Mass production creates abundant supply which produces low prices and allows more people to acquire the book.

In other words, falling prices are a boon to consumers. It expands the ranks of the “haves”. Cheaper books mean more people can afford them. Remember this when some official tells you deflation is a threat. It is … but not to you.

What if Rich Dad Poor Dad wasn’t a book, but a currency that you were earning and saving … how’s it working now?

Let’s say you went into the market and traded the blood, sweat, and tears of your labor for 100 copies of Rich Dad Poor Dad at a time when the book sold for $12.

Then suppose Robert Kiyosaki prints another 10 million copies because his printing cost is only pennies per book.

This printing increases supply and drives the book price down from $12 to less than $6.

Yes, more people get copies of Rich Dad Poor Dad. In fact, maybe Kiyosaki deposits books directly into the libraries of readers everywhere.

But you … you worked for your copies at a time when the value of your work was based on a price of $12 per copy.

And you saved your copies in your library so you could trade them later for other books you’d like to read. But now, your copies are worth half as much.

You lose. The act of printing more books diluted the value of the books you already earned.

Now, go back and re-read the story of Equity Happens and Rich Dad Poor Dad … but replace Equity Happens with gold, Rich Dad Poor Dad with dollars, and Robert Kiyosaki with the Federal Reserve.

Monetary policy … the printing of dollars … affects you and EVERYONE earning, borrowing, saving, and investing in dollars.

And just in case you didn’t hear, the Fed is printing TRILLIONS of them … more and faster than at any other time in history.

There are a LOT of angles to the cascading crisis created by COVID-19, so it’s easy to take your eye off the main thing. We could be wrong, but we think the main thing is the dollar.

Unfortunately, most Americans and the pundits who inform them aren’t really talking about the dollar. So we are … and have been for years and years.

Today, everything is moving bigger and faster. Extreme policies are likely to produce extreme results.

Whether those extreme results harm or benefit you and your portfolio depends on how aware, prepared, and responsive YOU are.

But your results also depend on what everyone else in the eco-system does … and the policies they support. So talk with your family and friends. Encourage them to pay attention too.

Spreading financial awareness and preparedness helps flatten the curve of economic impact to the financial system.

Like COVID-19, bad ideas are highly infectious … especially when people are highly vulnerable. Ideas affect individual actions and institutional policies.

We’re not telling you what to think or do.

But if you’ve been hitting the snooze button up to now, it’s probably time to snap to attention and start studying. Think and do is better than wait and see.

There’s a lot more to this chain of events to come.


Thanks to all of you who’ve taken the time to send a little sunshine our way.  It means a lot to us!

Here’s what The Real Estate Guys™ Radio Show community is saying … 

Awesome analogy for gold, dollar, and the Fed! … ” – John Y., 6/10/2020

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