Podcast: Getting to the Next Level with Your Real Estate Investing

Building your passive income and equity through real estate is a process of growth, plateaus, and breakthroughs.

In this edifying episode, we discuss getting started, getting stuck, and what it takes to get to the next level … whatever that is for you.

So tune in and find out what it takes to take your real estate investing to the next level.


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!

Something weird is happening with mortgages …

Real estate investing is largely the business of using debt to acquire streams of income and build oceans of equity.

In the hands of a professional real estate investor, mortgages are like a super-charged power tool … making the job of wealth building easier, faster, and more profitable.

Of course, powerful tools in the hands of amateurs can do a lot of damage … hacking off chunks of equity or creating wounds which hemorrhage cash flow.

But in all cases, for any investor who has, or is building, a lot debt in their portfolio … it’s wise to pay close attention to the condition of credit markets.

Sometimes new tools create opportunity. Sometimes there are hints that something might be breaking down.

In a little more esoteric corner of our news feed, we noticed a potentially concerning headline …

MBS Day Ahead: Another Chance to Watch MBS Suffer
Mortgage News Daily, 8/27/19

For the uninitiated, MBS isn’t referring to the controversial crown prince from Saudi Arabia. They’re talking about Mortgage Backed Securities.

Mortgage-backed securities are the vehicle Wall Street uses to funnel investment dollars into Main Street real estate.

As you may recall, it was Wall Street stuffing toxic sub-prime mortgages into the MBS they sold to institutional investors that triggered the 2008 financial crisis.

So it’s well known that MBS suffering can lead to serious Main Street suffering, especially for aggressive users of mortgages … like real estate investors.

The notable takeaway from the article is this chart which shows mortgage rates have decoupled from 10-year Treasury yields …

image

Source: Mortgage News Daily

According to The Real Estate Guys™ secret decoder ring, this means mortgage rates aren’t falling as far as fast as those of the 10-year U.S. Treasury bond.

This is notable, because it’s generally accepted among mortgage pros that the two are inextricably linked … because it’s always been that way.

But not now. Weird.

Of course, it begs the question … WHY?

According to the article, bond “traders are citing increased supply … with an absence of buyers …”

Now you can see from the chart, this has only been going on for a couple of weeks … so perhaps it’s just a little anomaly and nothing to freak out about.

But just like some war vets have panic attacks when a backfiring engine pops like live ammo, we get a little spooked when the bid on MBS dries up.

After all, it was MBS going no bid was the nuclear bomb which ignited the 2008 credit market collapse.

No one is saying another Great Financial Crisis is imminent … although for the aware and prepared, it could be a HUGE opportunity …

… but softness in MBS demand is a dot on the curve worth noting.

Looking at some other dots …

US home price growth slows for 15th straight month
Yahoo Finance, 8/27/19

“The market for existing-home sales remained soft in June despite some boost from lower mortgage rates as consumers remain wary of high home prices …”

Remember, home prices reflect the value of the collateral for mortgages being packaged up and put into mortgage-backed securities.

When property prices are rising, lenders (the buyers of MBS) see their security go up in the form of greater “protective equity” which insulates them from loss in the case of default.

Also, equity gained from rising property values creates greater incentives for the borrower to make the payments.

Sometimes, in a rising price environment, as lenders compete to make loans, they’re willing to take on more risk at inception …

… because they believe rising property values will increase their security over time.

So whereas a lender might really want 20-25% protective equity (75-80% loan-to-value) … they might be willing to originate a loan at only 10-15% to get the loan.

Then, as prices rise and equity builds, the lender quickly ends up with the protective equity they’re looking for.

But when prices slow or reverse, you’d expect the opposite …

FHA sets limits on cash-out refinancing
The Washington Post, 8/27/19

“Beginning Sept. 1, FHA borrowers will now be limited to cash-out refinancing a maximum of 80 percent of their home value.”

We’ve also heard rumors that Fannie Mae will be limiting access to cash-out loans on multi-family properties.  Stay tuned on that one.

Is this a meltdown? Hardly. But it’s a subtle shift in the wind which bears watching.

Meanwhile, rates are GREAT. Loans are still largely readily available.

And if you’ve got lots of equity and cash flow, now could be a great time to liquefy equity using long term debt while paying careful attention to cash flow.

If there’s a chance prime properties in solid markets will be going on sale in the not-too-distant future, you’ll want to be prepared to go shopping.

Meanwhile, there are still affordable rental markets offering reliable cash flows TODAY.

Repositioning equity from high-priced markets to affordable cash flow markets or product niches can be a great way to make your balance sheet work harder … without having to wait for a recession (or worse) to provide bargains.

After all, sometimes markets don’t crash suddenly or at all. They simply recede slowly for a season before ratcheting back up.  So sitting on the sidelines waiting for “the big one” could take your entire career. Base hits win games, too. Never swinging means you’ll never get on base.

Meanwhile, it’s probably a good idea to pay close attention to credit markets on the macro level and cash flow on the micro level.

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!

Financial Strategies to Reposition Equity for Maximum Profit & Security

Financial Strategies to Reposition Equity for Maximum Profit & Security

 

Don’t leave money sitting around … put it to work and make some money!

Is your equity lazy?  Is it idly sitting on your balance sheet doing nothing to generate cash flow … It needs to go to work for you!

No one understands this better than Billy Brown. 

Billy is an investor and lending solutions guru. His team at Alternative Capital Solutions specializes in Bridge and Permanent lending solutions for real estate portfolios. 

They problem solve so their clients get the highest leverage and ROI possible on every deal … and the first step is optimizing your current portfolio.  Not only will you discover higher ROI’s … 

But you’ll protect your equity from bursting bubbles! 

Sure, you could sell everything and sit on cash … But what’s the return on that? Not good.

Or you could reposition your equity for wealth preservation, privacy, and increased cash flow!

In this exclusive webinar, Billy joins with our very own Russell Gray to show investors like YOU how to do just that. 

Watch this webinar to learn:

✓ The pros and cons of non-recourse lending

✓ Strategies for using equity in existing properties as the down payment for a new acquisition

✓ How to protect your equity from bursting bubble

✓ And more!

Keep your money safe AND put it to work for you! 

Get started by filling out the form below to access Financial Strategies to Reposition Equity for Maximum Profit & Security.

The system is dead. Long live the system!

The ghosts of the Great Financial Crisis of 2008 still linger (as they should) in the minds and hearts of seasoned real estate investors …

… even though it’s been a an equity party for the last 10 years.

Of course, no one wants to hear it might be ending. Then again, every new beginning comes from another beginning’s end.

And as we recently noted, a bend in the road isn’t the end of the road … unless you fail to make the turn.

Right now, it seems like the global financial system is flashing caution lights all over the place.

Consider these recent headlines …

U.S. Treasury bond curve inverts for first time since 2007 in recession warningReuters, 8/14/19

Ex-Fed boss Greenspan says ‘there is no barrier’ to Treasury yields falling below zeroMarketWatch, 8/14/19

China Prepares Its “Nuclear Option” In Trade WarOilPrice.com, 8/13/19

Some real estate investors see these headlines … and yawn. Probably a mistake.

Experienced real estate investors and their mortgage professionals know mortgage rates pivot off the 10-year Treasury yield.

And because mortgages are the most powerful tool in a real estate investor’s toolbox and interest one of the biggest expenses, interest rates matter.

Regular listeners know we like fixed rates now because the risk of rates rising is greater than the benefit of them falling further.

It doesn’t mean they will. There’s a LOT of effort to keep them down.

In fact, just a year ago, 10-year Treasury yields were nearly 3.5 percent and today it’s half that. But at just over 1.5 percent, how much lower can they go?

You’d be surprised.

After all, the venerable Alan Greenspan himself is publicly raising the possibility Treasury yields could fall below zero.

How is that even possible?

Who makes a loan (buy a bond) not just for free (no interest income), but knowing they’ll get paid back LESS than the principal amount?

You might think no one in their right mind would do that, yet …

Negative-Yielding Debt Hits Record $14 Trillion as Fed Cuts
Bloomberg, August 1, 2019

And in Denmark, home-buyers can get a 10-year mortgages at NEGATIVE .5 percent interest

More good news for homeowners: Mortgages below 0% at fixed interest rates

(Unless you’re fluent in Danish, you’ll need to run this one through Google translate)

Home-buyers are being PAID to borrow.

So you can add negative interest rates to the list of items under “this time it’s different” … because this has never happened before.

What does it mean?

We’re still working on figuring that out. but we think it’s a clear sign something is broken … or least seriously different.

One of our favorite Brainiac economic commentators and an unconventional thinker is Keith Weiner at Monetary-Metals.

In a recent essay, Keith argues that based on the Net-Present-Value calculation, when interest rates hit zero, the value of assets become infinite.

We’re not sure we agree, because the limiting factor is the ability to debt service … even if all you’re doing is repaying principal.

But we do agree the result of cheap money is equity growth.

And this creates a HUGE and unique opportunity for income property investors.

That’s because when you get a mortgage to buy an income property, you’re also purchasing the income to pay down the loan.

Of course, this doesn’t mean it’s a risk-free ride.

If you lose your self-control and pay more for the property than the property’s income can service, you’ve transitioned from investor to speculator.

Now you’re banking on the equity growth in the property to compensate you for the negative cash flow … a subsidy that must come from someplace else.

This structure is most likely to occur with 1-4 unit residential properties because those lenders will let you supplement the property’s income with your own.

A word to the wise …

Unless you have a very specific, high probability plan to raise rents post-purchase …

… be VERY careful about buying a negative cash-flow property in an uber-low interest rate environment.

It’s doubtful lower rates will come along to reduce your interest expense and boost cash flow.

Of course, most commercial lenders won’t make a negative cash-flow loan, so if you’re playing at the pro level, you’re less likely to step on that landmine.

But the aforementioned headlines have some even MORE CONCERNING things to consider

First, yield-curve inversion has preceded the last five recessions.

Fortunately, those recessions don’t usually show up for about year and a half.

So if you pay attention today, there’s no reason to be blind-sided in two years. Hopefully, you’ve got time to prepare. But the clock is ticking.

Recessions mean softer employment and less Main Street prosperity.

Remember, when things are tight, people and businesses tend to move where the cost of living and tax burdens are lower.

Keep this in mind when picking markets, property types, and price points.

It’s always good to have some people above you on the food chain, who will move down and bolster demand in your niche during tough times.

Of course, that’s just your run-of-the-mill market-cycle awareness. Nonetheless, it’s always good to remember the basics.

But what if the system breaks down? What if the “this time it’s different” items tell a different story?

We’ve been watching this for quite a while.

We first spoke about it at the New Orleans Investment Conference six years ago.

We got into more detail on it at our Future of Money and Wealth conference. Of course, we’ve been writing about it regularly.

Now we’re talking about it even more because mainstream financial media is finally taking notice. Maybe we’re not crazy.

So even though we just wrote about it last week, when you hear about “nuclear options” in a trade war between the two biggest economies, would you rather hear the warnings multiple times … or risk missing it altogether?

And what if the Fed is really lowering interest rates to preemptively buffer the impact of China pushing the nuclear button? Will it be enough?

There’s a lot of hype about “the best economy ever” … and perhaps statistically it’s true.

But if interest rates spike suddenly, all that “best ever” talk goes away, along with trillions in equity … and it’s a whole new ball game.

Our pal Peter Schiff thinks the Fed will create trillions of dollars in a desperate attempt to reflate asset prices and keep rates down.

Gold is suggesting foreign central banks are preparing for trouble.

Those aware and prepared will make fortunes. Those unaware and unprepared will likely take a hit … or worse.

It’s not the circumstances that are good or bad. It’s how well you’re prepared and how quickly you respond when things start moving quickly.

The warning lights are flashing. Better to be prepared and not have a problem, than to have a problem and not be prepared.

Now is the time to expand your education, understanding, and network … and fortify your portfolio, just in case.

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!

Jerome Powell has spoken … now what?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You might agree or disagree.

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

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

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

So here’s some food for thought …

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

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

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

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

Equity is wonderful, but fickle and unproductive.

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

Read that again.

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

But wait! There’s more …

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

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

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

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

This is where real estate REALLY shines.

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

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

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

That’s why we say, “Equity Happens!”

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

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

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

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

Until next time … good investing!


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!

How to Buy Property and Use Leverage, In Belize!

How to Buy Property and Use Leverage, In Belize!

 

You CAN use leverage to buy properties in beautiful Belize … you just have to think creatively!

Buying property in Belize sounds like an investor’s paradise … but many people struggle to pull the trigger.

Some don’t have the cash. Some want to use other people’s money. Others are simply afraid to invest in a land they don’t understand.

This special report highlights insider tips from David Kafka … Belize investor and Re/Max broker.

Working with investors every day in Belize, David specializes in creative options for using leverage to buy property …

Discover:

✓ Options for buying in Belize when low-cost financing isn’t always available

✓ Special considerations … like fees … for each financing route

✓ How to put yourself in position for massive equity growth

✓ And more!

Get creative, use leverage, and buy property in this piece of paradise!


Start by filling out the form below to access How to Buy Property and Use Leverage, In Belize!

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

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

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

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

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

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

Listen

 


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How do I find a property management company?

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

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

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

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

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

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

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

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

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

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

How do Section 8 rentals work?

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

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

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

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

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

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

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

Should I invest now, or later?

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

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

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

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

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

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

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

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

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

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

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

How do I create residual income with little savings?

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

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

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

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

Some options …

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

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

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

Can you recommend turnkey management companies?

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

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

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

But we do know lots of other great folks.

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

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

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

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

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

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

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

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

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

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


More From The Real Estate Guys™…

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!

Precious Metals for Real Estate Investors

In our latest episode, we’re chasing shiny objects. Gold, silver, palladium, and platinum, to be specific.

Now, you might be wondering how precious metals investing is relevant to you as a real estate investor. But guess what? When people want somewhere to hide equity, and don’t want to put money into stocks and bonds, they turn to gold.

Precious metals play an essential role in the worldwide economic sea. They act as a hedge against falling currency and a way to diversify.

So, we invited a special guest to explain how the precious metals business works … and give you the information you need to decide whether gold and silver might be a great investment for YOU.

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

  • Your golden host, Robert Helms
  • His silvering co-host, financial strategist Russell Gray
  • Precious metals expert Dana Samuelson

Listen

 


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Broadcasting since 1997 with over 300 episodes on iTunes!

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Basics of precious metals investing

We met with Dana Samuelson at the 44th annual New Orleans Investment Conference. It’s our 6th year attending, but Dana’s been around since 1983, when he started working in the precious metals business for Jim Blanchard.

Dana owns a national mail-order business, through which he buys and sells modern bullion coins. He is also an expert in classic U.S. and European gold coins.

We asked him to explain the goal of precious metal investments.

Gold is not necessarily an investment, Dana says. But, “We live in a world of enormous debt, so precious metals are a good insurance policy,” he says.

Dana says investing 5 to 10 percent of your net worth in precious metals offers a way to keep your equity solid, even when the value of paper assets is fluctuating.

He calls gold a “safe, proven, real money investment.”

There are different ways to invest … you can collect precious metals bit by bit over time, or you can pick up larger amounts during periodic price dips.

Gold and silver are slightly different investments. For one thing, gold is more portable than silver. A handful of gold equals a wheelbarrow of silver.

Another difference … people tend to put their equity in gold over silver when the stock market and the dollar aren’t doing well.

The gold-silver price ratio can be used to determine the relative value of gold to silver. To find the ratio, simply divide the gold price by the silver price.

Traditionally, this ratio has been 20:1. Today, it usually hits somewhere between 60:1 and 80:1. Right now, the ratio is on the high end, about 85:1, which means silver is cheap relative to gold.

It’s a good number to look at when you’re trying to figure out what … and when … to buy.

Different methods for precious metals investing

Gold and silver come in many forms.

There are gold bars, which are now mainly produced by mints around the world and have to meet purity and weight integrity standards.

There are also smaller American Gold Eagles and Canadian Gold Maple Leafs, modern bullion coins that are sold by the ounce, half-ounce, quarter-ounce, and eighth-ounce.

Since these are smaller than gold bars, you don’t have to report to the government when you buy them, typically.

Dana calls these bullion coins “bread and butter” products. They’re reliable, widely available, competitively priced, and have long-term value and viability.

You can also buy generic 1-ounce rounds from private mints, usually silver.

Many people like to have a viable alternative to paper money, Dana says. Aside from widely available bullion coins, investors can also go the numismatic route.

U.S. coins minted before 1964 are 95% silver by weight. And gold coins minted before 1933, when the U.S. went off the gold standard, are increasingly valuable.

The coin-collecting route is great because of basic supply-demand principles … as time goes by, fewer older coins are available, so not only are these older coins made from precious metals, but they also hold an inherently higher value because they’re increasingly scarce.

How to get started with precious metals

Gold has been a form of money literally since the concept of money first originated. It’s a currency of last resort because it’s one of the few forms of currency that doesn’t need a government guarantee to back it.

Gold and silver are the most popular precious metals. We asked Dana about the other two sister precious metals, platinum and palladium.

These are much, much scarcer than gold, Dana says, but they’re valuable because they’re scarce … and because they’re necessary. Both metals are used in catalytic converters for automobiles.

How can someone new to precious metals get started? “Find a reputable, long-term dealer,” Dana says.

He offers his precious metal trading business as an example. They follow principles of transparent pricing, guarantees for sold items, and guaranteed buy-backs for anything they sell.

And perhaps consider staying away from eBay.

“I can tell a counterfeit a mile away,” Dana says. eBay can be sketchy … and it’s harder for amateurs to tell real from fake. To be extra safe, stick with established, hard-to-counterfeit products like bullion coins.

Investors also need to think about storage. “Gold is pretty compact. It doesn’t take up a ton of space,” Dana notes. Silver, on the other hand, is bulkier.

Some banks are writing coins out of safe-deposit box charters. So you have a few options for storage …

  • Find a bank that offers storage options for coins and bullion
  • Get a secure home safe
  • Go with a storage company … new storage options around the country are a great option for those dealing with a high volume of precious metals

Also consider that there may be reporting requirements when you move money in and out of the country, due to the Patriot Act.

“The most important thing is to think about what you’re trying to do and find a dealer to help you walk through your options” for purchasing, storage, and selling the asset in the future, Dana says.

“Use common sense.” After all, Dana points out, “You’re your own best doctor.”

A final note for those still dubious about precious metals.

We know it might not seem immediately logical to take your equity … and then just put it away in gold and let it sit. There’s no cashflow, there are no tax benefits … so why do it?

A few big reasons. Putting your equity in precious metals allows you to …

  • Invest outside of the traditional banking system
  • Get away from inherent risk and keep your equity stable
  • Diversify your equity in terms of currency types
  • Parks your equity until you need it in a low-risk currency form

To learn more, check out Dana’s report on investing in precious metals.

Now, go out and make some equity happen!


More From The Real Estate Guys™…

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The mid-term morning after …

If you’re an American, unless you’ve been in a coma or living under a rock, you know the United States just had one of the most energetic mid-term elections in quite some time.

The day after, both sides are disappointed … and both sides are claiming victory.

One of the advantages of being older is we’ve seen this movie before.

In our younger days, when elections didn’t go our way, we thought it was the end of the world.  Today, not so much.

It doesn’t mean we don’t care.  We do.  And certainly, politicians and their policies have a direct impact on our Main Street investing.

But it’s in times like these we’re reminded of the beautiful, boring stability of real estate.

Because while all the post-election drama and speculation plays out, people still get up and go to work and pay their rent.

And though the Trump-train just got slowed … like Barack Obama before him, big chunks of his agenda got pushed through early … and are likely here to stay for a while.

In other words, it doesn’t look like Obamacare or the Trump tax reform will be repealed any time soon.

More importantly, investors of all stripes … paper and real … now know what the lay of the land is for the next two years.

Early indications (based on the all-green dashboard of Wall Street) reveal there’s cash on the sidelines waiting to see what happened … and now that gridlock is the answer… money is pouring into everything.

We know that sounds counter-intuitive.  But while political activists push change … too much change too fast makes money nervous.

Investors and entrepreneurs need to make decisions about long-term risk and reward.  And when the world is changing too fast, those decisions are harder to make.

Way back in the lead-up to the 2010 mid-terms, we penned this piece about a concept we call “healthy tension.”  Just change the team colors and it’s just as applicable today as it was back then.

The point is that money and markets like gridlock.

At this point, from an investing perspective, it doesn’t really matter if any of us like or dislike what happened … politically.  It’s done.

Now we all just need to decide what it means to us and how to move forward … because life goes on.

So bringing it all back to Main Street …

We’re guessing all the great Trump-tax reform benefits for real estate investors… from bonus depreciation to Opportunity Zones … are here to stay.

And as we said just a week ago …  there’s probably a lot more money headed into real estate.  Nothing about this election appears to change that.

So gridlock inside the beltway means stability on Main Street.

Sure, it might be a little boring.  But real estate investors are used to boring.  And when it comes to long-term wealth building … boring is good.

Until next time … good investing!

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There’s MORE money headed into real estate …

In the swirling sea of capital that makes up the global economic ocean we all invest in …

… big fund managers are pay close attention to a variety of factors for clues about the ebb, flow, and over-flow of people, business, and money.

Right now … it seems like a BIG wave of money could be headed into real estate.

Of course, compared to stocks, these things aren’t simple to see and track.  And they’re even harder to act on.

Stocks are easy … if interest rates fall and money floods into stocks, you just buy an index fund and enjoy the ride.

Just remember … the dark side of easy and liquid is crowded and volatile.

So unless you’re a seasoned trader, trying to front run the crowd to both an entrance and exit in stocks can be a dangerous game.

But real estate is slow.  It’s inefficient.  It moves slowly.  There’s drama.

And yet, the BEAUTY of real estate is its messiness.  Embrace it.

So here’s why we think more money could be flowing into real estate soon …

Opportunity Zones

We’ll be talking about this more in the future, but the short of it is the new tax code creates HUGE incentives for current profits from ANYTHING (including stocks) to make its way into pre-identified geographic zones.

According to The Wall Street Journal,

“U.S. is aiming to attract $100 billion in development with ‘opportunity zones’…”

“could be ‘the biggest thing to hit the real estate world in perhaps the past 30 or even more years’ …”

 Private Equity Funds

 Another Wall Street Journal article says …

“Real estate debt funds amass record war chest

“Property funds have $57 billion to invest …”

Pension Funds

This Wall Street Journal article indicates BIG pension funds are getting into the game too …

“Big investors like the California teachers pension are backing real-estate debt funds …”

One reason savvy investors watch economic waves is to see a swell building … so they can paddle into position to catch a ride.  It’s like financial surfing.

Time will tell where all these funds will land, but it’s a safe bet it won’t be in smaller properties.  MAYBE some will end up in residential mortgages, but don’t count on it.

So what’s the play for a Mom and Pop Main Street investor?

Start by watching the flow …

We’ll be watching the markets and product types the money goes into.

Then we’ll be watching for the ripple effect … because that’s probably where the Main Street opportunity will be.

For example, if money pours into a particular geography, it’s going to create a surge of economic activity … especially if the funds are primarily used for construction.

But we’d be cautious about making long-term investments in any place temporarily benefiting from a short-term surge … so it’s best to look past the immediate impact.

Think about the long-term impact … which is a factor of WHAT is being built.

Fortunately, major projects take many months to complete … so they’re easy to see coming IF you’re paying attention.

We like to plug into the local chamber of commerce to track who’s coming and going in a market place … and why.  The local Business Journal is also a useful news source to monitor.

The kinds of development that excite us include factories, office buildings, industrial parks, and distribution centers.  Those mean local jobs.

We’re less excited about shopping centers, entertainment centers, and even residential and medical projects.

Because even though they mean jobs too … they don’t DRIVE the economy.  They feed off it.

Of course, we’re not saying those things are bad … but they should reflect current and projected growth … not be expected to drive it.

Hopefully, developers are doing solid market research and are building because the local population and prosperity can absorb the new product.

Then again, when money is aggressively pumped in, sometimes developers get greedy … and areas get OVER-built.

So don’t just follow the big money.   Be sure you understand the market.

Watch for the over-flow too …

Sometimes money moving into a market creates prosperity only for some … and hardship for others.

Silicon Valley is a CLASSIC example.

As billions flood into the market through inflated stock prices, many people get pushed off the back of the affordability bus.

But even though it’s hard for those folks, they end up driven into adjacent markets which are indirectly pushed up.  It’s overflow.

That’s when you see headlines like these …

Boise and Reno Capitalize on the California Real Estate Exodus –Bloomberg, 10/23/18

“Sky-high housing prices in the Golden State bring an echo boom—and new neighbors—to other Western states.”

Sure, in Silicon Valley’s case, the flow of money is cheap capital pouring into the stock market and enriching tech companies … and their employees.

But it doesn’t matter which door the money comes in when it flows into a market.  That’s why it’s best to look at ALL the flows into a market.

And when the flow of capital drives up investment property prices in a market (depressing cap rates), even investors will overflow into secondary markets in search of better yields.

The lesson here is to watch the ebb, flow, and overflows as capital pours into both the debt and equity side of real estate through Opportunity Zones, private equity funds, and increasing pension fund allocations.

You never quite know how the market will react, but you can be sure it will.

The key is to see the swell rising early so you can start paddling into position to catch the wave.

We do it by looking for clues in the news, producing and attending conferences, and getting into great conversations with the RIGHT people.

We encourage YOU to do 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!

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