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!


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Is THIS the next crisis?

We’re just back from yet another EPIC Investor Summit at Sea™.  If you missed it, be sure to get on the advance notice list for 2020.

It’s hard to describe how transforming and powerful the Summit experience is.  So we won’t.

Instead, today’s focus is on the flip side of the Fed’s flop on interest rates … in context of the #1 thing Robert Kiyosaki told us he’s MOST concerned about.

We recently commented about the Federal Reserve’s abrupt reversal on plans to raise rates and tighten the supply of money (actually, credit … but that’s a whole other discussion).

The short of it is … there’s more air heading into the economic jump house. 

Based on the mostly green lights flashing in Wall Street casinos since then, it looks like the paper traders agree.  Let the good times roll.

Real estate investors care because the flow of money in and out of bonds is what determines interest rates.

When money piles into bonds, it drives interest rates LOWER.

Not surprisingly, as we speak … the 10-year Treasury is yielding about 2.3% … compared to nearly 3.3% less than six months ago.

While a 1% rate change may not seem like much, it’s a 43% decrease in interest expense or income (depending on whether you’re borrower or lender).

So as a borrower, your interest expense is 43% lower.  Obviously, with record government debt and deficits, Uncle Sam needs to keep rates down.

But as a lender (bond investor) you’re also earning 43% less.  And yet, lenders (bond buyers) are lining up to purchase.

That tells us they probably expect rates to fall further and are speculating on the bond price.

But whatever the reason, they’re buying, so bonds are up and yields are down.

As you may already know, lower Treasury yields mean lower mortgage rates.  So this headline was quite predictable …

Mortgage Rates are in a Free Fall with No End in SightWashington Post, 3/21/19

Falling mortgage rates are bullish for real estate values because the same paycheck or net operating income will control a bigger mortgage.

This purchasing power allows buyers to bid up prices … IF they are confident in their incomes, and IF their incomes aren’t being directed towards rising living expenses.

So lower interest rates don’t automatically mean a boom in real estate equity.  But they help.  We’ll probably have more to say about this in the future.

For now, let’s take a look at the other side of falling rates …  the impact on savers and especially pension funds.

Remember, if you’re investing for yield, your income just tanked 43% in only six months.  Unusually low interest rates creates problems for fund managers.

During the Summit, Robert Kiyosaki revealed he’s VERY concerned about the global pension problem.

Low interest rates are only one part of the problem.  A much bigger part is the demographics and faulty model underneath the pension concept.

The net result is there’s a growing disparity between pension assets and liabilities.  And it’s not a good one.

Like Social Security, both public and private pensions worldwide are on a collision course with insolvency … led by the two largest economies, the United States and China.

This problem’s been brewing for a long time.  But it’s a political hot potato and no one has a great answer.  So the can keeps getting kicked.

But we’re rapidly approaching the end of the road.  And this is what has Kiyosaki concerned.

Yet few investors are paying attention … probably because it all seems far away and unrelated to their personal portfolio.

However, the pension problem has the potential to affect everyone everywhere.

The reasons are many, but the short of it is the problem is HUGE and affects millions of people.  The pressure for politicians to do SOMETHING is equally huge.

Peter Schiff says the odds of them doing the right thing are very small.

Our big-brained pals say it probably means 2008-like mega money printing and bailouts … except even BIGGER.

So what does all this mean to Main Street real estate investors?

Keep in mind that some of the biggest pension problems are states and local municipalities.  California and Illinois come to mind.

Unlike private corporations, public pensions don’t have a federal guarantee.

But even if they did, Uncle Sam’s Pension Benefit Guaranty Corporation (PBGC) is in trouble too.

According to this government report, the PGBC will be broke in 2026

“ … the risk of insolvency rises rapidly … over … 99 percent by 2026.” – Page 268

Sure, the Fed can simply print all the money needed to save the PGBC … and Social Security … and more … but at the risk of ruining faith in the dollar.

As we detailed in the Future of Money and Wealth, China’s been systematically moving into position to offer the world an alternative to the U.S. dollar.

Will they succeed?  No one knows, but it’s yet another story we’re paying close attention to.

Meanwhile, unlike Uncle Sam, states and municipalities can’t just monetize their debts away with a little help from the Fed.

Of course, we’ll bet if the stuff hits the fan, the Fed will “courageously” attempt to paper over it … just like they did with Fannie Mae and Freddie Mac in 2008.

But many observers contend the Fed’s recent inability to “normalize” either rates or their balance sheet means they might not have the horsepower.

In other words, it may take MORE than just the full faith and credit of the United States to persuade the world the dollar is still king.

Oil and gold might be more convincing.  Perhaps this explains some of Uncle Sam’s recent foreign policy moves?

Of course, that’s conjecture FAR above our pay grade.

But until the pension problem becomes a full-blown crisis and federal policy makers attempt to ride in on their white horses …

cash-strapped states and municipalities are on their own … and likely to do desperate things in their attempts to stay solvent.

Some will adopt policies designed to attract new business and tax revenue.

But we’re guessing most will push the burden onto consumers, businesses, and property owners.  That seems to be the way politicians roll.

So when you’re picking states and cities to make long-term investments in, pay attention to the fiscal health of the local governments.

And if your tenants are counting on private pension benefits, they may not be aware of 2014 legislation allowing a reduction of those “guaranteed” benefits.

If YOU have any direct interest in private pensions, you should read this page.

You’ll discover that plan participants can vote against a reduction. But even if most who vote reject it … if not enough people vote, it can pass anyway.

For retired carpenters in Southwest Ohio, benefits drop on April 1, 2019 … along with their ability to pay you rent.

The bad news is the pension problem is a slow-motion train wreck.  It’s rolling over small groups of people a little at a time … but it’s building momentum.

The good news is it’s slow-motion right now, so  there’s time to watch, learn, and react.

But Kiyosaki says it’s a big deal that’s probably going to get a lot bigger. 

From a real estate investor’s perspective, some markets will lose, and others will gain.

Choose carefully.

Until next time … good investing!


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The role of housing in economic growth …

Some people think housing is a driver of economic growth.  But that doesn’t make sense to us.

Sure, a robust housing market creates a lot of jobs from construction all the way back through the supply chain.

But housing itself is a by-product of prosperity, not a creator of it.  After all, who buys a house first … and then gets a job?  It’s the other way around.

So we think housing is not a leading indicator, but a trailing indicator.

With that said, in addition to reflecting economic prosperity, housing definitely plays a role in driving economic activity.  But not in the way most people think.

So let’s take a look …

Economic activity isn’t about asset values.  It’s about velocity … transactions … how fast money is flowing through society.  That’s why they call it currency.

But it isn’t really money that’s flowing.  It’s credit. It’s a subtle, but important difference because you can’t create money from nothing.  Only credit.

If you’re not familiar with the VERY important difference between money and credit, you should strongly consider investing in the Future of Money and Wealth video series …

… because G. Edward Griffin (author of The Creature from Jekyll Island) does an amazing job of explaining it all in an easy to understand way.

The fundamental principle to understand is that a loan is an asset to a bank.

When a bank makes a loan, they effectively create “money” from nothing by issuing credit.

Obviously, the biggest loans in most people’s lives are mortgages on houses.  So that means banks are creating LOTS of “money” by extending credit.

Meanwhile, governments issue bonds, which are simply humungous, glorified IOUs … like a mortgage.  Except the collateral isn’t a house … it’s the citizens’ earnings.

And when the mother of all banks, the Federal Reserve, buys government bonds, they are effectively creating “money” by issuing credit.

Now when all this “money” gets into the financial system it pushes asset prices up.  But not evenly.  And no one know for sure where it will all end up.

If lots of the new “money” goes into bonds, bond prices go UP and interest rates go DOWN.  There was a LOT of that going on over the last decade.

Similarly, if it goes into stocks, then stock prices go up.  There was a lot of that over the last decade also.

One big driver of rising stock prices has been corporations pigging out on cheap debt and then using the proceeds to buy back their own stock.

But remember, this isn’t economic activity … it’s just inflation of asset prices.  So it’s a mistake to think a rising stock prices means a booming economy.

In fact, “stagflation” occurs when prices go up, but economic activity is slow.

And just last week, former Fed chair Alan Greenspan said he sees stagflation coming to an economy near you.

At the same time, fellow former chair Janet Yellen is warning of excessive corporate debt.  We were just talking about that in our last commentary.

Funny.  Neither Greenspan or Yellen has said anything about the Fed going insolvent.  Pay no attention to that man behind the curtain.

Meanwhile, Fannie Mae’s economics team recently announced their prediction of slowing economic activity in 2019.

And just so you don’t think they’re merely jumping on the bandwagon, Fannie Mae Chief Economist Doug Duncan predicted this in his Future of Money and Wealth presentation on our last Investor Summit at Sea™.

All this to say, there are some notable experts saying the economy could be in for some headwinds in 2019.

So back to housing and its role in goosing economic activity …

Anyone paying attention knows housing prices have bounced back nicely from their 2008 debacle.

And almost everyone who bought early in this last run-up has built up gobs of equity.  Good job.

Unsurprisingly, consumer confidencecash-out refinances, and consumer spending all surged in 2018 … as households became equity rich … and then tapped that equity to SPEND.

In other words, credit flowed through housing to consumer spending which drove a lot of economic activity.

So it’s not housing construction that’s a leading indicator … it’s rising prices and equity.

But as housing price appreciation slows … it’s no surprise consumer confidence is dipping too.

Remember, consumers are usually the last ones to realize what’s coming.

So again, it’s the flow of credit into home prices and equity … and then the flow of credit through home equity to consumers … and then from consumers into the economy … that be a leading indicator of what’s coming down the line.

There’s one more nuance to consider …

As we’ve been pointing out for the last few months, there are LOTS of reasons to think more money is heading into real estate.

A combination of the best tax breaksOpportunity Zones, and nervous stock investors fleeing Wall Street in record numbers to seek a safer haven in housing … all could have real estate setting up for a nice run.

But be cautious.

Because if Alan Greenspan is right about stagflation … rising prices without rising real wages and economic activity …

… then real estate PRICES could rise from big money seeking safety … while the rents you use to control the property could be under pressure.

Consider RentCafe’s recent year end report, which found the most popular things renters searched for in 2018 were “cheap” and “studio.”

So as we’ve been suggesting for quite some time …

… it’s probably safer to focus on affordable markets and product types… using long-term fixed financing … and focusing on solid cash-flows to position your portfolio to ride out a slow-down.

We’re not saying there will be slow down.  But others are.

And it’s better to be prepared and not have a slow-down, than to have a slow-down and not be prepared.

And remember … asset prices and economic activity are NOT one and the same.

Until next time … good investing!


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Seven lessons for better investing …

With less than 7 weeks remaining in 2018, we’re taking a short break from our obsessive-compulsive perusal of the financial news.

Because with an exciting New Year about to begin … full of hope, challenges, and opportunities … it’s a great time to focus on some important fundamentals.

Lesson# 1:  Invest in yourself first and frequently

Think of the amount of money you put into fixing up a property in the hopes of generating a few thousand dollars of profit or cash flow.

How much MORE important are YOUR education, skills, and network over the rest of your career?

For a fraction of what you’ll spend sprucing up just a single property, you can increase your sales skills, gain more strategic clarity, expand your economic education, and grow your professional network.

Any ONE of those things can pay you back 10x or more in just a few years.  Plus, investing in your education and networks sets you up for …

Lesson #2:  Focus on relationships, not transactions

Sure, we understand you need to do deals … to produce profits … so you can pay the bills and keep investing.  But transactions are really just a by-product of great relationships.

When you put the transaction over the relationship, you risk killing the goose that lays the golden eggs.

And remember, every person you know knows MANY more people you don’t.

So even if the person in front of you isn’t ready to do a deal today, someone they know might be.

This is where YOUR education and network come into play …

When you know things other people don’t, but need to … or when you know people other people don’t, but need to …

… YOU have something of great value to enhance a relationship or work through one contact to reach another.

Most people won’t give you a referral if they think you want to sell their referral something.

But they’ll happily connect you if they think you will HELP their referral.  That’s based on trust, which is based on the relationship.

It sounds so easy … and it is.  But for some reason, most people focus on the small value of the transaction and miss the HUGE value of the relationship.

Lesson #3:  Emphasize mission and values

The old adage says, “People don’t care how much you know, until they know how much you care.”

It’s true.  But it goes further …

People do business with people and brands they trust.  And when you focus on mission and values, and filter all you say and do through them …

… over time, you’ll create a trustworthy reputation.

Of course, a good, trustworthy reputation will attract more people into your life … and that means more relationships, and ultimately, more deals.

Lesson #4:  Build a business and portfolio that works for YOU … and not vice-versa

We’re old enough to remember when Michael Gerber’s now classic title, The E-Myth, was the hot new business book.

But the timeless lessons are as applicable today as ever.

Too many people … employees, entrepreneurs, and investors … do the “two-step.”

They set out to do whatever they can find to make money based on the belief that if they can just make enough money, THEN they can go do what they REALLY want.

The problem is when you don’t love what you do, either you let off the gas and never really succeed …

… or worse, you lose yourself in service to a business, portfolio and lifestyle you don’t really enjoy.

And then you just hold your breath until the day you can sell it or retire on your investments.

Better to ask yourself EARLY what’s really important to you … how you want to live … what you love to do … and then build a business and/or portfolio around THAT.

It’s a harder problem to solve, but you’ll LOVE the answer when you find it.

Lesson #5:  Develop and maintain a clear vision

We all run around with pictures in our mind. How we see the world … how we see ourselves … what we’re working to accomplish.

The challenge for many is the picture is fuzzy.

It’s like driving in the fog.  You have a sense of direction … but aren’t exactly sure how to get there.

You’re feeling your way … scared to go too fast and miss a turn or fall into a ditch.

Yet some people are taking bold action and moving aggressively through life.

What’s the difference?

Clarity.

Bold action takers can “see” exactly where they’re going, what they’re building, and WHY … and that vision inspires and emboldens them to move towards the goals with enthusiasm and confidence.

We say, “When you have clarity of vision, strategy and tactics become evident.”

So when you’re not sure what to do, focus on your vision.  Just seeing the end from the beginning is often enough to tell you what to do next.

Lesson #6:  Always see the downside

Really?  Doesn’t focusing on the negative create paralysis?

Only for amateurs.  Pros are more afraid of what they DON’T see than what they do … because you can’t avoid or manage risks you aren’t aware of.

Billionaire real estate investor Sam Zell says everyone sees the upside.  That’s what they look for and what motivates them to go for it.

But Zell says his success comes from being able to see the DOWNSIDE too …  and then making plans to mitigate it … even if it means walking away.

Pessimists ONLY see the downside and can’t act.  Optimists only see the upside and hope for the best.

We’re pretty sure hope is not an investment strategy. Be a realist and get good at seeing and managing risk.

Lesson #7:  Always pay attention to cash and cash flow

Profit and net worth are important.   Cash and cash flow are essential.

A business mentor of ours once taught us that cash is like oxygen, while revenue is like water, and profit is like food.

You can survive for a long time without profit … if you have revenue and cash.

You can survive for a little while without revenue … if you have cash.

But run out of cash … and you’ll be dead very soon.

Pre-politician Donald Trump once told us it’s always good to have cash in the downtimes. We say, “Cash Flow controls and Cash Reserves preserve.”

So have some liquidity at all times. Write off the lost opportunity cost on the cash as an insurance premium.

And do NOT count on credit for liquidity. We did that once … and it didn’t end well.  Lenders tend to cut off credit when you need it the most.

Bonus Lesson:  Use firewalls to avoid portfolio contagion

Let’s face it.  Some investments are more risky than others.

But if you don’t have firewalls, then just ONE risky investment can implode your entire portfolio.

You might have a solidly built, cash-flowing portfolio of properties, and a high net worth with good liquidity, and hedges against inflation and deflation.

But just ONE lawsuit, or personal loan guarantee on just ONE risky deal, or pulling money out of performing property or business to feed a loser …

… and EVERYTHING goes … UNLESS you use legal structures, mental discipline, and emotional control to isolate risk.

It’s a bigger topic than we have time for here, but we address it in ourIntroduction to Strategic Real Asset Investing webinar.

You can get the webinar as a free bonus when you order the Future of Money and Wealth video series … which is a great primer on several risks ALL investors should be paying attention to right now.

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.


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Ask The Guys – Finding Great Agents, Vetting Syndications, Starting Small

We’re back … with an all-new episode of Ask The Guys!

In this series, we answer YOUR questions about all things real estate.

Before you click play, please remember that we are not tax advisors or legal professionals. We offer ideas, not advice … please run any investment ideas past a professional before putting them into action.

Now, listen in to The Real Estate Guys™ show! You’ll hear from:

  • Your pondering host, Robert Helms
  • His pesky co-host, Russell Gray
  • Bob Helms, the godfather of real estate

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Syndication, securities, and accreditation

Susan, from New Hope, Pennsylvania, wants to know what real estate investment opportunities are open to non-accredited investors.

The short answer is A LOT. For the long answer, let’s start with a definition.

An accredited investor is someone who has a net worth of over $1 million excluding their primary residence OR someone who has had an annual income of $200,000 for at least two years ($300,000 for married couples).

These requirements allow the SEC to regulate the kinds of investors who get involved in securities investments.

They are a way to verify you’ve reached adequate financial aptitude and won’t run aground by investing in a big deal.

If you’re not at that level yet, that’s perfectly all right!

You have multiple options:

  1. Employ a tenant-in-common ownership to invest in a property as a group. Make sure you structure the deal so it stays within SEC regulations.
  2. Make friends with a syndicator. Deal makers can work with up to 35 non-accredited investors through the 506B exemption.
  3. Work with an accredited partner to complete your first few bigger deals.
  4. Invest in a publicly traded security in real estate.
  5. Use a crowdfunding site to invest limited funds into a larger project.
  6. Make a private loan to other investors.

HOWEVER … keep in mind that the average beginning investor is NOT accredited. Condos, single-family homes, and other smaller properties are ALL available to non-accredited investors.

In fact, the vast majority of real estate investment opportunities are available to non-accredited investors.

The fundamental piece of the equation is education. You have to know WHAT you’re buying and WHO you’re doing business with for every deal before you can move confidently into a deal that risks large amounts of your equity.

Michael, from Richardson, Texas, asks a related question … when does a deal become syndication?

Syndication simply means putting together money from a group of individuals.

Things start to get a little tricky when some of those individuals are passive investors, however … because then you have a security and have to make sure investors are accredited, like we talked about above.

When you’re working with a group of people to do a deal, make sure you hire a real estate or securities attorney to properly document your deal. We DO NOT recommend the do-it-yourself method here.

Repair first … or sell as-is?

Betty, from Littleton, Colorado, is wondering whether her in-laws should fix the broken foundation of their home before selling or sell it as-is.

Bob reminds us that as-is means as disclosed … it’s important to tell a potential buyer EVERYTHING that could be an issue, including any reports you’ve commissioned.

The best solution in this case might be to get a report on the damage to the foundation … and then decide whether to sell or fix.

There’s no automatic best answer here … in a strong market, you can probably get away with as-is, while in a buyer’s market, you may have to do more work.

To figure out the best option, sit down with your real estate professional.

Investing to learn

We got a question from Daniel, in Garden Grove, California. He is wondering how to invest in larger deals as a learning endeavor. He wants to expand beyond single-family investments. Like our first questioner, he is not accredited.

Let’s start with what you need to do to FIND deals as a passive investor.

Passive investors bet on both the jockey and the horse. In other words, you need to know the details of the deal … AND know who you’re doing business with.

That’s why networking events are so important. And the TYPE of events you go to are important too … we bet you’ll find more dedicated, passionate investors at professional development events than at events where syndicators get together to show off their deals.

If you want to learn, put yourself out there, get to know people, and pick out a few niches you find interesting. Then put a smaller amount of money into multiple deals … instead of putting all your eggs in one basket.

And make sure you’re working with a syndicator who is invested in your educational process. You want a syndicator who will let you be a fly on the wall.

Passive investment options for residential assisted living

Bill, in Northbrook, Illinois, asks whether it’s possible to invest passively in residential assisted living or AirBnb investment options.

If you’re interested in residential assisted living, we recommend looking into Gene Guarino. His educational events have taught many investors how to step into the assisted living field … and many of those investors become syndicators willing to work with investors like Bill.

AirBnb, on the other hand, is something we’re not 100 percent sure about yet. There’s some legal resistance and the whole industry can be a bit sketchy.

We just don’t know enough about AirBnb investing to recommend this option … and we haven’t yet found an expert who’s really crushing it in that field. For now, this option is just a wait-and-see niche for us.

Book releases and Belize trips

We answer three quick questions from curious listeners …

Ellie in Seattle wonders where she can find a copy of Bob Helm’s new book, Be The One Percent.

The book is meant to teach realtors about how to serve investors … and become investors themselves.

To get your hands on a copy, listen in to the show for special access.

John, from San Antonio, Texas, wants to know whether we hold a convention in Belize. While we don’t hold a convention … we do conduct Belize discovery trips three to four times a year!

These trips are a great way to get an in-depth perspective on the Belize market … and even if you’re not ultimately interested in offshore investing, you’ll learn a heck of a lot about market analysis.

Holly, from Pingrove, Illinois, wonders whether we have any Belize field trips scheduled in the near future. To check out upcoming field trip dates, check out the event page.

Finding the truth about private lending platforms

We were excited to hear from a former participant in our mentoring program. Domingo, who’s located in San Anselmo, California, wants to know what we think of a particular private lending platform.

He also wants to know what we think about his general economic theory … that there’s a strong possibility the market will come down, and that real estate will continue to be a viable investment option during a crash, even if liquidity dries up.

About the lending platform, we can’t really comment. There are several peer-to-peer lending platforms that specialize in crowdfunding loans, and these can be a great way to diversify loan types.

But lending is lending … so no matter the loan type, you have to understand the basic underwriting … what you get if a foreclosure happens.

Don’t get lost in the weeds. Instead, understand the basics … what are you giving, and what do you get? And if things go wrong, what happens?

As to the economic theory, we think Domingo is on the right track. ALL of our listeners should be thinking about how to position themselves so they can thrive when a downturn happens.

Land brokerage and multi-family investing

Our last question is from Troy, in Millcreek, Washington. Troy is looking to get better as a land acquisition agent … but he also wants to dip his toes into multi-family products.

We haven’t been in the land brokerage business, but we think there are a few things to take into consideration.

First, land is not land is not land.

By that, we mean every land bank could lead to a different outcome … so you need to look at where every piece of land will end up, whether that’s agriculture or retail development.

Second, every specialty brokerage follows the 80/20 rule … 80 percent of real estate is sold by 20 percent of agents. So, be the 20 percent.

That means you need to be really well educated, have outstanding product knowledge, and build excellent relationship.

To succeed, look for the big players in your field and try to get in a room with them. Pick their brains, learn the language, and build your business.

And ask yourself the most important question … who is my customer? Understand the needs of the person you’ll be selling to.

As to multi-family, our friend Brad Sumrock has a wealth of resources. He’s one of several multi-family investors on our Summit at Sea faculty … but he also holds a two-day training three times a year in Dallas, Texas.

It’s an invaluable learning opportunity, and one we can’t recommend enough.

Have a question of your own? Ask us here. Until next time, happy investing!


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Finding Opportunity in Comeback Markets

Job creation is up. Even better news … the jobs being created are blue-collar jobs, many in the reviving manufacturing industry.

This means more wages, more workers … and more folks who can pay rent.

In this episode of The Real Estate Guys™ show, we talk to an entrepreneur who has built a real estate business in an off-the-radar market.

The truth is, the hot markets you always hear about … San Francisco, New York, Los Angeles … don’t make sense for investors.

On the other hand, markets with not-so-great reputations might get you the best bang for your buck, depending on where they’re at in the market cycle.

Our conversation today delves into what makes a market make sense … and what it takes to make a profit in sensible markets.

Listen in … you’ll hear from:

  • Your reputable host, Robert Helms
  • His bad-reputation co-host, Russell Gray
  • Bryce Keesee, founder of Great Lakes Capital Solutions

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Riding the market waves

Let’s start with a quick real estate investing lesson.

Many people generalize the entire real estate investment category. They think real estate is overheated … so there’s no opportunity anywhere, for anyone.

That’s just plain wrong.

Real estate is NOT an asset class. It’s NOT a market. It’s an investment category with MANY different markets, each of which is in its own unique place in the market cycle.

But smart investors don’t look at averages. They take the time to do research, look for clues, kick the dirt, and meet people in individual markets.

When you’re looking for great markets, one excellent option is the comeback market.

Markets go through phases …

  1. Growth.
  2. Stabilization.
  3. Deterioration.
  4. Revitalization.

Catching a market as it hits step four is the key to riding an up-wave.

You don’t want to get in before things have started looking up … but you do want to get into markets that are turning upwards before the crowd.

Case study: Cleveland

Our guest Bryce Keesee got into real estate in southern Florida 15 years ago … but he has since switched to a market in the midst of MAJOR revitalization.

The market? His hometown … Cleveland, Ohio.

You might not initially think of Cleveland as a great investment market. That’s part of what makes it so great.

Bryce says the market offers many benefits … good price points for properties and rents, a steady flow of dependable tenants, stable worker incomes, and best of all … high cash flow.

Let’s get into what makes Cleveland so great.

First of all, a revitalized manufacturing industry only adds to the wide variety of blue-collar companies in the city.

Steel manufacturers join other major employers like Lincoln Electric, Progressive Insurance, several Amazon warehouses, and the renowned Cleveland Clinic, just to name a few.

This variety offers stability … and provides blue-collar jobs that keep rent prices steady.

These jobs are one reason Cleveland has a reputation for affordability.

Bryce is a fan of blue-collar workers because they tend to be long-term tenants. Many of these workers don’t plan to buy a home. Purchasing a property is “off the list” of goals for many people.

Dive into the details

We asked Bryce to give us the low-down on his typical rental property.

Bryce says properties are slightly different depending on location.

The east side of Cleveland has been abandoned for many years, although it’s starting to see growth now. So price points are a bit lower.

Bryce says single-family homes on the east side sell for $60-65,000. Monthly cashflow is $750 a month, on average … well above one percent.

The west side, on the other hand, has slightly higher price points and rents. Homes sell for 70-75,000, and rents are in the $900 range.

It takes 30-60 days from closing to repair and refurbish properties so they’re ready to rent.

The rehab process doesn’t follow a cookie-cutter template. Bryce and his partners have standardized the contractors and materials used, but each property gets an individual evaluation.

He wants well-functioning, desirable rentals that will save the company time and maintenance costs in the long-term.

That keeps tenants happy. Bryce also works to keep tenants happy by building relationships with tenants via his property management company.

“Our tenants love us,” Bryce says. A big reason is great communication from his property management team, with whom he has a 10-year relationship.

What about the general atmosphere of the Cleveland market? Ohio is extremely landlord-friendly, says Bryce. The law allows for a 3-day notice to vacate for non-paying tenants. The eviction process is only 10 days.

That doesn’t mean Bryce follows those timelines … he says his response is to establish a relationship with tenants and make sure the lines of communication are open. Yet another reason why property management is so important!

Investors interested in the Cleveland market should listen in to get access to a special report by Bryce that includes even more details!

Ohio Field Trip

Bryce really loves Ohio, and he thinks other investors will too.

Cleveland has great sports teams and the second-largest performing arts district outside of New York City.

But it’s also experiencing a revitalization that you can only really understand by kicking the dirt.

That’s why we recommend the Cleveland Field Trip.

You’ll get a chance to tour Cleveland with Bryce. But you’ll also learn about the investment model Bryce uses … an excellent education even if Cleveland isn’t right for you.

We live in an era of over-saturated markets. It’s hard to find markets that make sense. But some markets are just starting to get hot.

The very best way to get in on these markets is to learn from someone who has boots on the ground. Because remember, you’re not looking for a property, or even just a market … you’re looking for a TEAM.

And a field trip is the best way to meet the people … who know the market … and can help YOU build your own brilliant team.


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


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Creating Consistent Cashflow with Retail Real Estate

Most people in the real estate investing world tend to gravitate toward a specialty … a market about which they know ALL the ins and outs.

On our latest show, we’ll talk to someone who has made a particular market his bread and butter … the retail market.

Wait … isn’t retail dead? No!

In this episode we’ll talk with a 30-year veteran of the retail investment industry about WHY the retail market is still completely viable … and HOW you can get started in the wide world of retail.

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

  • Your seasoned host, Robert Helms
  • His senior co-host, Russell Gray
  • Retail investor and developer Michael Flight

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Why retail?

Michael Flight has been involved in shopping center development since 1986. His business, Concordia Realty has been adding value to shopping centers since 1990.

In his 30-year career, Michael has seen the retail industry change a lot. Change is one constant in the industry, he says.

Several decades ago, the Sears catalogue made a big splash and replaced the business of many local merchants. Today, Sears is going downhill quickly … due to the popularity of online shopping sites like Amazon.

But smart investors have found ways to make brick-and-mortar retail thrive.

Retail facilities have evolved from single-purpose buildings to multi-function facilities (think shopping malls with restaurants, entertainment, and a wide variety of stores).

Businesses like Amazon need space to store and fill orders … another place where real estate folks come in.

Michael calls his specialty “de-mall-ing” … that is, taking a struggling mall and changing out the tenants and revitalizing the complex for modern shoppers.

We’ll explore the nitty gritty of how to get into the retail market, but first, a few great reasons investors should consider retail as part of their investment strategy:

  • One of America’s favorite pastimes is shopping … in person. Although online shopping is increasing in popularity, it’s still only 10 percent of the retail market. And customers flock to big-box stores for necessities like clothes and shoes that are harder to buy online.
  • Investors don’t have to deal with two of the major problems of apartment investing … vacancy and turnover. Tenants typically sign long-term leases ranging from 5 to 40 years to very stable tenants. Michael says many tenants will be national brands who offer lots of equity and will advertise FOR you.
  • Low day-to-day involvement … tenants are responsible for their own maintenance and sometimes even build their own stores. With a triple-net lease, tenants are responsible for real estate taxes, insurance (both property and liability, plus the contents of their store), and maintenance, including common-area maintenance like plowing snow and maintaining lighting.

How does the retail market work?

What does it take to purchase a small shopping center? Michael says potential investors must answer a few questions first …

  • What’s the neighborhood like? Is the property located in a good location?
  • Is there an adequate local population to support retail stores?
  • Is there a good travel path? That is, is the center accessible to cars and located near homes and other businesses?

Once you’ve made sure those criteria are satisfied, you have to look at what kind of tenants are already there … and what kind of tenants you need.

Shopping centers should have an anchor tenant … a grocery store or drug store or other big brand that will draw customers to the shopping complex.

When you’re negotiating, anchor tenants often have a lot of power to negotiate terms. But if you have a really great location, that gives YOU more leverage.

And you have to make sure customers are going to come.

The threat from online retail is real, but that doesn’t mean brick-and-mortar retail stores are failing … it just means investors have to get creative.

That might mean integrating omni-channel options … warehouses that provide last-mile delivery and stores that offer online order pick-up, for example.

But the big question investors have to look at is how can we get more people here … and keep them here longer?

For example, don’t build a shopping center without integrating great places to eat and rest … you’ll get more customers who stick around, and a more successful investment.

Michael emphasizes that investors need to know about retail itself, from how retailers do business and which retailers sell what, to merchandising … putting the right tenants in the right spots.

That means making sure tenants are complimentary. Have a couple clothing stores? Make sure you look for a shoe store as well.

The fine details of retail investing

We asked Michael what he looks for when he is figuring out finances.

He said he wants the loan-to-square-foot amount to be $100 or less.

After that part is figured out, he does underwriting based on a 10-year lease.

Lenders range from big lenders to banks or private loans for turnaround situations.

“We really like to play in the 1 to 20 million dollar range,” says Michael. This puts him below big institutional facilities … but above the mom-and-pop shops.

How long does it usually take to rehab a distressed retail asset? Nothing ever goes as planned, Michael says, but three years is typical to execute a solid business plan.

Retail is a LOT different than single-family homes and apartment complexes, so we asked Michael to explain some of the big differences.

In retail, tenants typically get a retail improvement allowance.

Owners will offer a white box … drywall, drop ceilings, concrete floors, and bathrooms. They often offer an allowance to build out the store to the tenant’s specifications.

When tenants have very specific construction specifications, Michael says a good option is offering money or free rent so the tenant can deal with construction on their own.

Why should the investor pay for modifications to the retail space? It’s the standard … and investors want to draw in tenants that will stay for 5 or 10 years, or longer.

Remember, if you’re not ready yet to take on an entire shopping mall, working with a syndicator is always an excellent way to dip your toes into retail.

To dive into ALL the details, listen in for access to Michael’s special report on retail investing. He covers the HOW and WHY of retail real estate in depth.

Listen to experts!

You can’t fake 30 years of expertise.

Our mission is to find subject matter guides who know what they’re talking about and can educate our audience … YOU.

Michael Flight is a great example of someone who walks the talk. He is an expert in this area … and we hope your curiosity about the retail market has been piqued.

For more wisdom from experts, check out our Future of Money and Wealth video series … or meet some of the best minds in the investing world at our annual Summit at Sea™.


More From The Real Estate Guys™…

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


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Can you handle the truth?

“You can’t handle the truth!” 

 – Jack Nicholson in A Few Good Men

Neither optimists or pessimists can handle the truth.Optimists refuse to acknowledge the part of reality that’s negative …

… while pessimists can’t see the ever-present opportunities hidden behind the problems.

While we’d rather be optimistic than pessimistic, maybe it’s better to be BOTH.“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” 

 – F. Scott Fitzgerald 

Here are some thoughts about risk and opportunity from legendary real estate investor Sam Zell …

People love focusing on the upside.  That’s where the fun is.  What amazes me is how superficially they consider the downside.”  

“For me, the calculation in making a deal starts with the downside.  If I can identify that, then I understand the risk I’m taking.   Can I bear the cost?  Can I survive it?” 

You can only take calculated risks if you look carefully at both the upside AND the downside.

Today, the entire global financial system is largely based on “full faith and credit” … primarily in the United States dollar.

And there’s a gigantic investment industry that’s built on perpetual optimism …and a belief non-stop debt-fueled growth FOREVER is actually possible.

Even worse, the entire financial system’s fundamental structure literally REQUIRES perpetual growth to avoid implosion.

That’s why central banks and governments are COMMITTED to debt and inflation … at almost ANY cost.

But as Simon Black points out in Future of Money and Wealth 

History is CLEAR.  Empires and world reserve currencies don’t last forever.

And irredeemable paper currencies and out-of-control debt ALWAYS end badly … at least for the unaware and unprepared.

Optimists can’t see this.  So they take HUGE risks they don’t even know exist.

Pessimists can’t act.  So they miss out on the HUGE opportunities that are the flip-side of the very problems they obsess over.

Robert Kiyosaki stresses the importance of being REALISTS …

… standing on the edge of the coin, seeing BOTH sides … and then being decisive and confident to ACT in pursuit of opportunities while being keenly aware of the risks. 

We created the Future of Money and Wealth to gather a diverse collection of speakers and panelists together … to examine the good, the bad, and the ugly …

… so YOU can have more context and information to make better investing decisions. 

Chris Martenson opens our eyes to the physical limitations of long-term perpetual exponential growth which depends on unlimited supplies of clearly LIMITED resources.

Of course, as these critical resources dwindle, they’ll become very expensive as too much demand competes for too little supply.

When you see nation’s fighting over scarce resources, it’s a sign of the times.

But of course, there’s OPPORTUNITY hidden inside of crisis.

And to seize the opportunity, you must understand it … or it just sits there like a hidden treasure under your feet.

But it’s not just recognizing trends.  It’s also TIMING.  And being a lot early is much better than being even just a little late.

To beat the crowd, you can’t wait for the crowd to affirm you. 

To get timing right, it’s important YOU know what the signs are.

What does it mean when Russia dumps Treasuries and buys gold?  What caused Bitcoin to sky-rocket in 2017?  Why are there bail-in provisions in U.S. banking laws?

Peter Schiff saw fundamental problems in the financial system back in 2006 … and screamed from the rooftops that the financial system couldn’t support the then red-hot economy.

Few listened … then WHAM!  In 2008, the weakness of the financial SYSTEM was exposed … and MANY people were CRUSHED.

Peter insists the REAL crash is still yet to occur … and everything that made the financial SYSTEM weak in 2006 is MUCH WORSE today.

Yet small business and consumer OPTIMISM is at all-time highs.  The ECONOMY appears to be BOOMING … again.  And Peter’s still screaming out his warnings.

The Fed is RAISING interest rates to cool things down.  But history says EVERY SINGLE TIME the Fed embarks on a rate raising campaign it ends in RECESSION.

In Future of Money and WealthFannie Mae chief economist Doug Duncan reveals when he thinks the next recession is coming … and WHY.  We listen to Doug because he’s got a really good track record.

The 2008 crisis exposed real estate investors to the REALITY that what happens on Wall Street, at the Fed, and in the global economy … can all rain down HARD on Main Street. 

Ignoring it doesn’t make it go away.  And you’ll die of old age waiting for the storm clouds to blow away.

There will ALWAYS be risk.  There will always be OPPORTUNITY. 

It’s not the external circumstances which dictate what YOU get.

It’s really up to YOU … and your ability, like Sam Zell, to see both opportunity and risk, so you can aggressively reach for opportunity while carefully navigating risks.

Education, perspective, information, and thoughtful consideration are all part of the formula.

That’s why we created the Future of Money and Wealth video series.

Future of Money and Wealth features TWENTY videos … over fourteen hours of expert presentations and panels …

… covering the dollar, oil, gold, real estate, crypto-currencies, economics, geo-politics, the new tax law …

… PLUS specific strategies to protect and GROW wealth in the face of potentially foundation-shaking changes to the financial system.

Just ONE great idea can make or save you a fortune. 

Future of Money and Wealth might just be one of the best investments you’ll ever make.

To order immediate access to Future of Money and Wealth … 

Click here now >> 


More From The Real Estate Guys™…

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

Ask The Guys – Cash Offers, Crappy Properties, and More

We’re back again to tackle the questions we missed in our last Ask The Guys episode. We love these episodes and the opportunity we get to talk through some of YOUR real-world investing opportunities and challenges.

We hear from listeners dealing with tenant damage and security deposits, 1031 tax-deferred exchanges, nontraditional lending ideas and TONS more.

First, the ground rules.

We talk about ideas and information. When you’re dealing with real money in the real world, you want to consult a professional. We don’t offer legal, investment, or tax advice.

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

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

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Question: How soon can I move in after a cash offer, and how low can I go under the asking price?

Joseph in Tacoma, Washington, asked this question. The important concept to understand here is price versus terms.

Whether or not you offer cash or take out a loan, the outcome is essentially the same for the seller. What cash offers is a quicker payout with certainty.

But, this isn’t attractive to every seller. In some cases, a quick closing isn’t what a buyer wants at all, so the promise of quick cash won’t be an incentive.

When you’re negotiating with cash, make sure what you’re offering lines up with the seller’s priorities. A cash offer doesn’t automatically mean a 20 percent discount.

Question: I rehabbed a rental property in Detroit, and now I’m ready to sell. My tenant wants to purchase the property, but she has limited cash on hand. How can I find a lender to do the deal?

Wilbert in South Field, Michigan, brings us this question. He wants to sell the home for $38,000, but the appraisal came back at $20,000. That price gap, as well as the location has made it difficult to find a traditional lender.

The first problem is that many banks won’t do a loan for less than $50,000. If the lender is going to go to all the trouble to do the paperwork for a percentage of the loan amount, then the loan amount needs to be enough to get their attention.

Here are a couple alternatives for Wilbert to consider:

  • Find a private lender. This might mean a higher interest rate for the buyer. But, that higher interest rate will be more likely to attract a lender.
  • Be the private lender. Rather than finding an outside investor, work a deal with the tenant to have them pay the loan to you instead. If they pay off the mortgage, you’ve still had that steady stream of income. If not, you’ll get the property back to rent or sell to someone else.
  • Find a different buyer. If finding a private lender isn’t possible, consider finding a different buyer who is able to get financing or purchase the home for the price you want to sell.

Question: When a tenant in our out-of-state rental moved out, they caused a lot of damage. Why don’t tenants take care of their rentals better, and why are they surprised when they don’t get their deposit back?

Renters view their home differently than an owner. How else do you explain that it feels like no renter owns a vacuum cleaner?

Damage to property is part of doing business as a landlord. But, Lauren in Charleston, South Carolina, did a lot of things right. They documented all the damage with photos before the tenant moved out, had a third-party realtor do a final walkthrough with the tenant, and got estimates from contractors to repair the damage.

Here are a few other things you can do to deal with damage:

  • A picture is worth a thousand words. Take photos of the property BEFORE the new tenant moves in and get their initials on the photos. Then, when they’re ready to move out, you can use those photos to justify the cost of any damage.
  • Open up a pet policy. Many landlords are hesitant to allow pets in a rental. But, with a hefty pet deposit and even a little higher rent, you can come out on top.
  • Get a read on your renters. As you screen applicants, be perceptive. We’ve also known people who will meet with potential renters at their current residence to see how they treat their current space. This may not be possible for everyone, but get creative and thoughtful about how you screen new renters.

At the end of the day, renters are more likely to treat a rental home with less care than you do. Damage and repairs are a cost of doing business, so make sure you build that into your budget.

Question: I want to sell my rental home in California, and I’m interested in the 1031 tax-deferred exchange to buy a new property in Texas. I’m confused by the IRS form and want to know if this will eliminate my taxes in California?

Cindy in Fort Worth, Texas, is definitely an A student!

First of all, we want to be clear that with this kind of complicated tax question, you need expert opinion and advice. A 1031 tax exchange intermediary will be well worth the cost and can answer all your questions.

The intent of the 1031 tax-deferred exchange is that if you sell a property and then purchase another property, you can defer the tax. As you buy and sell properties, you can continue to defer the tax, but there isn’t a way to eliminate the tax completely.

Finally, try not to let the tax tail wag the investment dog.

Real estate offers many great tax benefits, which is one of the reasons we love it! But, when you’re dealing with real money and the IRS, you need a team of experts to guide you.

Life is short, and you don’t want to spend your valuable time reading an IRS form.

Question: How can I learn more and get coaching on real estate syndication?

Addie in Seattle, Washington, brings us a question that is near and dear to our hearts!

We recommend our Secrets of Successful Syndication seminar as your first step. Whether you want to be a syndicator and learn how to leverage money with a group of investors or invest passively in real estate, this is an event you’ll learn a lot from.

In this seminar, we’re teaching the strategies that have been a part of our investments for years.

We do have a coaching program, but you can only learn about it at the seminar during an OPTIONAL session after the two days are done.

If you want to register for the event and see if syndication is right for you, we’d love to have you!

Question: My wife and I have a real estate investment company with 23 doors under rent. We’ve found traditional lenders to be slow and cumbersome and want to simplify our lending process. How can we do this?

John and Karen in Troy, Ohio, are having trouble scaling their business because of lenders. They write that they’d be willing to pay a higher interest rate to make the process easier and more streamlined.

For traditional banks, the process is often necessarily slow. They need to do due diligence to make sure the investment is a good one.

Private capital is easier and faster, but it comes at a higher price. This can be done through syndication or networking to find interested investors. Make sure you’re well advised and working with big deals, and you’re well on your way.

We’d also suggest that with the rollback of some of the Dodd-Frank provisions, some of the restrictions on community lending have eased. If you haven’t checked in with your community lender recently, it’s worth getting to know them. They’ll get to know you and your entire portfolio of properties and could be a valuable resource.

Question: I wasn’t able to attend your events for the Future of Money and Wealth in Florida. But I’d sure love to get access to that information. How do I do that?

A listener in Hawaii wants to learn from the incredibly faculty we brought in to talk about how to keep up with the changing times in the economy.

This was a one-off event, and it was an incredible gathering of some of the best minds in a variety of subjects all focused on how to protect your wealth.

We recorded the event with a professional video crew and now have 20 different panel discussions and presentations available to watch.

You can visit the Future of Money and Wealth website to learn more or send us an email to future [at] realestateguysradio [dot] com. We’ll get you all the details on how to access these videos.

Question: My schedule seems to be always booked up by the time I hear about the Belize discover trips. Do you know the future trip dates for later in the year?

Tim in Silverton, Oregon, like many of us, has a busy schedule and needs to plan ahead!

To find out events as soon as possible and to get them on your calendar, get on our advanced notice list. Head to the events tab on our website. If you find an event there, and the date doesn’t work out, get on the advanced notice list and you’ll get an email letting you know about future dates.

Our next Belize discovery trip will be August 24-27, and registration is open now! We hope to see you there.

Question: What is the definition of a performing asset?

Matthew in Nacomin, Florida, asks us the shortest question in our inbox!

Simply put, a performing asset is something that puts money in your pocket. The more cash flow, the more equity. If you have something on your balance sheet that doesn’t put money in your pocket, it’s not a performing asset.

When you consider an asset you can go for a fat cow, a performing asset that will come at a premium but continue to deliver, or a skinny cow, a non-performing asset that needs some work to get it performing again.


More From The Real Estate Guys™…

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

Beware of bubble genius …

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

Time flies when you’re getting rich.

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

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

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

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

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

It’s about financial and emotional intelligence.

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

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

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

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

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

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

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

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

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

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

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

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

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

Money and margins are both getting tighter.

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

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

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

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

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

A case in point are apartments …

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

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

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

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

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

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

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

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

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

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

Think about it …

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

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

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

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

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

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

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

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

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

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

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

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

As for bonds …

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

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

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

A bond default is TOTAL loss. Yikes.

Real estate to the rescue …

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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

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