What this legendary real estate investor is buying NOW …

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

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

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

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

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

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

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

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

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

We think that’s REALLY interesting.

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

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

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

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

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

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

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

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

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

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

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

So Zell must see gold demand holding … or increasing.

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

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

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

Which begs the question …

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

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

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

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

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

Sam Zell is buying gold as a “hedge.”

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

Investopedia defines a hedge this way …

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

Well, THAT’S interesting.

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

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

Which begs yet another question …

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

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

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

Zell is bullish on oil.

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

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

Um, probably not.

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

So why oil?

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

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

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

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

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

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

Until next time … good investing!

More From The Real Estate Guys™…

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


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Oil and Gas Investing 101

Oil and Gas Investing 101

 

Oil and gas investing generates more wealth than any other asset class … and it comes with MAJOR tax benefits.

Oil can be a valuable and dynamic part of your portfolio. Demand is rising … meaning NOW is a great time to invest.

An investment in drilling operations can continue to produce income for years to come.

To get the maximum amount out of this investment and to manage risk, you need a serious expert who knows the business inside and out. Bob’s team is not only skilled in every part of their business, they’re here to educate you and give you hands-on experience.

Learn the ins and outs of the oil industry in this special report … from the extraction process, to predicted world-wide demand.

Find out whether gas and oil investing is right for YOU … and discover how you can get started in this exciting asset class.

Don’t wait! Catch the rising returns as they continue to soar … let Panex show you how to open up your portfolio for profits.

Simply fill out the form below to get a copy of this exclusive report on what oil can do for YOU.

Exploring the Tax Advantages of Oil & Gas

Exploring the Tax Advantages of Oil & Gas

 

Keep money in your pockets! Reap major tax benefits by investing in oil and gas.

At the end of every year, you have a choice to make. Will you hand over your money to the IRS, or will you invest in your future?

Oil and gas investing can generate more wealth than any other single investment class … and the tax benefits are HUGE.

In fact, if you live in the United States, you can deduct up to 85 percent of your domestic oil investment in the FIRST YEAR.

With more than four decades of experience in the oil and gas industry, Bob Burr knows the ins and the outs of this investment class.

While Bob and his team at Panther Exploration are not CPA’s or tax experts … they’ve personally experienced the tax advantages of investing in domestic oil drilling partnerships.  

So tune in to this webinar to learn how the tax benefits mean BIG RETURNS on your investment.

Keep more money in your pocket and diversify your investment portfolio. Simply fill out the form below to access this informative webinar.

Oil and Gas for Real Estate Investors

Energy is the key input for all economic activity. And as populations and economies grow worldwide, there’s an increasing demand for energy.

So listen in as we chat with an experienced oil man and discuss the nitty-gritty of investing in oil and gas for profits and tax breaks.

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

  • Your well-oiled host, Robert Helms
  • His slightly creaky co-host, Russell Gray
  • Oil and gas businessman, Bob Burr

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How we got into oil and gas

We’re often asked how we transitioned from real estate to other real assets.

We started studying economics after the ’08 financial crisis. We were looking to see what we could have done … to better survive the crash.

We realized we needed to be more careful about structuring our portfolios so they weren’t vulnerable to the ups and downs of Wall Street.

We also realized the dollar, gold, and oil were all interconnected.

And, we looked at the tax benefits, and realized the tax path leads to oil.

Our guest today is basically the Godfather of Gas and Oil. Bob Burr started out in the gas and oil industry working on rigs as a young man in Louisiana.

“It was my life’s mission to find out the other end of the business,” Bob says.

Well, he’s made it … Bob now has several cumulative decades on the money-making side of the oil and gas industry.

And he’s still at it … technological innovations and new oil discoveries have made the U.S. one of the top places in the world for oil extraction.

Bob’s decades of experience have led him through ups and downs, mistakes and discoveries, and he has come out wiser on the other end. He met us on the Summit at Sea™ … and now he’s here to share his knowledge with YOU.

The tax benefits of oil investing

So … why oil and gas?

“The tax shelter is just tremendous,” Bob says. Oil and gas investing is the only business today where you can put in a dollar and write off 70 to 80 percent of that, whether you win, lose, or come to a draw.

There are risks inherent to investing in the industry, but the federal government makes it much more approachable by subsidizing heavy tax breaks.

“Every time you drill a well, you’re gambling,” Bob says. But since oil drives the economy, Uncle Sam is willing to place some bets.

Bob does a lot of due diligence before he even starts digging to make sure a potential well has a high chance to be profitable for him and his partners.

First, he explores the land and picks out a bunch of prospective sites.

Then, he sends those prospects to a third-party geological team and says, “Kill it.” Really. If the geological team comes back and says no go, Bob moves on.

After the geological team gives the A-OK, Bob does yet another evaluation. His sons do a due diligence inspection to examine specific site issues.

“We’ll have some bad ones regardless, but I’m doing everything to avoid that,”  Bob says.

Oil and gas exploration is a numbers game, but Bob is shaving the odds in his favor. He’s eliminating 90 percent of the bad options … before the drilling starts.

Oil and gas investing is an industry that requires high responsivity to partners.

Because it is a high-risk industry, Bob makes sure he is being attentive to his investment partners’ needs.

“We need to shut up and listen and let them present the facts,” Bob says. If there’s ever a point where he disagrees, he consults with specialists and experts first.

Bob has been in the business a long time. “I would be lying if I never did anything wrong,” he says. “I had to climb the mountain and fall back down, climb the mountain and fall back down.”

But now, “You can’t play any tricks on me,” he declares.

Who gets a cut?

How does oil and gas investing work for everyone involved?

First, there are the land owners. In usual oil and gas terms, the land owner owns the surface and minerals. The oil extractor … that’s Bob … gives the owner a bonus for each acre used, plus royalties … a percentage of the total proceeds.

“You have to look at the economics,” he says, in reference to the royalty rate.

If an oil person is pulling in millions of dollars, the reserve rate … what they take home to investors and their own business … will be less, perhaps closer to 50 percent. For a smaller pull, it’ll probably be closer to 80 percent.

“You have to play every hand differently,” Bob says. There are a lot of variables that affect each situation.

Now, what about the investors?

Becoming a partner to Bob or another oil person requires taking on a lot of risk. But regardless of the outcome, investors still get tax benefits.

Bob says he does turn-key deals on each well, and he takes on the responsibility of figuring out completion costs and risk.

If he runs into problems, he doesn’t go back to his investors to ask for more money, he says … but if there is a chance to drill deeper and get much higher profits, he will sometimes give investors an opportunity to put more money in and play the game.

As for the profits? “I’ve never had one problem having a market for oil at a premium price,” he says.

Bob recently got about $70/barrel for West Texas crude, but he says he can make money at as low as $25/barrel … so there’s a lot of flexibility. Twenty-five is still a good, solid return, he says.

The oil industry is all about developing relationships … after all, we only got to know Bob through the great relationships we form each year at the Summit at Sea™.

“I’m a team with my partners, and I’m the captain of the team,” Bob says. “And I want to score.”

Think you want to learn more about oil and gas investing? You can start your research with Bob’s custom report. And of course, you can meet Bob and other experienced investors 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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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.

Rising rates, oil, and an angry Amazon …

Even though the Fed skipped a rate hike last meeting, someone forgot to tell the 10-year Treasury yield, which has broken over three-percent … DOUBLE where it was just two years ago.

In case you don’t know, the 10-year Treasury yield is arguably the single most important interest rate on Earth … certainly for real estate investors.

Of course, oil broke over $80 a barrel last week also … in spite of dollar strength.  So while dollar-denominated gold dipped … oil rose.

It makes us wonder what oil will do if (when) the dollar starts falling again!

Now before you check out, let’s consider what all this means to Main Street real estate investors.  

Obviously, interest rates matter because most real estate investors are liberal users of mortgages.  Higher rates mean higher payments and less net cash flow.

But as we often point out, rising rates also affect your indebted tenants.  Higher rates mean bigger payments on credit card, installment, and auto debt.

And speaking of auto-debt, sub-prime auto loan defaults have spiked above 2008 levels.  It seems consumers at the margin are starting to struggle.

Now back to oil

If you’re an oil investor … or you buy real estate in areas whose economies are

strongly supported by the oil industry … higher oil prices can be a GOOD thing.

For everyone else, it means gas … and all petroleum derived products … andanything produced or transported with oil-derived energy … are all getting more expensive.

And for your working class tenants … the cost of filling up their commuter cars is getting worse too.

So until all this “wonderful” inflation makes its way into wages, working class people are still getting squeezed.

All that to say, it’s probably a good idea to tread lightly on rental increases unless you’re very sure your tenants can handle it.

But of course, these are the fairly obvious concerns.  But there’s something even MORE ALARMING circling on the horizon …

Pension Problems Potentially Pinching Property Owners

(Sorry.  Peter Piper purposely pressured us to print that prose. ‘pologies …)

In a recent post, we highlighted a SHOCKING proposal by the Chicago Fed to punish property owners by imposing an additional one-percent property tax … to pay for Illinois’ severely under-funded pension plan.

Of course, Illinois isn’t only the place with pension problems, so be on the lookout for a punitive tax proposal coming soon to a neighborhood near you.

This is why we continually point out it’s REALLY important understand the markets you’re in.

It’s like buying a condo in a troubled complex, but never bothering to review the HOA financials …

YOU might be hyper-responsible, but if the HOA’s in trouble … you could be too, because they have the the power to assess YOU to pay for it.

As we pointed out at Future of Money and Wealth, governments sometimes do desperately dumb things when they’re facing financial challenges.

Don’t Slap an Amazon

The latest case in point comes to us from the super-city of Seattle … home of Amazon, Starbucks, Boeing and several other mega-employers.

You may have heard, the city council of Seattle voted 9-0 to impose a “head tax” on all businesses doing over $20 million in GROSS revenue.

The original tax proposed was over $500 per person.  But after businesses complained, they backed off to “only” about $275 per head.

The purported purpose of the tax is helping the homeless, which is a noble cause.  But regardless of how you or we feel about it, what matters is how the employers feel … and they’re NOT happy.

Amazon fuming after Seattle votes to tax high-grossing corporations to help the homeless

“ ‘We are disappointed by today’s city council decision to introduce a tax on jobs,’ [Amazon Vice President Drew Herdener] said in a statement.

 “ ‘While we have resumed construction planning… we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here…’ ”

 Starbucks Corp., another of the 300 businesses that will have to pay the job tax, seconded that.

 Think about this …

These are two pre-eminent brands and major economic drivers for Seattle and its surrounding neighborhoods … and there are 298 other big businesses also affected.

While they’re not likely to all pack their bags and move out in the middle of the night, Amazon’s comments make it clear they’re also not committed to staying or growing.

Again, it doesn’t matter how YOU feel about these companies, the homeless problem, or the role of government in redistributing wealth …

… what matters is how employers feel and what they choose to do when slapped with taxes or regulations.

Because if these companies go in search of a friendlier environment, one area will lose current and future jobs … and others will gain them.

As real estate investors, we want to be on the right end of that shift.  That’s why we’re always watching for clues in the news.

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.

Profits, jobs, and opportunity …

In spite of rising rates and concerns about bubbles … real estate is looking pretty good right now.  At least the right real estate in the right markets.

Of course, “real estate” can mean a lot of different things.  In this case, we’re talking about good ol’ fashioned single-family residences.   Houses.

Yes, we know mortgage rates are rising.  But that just means it’s harder for renters to buy a home … which keeps them renting … from YOU.

And if you proceed with caution, there are some reasons to pursue single-family homes even though prices have recovered substantially from the 2008 lows.

Consider this Yahoo Finance headline:

Small business earnings hit all-time high, NFIB declares

“Small business earnings rose to the highest levels in at least 45 years last month, according to the results of a survey from the National Federation of Independent Businesses (NFIB) …” 

“ …  the 17th consecutive month of ‘historically high readings.’”

That’s good news for small business owners … and for the U.S. economy.  It’s commonly believed that small business drives a majority of job creation.

So perhaps this CNBC headline isn’t a big surprise …

Job openings hit record high of 6.6 million

Of course, job creation is good for landlords.  It’s a lot easier for tenants to pay rent when they actually have jobs.

But there’s the issue of wages.  Even though the unemployment rate fell below 4% … which is considered “tight” … wages still haven’t risen substantially … yet.

Meanwhile, life is getting more expensive as rising interest ratesgas prices and healthcare premiums are among several factors squeezing household budgets.

While jobs are good, it’s hard to save up for a down payment when living costs are going up faster than paychecks … which keeps people renting.

And if all that isn’t a big enough challenge, there’s the problem of high housing prices.  Obviously, higher prices also make it harder for renters to become homeowners.

So all that’s not horrible news for landlords … especially those who are investing in more affordable markets and property types.

But there are two more parts to the story …

First has to do with a deeper dive into the jobs market.  The April jobs report didn’t seem great at first blush.

But in the past, the reports looked great at first, then you’d drill down and discover the jobs created were low-wage service industry jobs.

Notably, recent jobs reports reflect a subtle but important shift in the composition of jobs.

So while the quantity of jobs created might be not bad … the quality is actually looking pretty good.

According to this Wall Street Journal article, manufacturing added 24,000 workers in April … after adding 22,000 and 31,000 in the last two months.

“While manufacturing employment has been generally declining for decades, hiring picked up in the sector over the past year.” 

Way back our 2011 blog, What Washington Could Learn from Real Estate Investors, we argued that not all jobs are equal. We like what’s happening.

Seems to us if the American economy can keep this up, it’s a tailwind for housing … in spite of rising rates, inflation, and high debt levels.

And speaking of wind …

As we discussed at length during Future of Money and Wealth, the entire financial system is based on debt.  So to grow the economy, debt MUST grow.

The why and how of all that is too big a topic for today’s discussion, but if you take it at face value, it really explains a lot.  It also has some big ramifications for real estate.

After 2008, lenders ran away from real estate … but debt still needed to expand.  So new debt-slaves borrowers were needed.

Student debt soared.  Sub-prime auto loans spiked.  Credit cards hit record highs. Corporations borrowed heavily to bid up their own stock.

But today, students are reconsidering the value of a financed college education.  Auto sales are slowing.  Credit card losses are mounting.

Corporations are slowing down their borrowing … with nearly 14% of the largest companies unable to pay their interest payments from earnings.

In fact, a recent Bloomberg article quotes Gregg Lippman of “Big Short” fame as saying corporate debt will trigger the next financial crisis.

“ … corporate debt and equities will face the biggest pain when the next downturn comes. Investments linked to consumer debt, unlike the last crisis, will be relatively safe …”

“The consumer is in much better shape than corporates. Consumers are less levered than they were pre-crisis. Corporates are more levered than they were pre-crisis …”

So let’s wrap this all up and put a bow on it …

If it’s true debt MUST expand, lenders will be looking for where they can make loans.  Remember, your debt is their “investment”.

There are already tremors in the debt markets.  Lenders will be looking for quality.

Similarly, there are tremors in the stock markets.  Investors and consumers will be looking for an alternative for their wealth building (remember, consumers consider their home an investment).

So we think there’s a good chance the focus will shift to real estate again.  Just like it did in the early 2000s.

Yes, we know the run-up from 2000 – 2008 ended badly.  But not for everyone.

If you buy the right markets, use sustainable financing structures, and pay attention to cash flow, there’s an argument to be made that single-family homes still have solid potential for long-term wealth building.

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.

11/23/14: Liquid Real Estate – Has the Oil Boom Run Out of Gas?

Oil prices have been falling.  Why?  And does that mean it's a good time to invest?The dollar price of oil has fallen substantially as of late…just like real estate did a few years back.

Does that mean it’s all over for oil?  Or is now a good time to buy?

To explore this slippery topic, we take a trip to Texas to talk oil, gas and cash flow with our favorite oil man.

In the station pumping out broadcast brilliance:

  • Your energetic host, Robert Helms
  • His slimy co-host, Russell Gray
  • Special guest and bona fide Texas oil man, Paul Mauceli

While it may seen obvious to some, in case you’re wondering, oil and gas can definitely fall under the heading of real estate investing.

We’re not talking about commodity trading, where investors are flipping in and out of futures contracts or options trying to skim a little profit from price spreads and market volatility.

Oil well investing can be a great way to generate passive incomeWe’re talking about buying or leasing a piece of land, digging a well, putting up a pump and sucking money out of the ground.

Most of the horror stories you hear about in oil and gas are rookies getting crushed by the pros in the paper markets…or by naive investors going into a high risk (and potentially high reward) exploration project.

Exploration is like venture capital investing.  You’re buying into an unproven business plan.  Of course, if you strike oil, you’re rich.  Just ask Jed Clampett,  But the odds are against you.

Our friend Paul Mauceli has a different approach that we like a lot better.  It feels more like investing in an existing apartment building.

The concept is simple…

Instead of buying into one single point failure make it or break project hoping to hit a home run, buy into a pool of already drilled and producing wells…just like buying an apartment building that’s already leased up…and the oil (and cash) is flowing.Investing in a pool of multiple wells mitigates the risk of hitting a dry hole.  And no one likes a dry hole.

Your cash flow is based on the “rent” (the price of oil) times the number of units (barrels) less operating expenses.  These are things every real estate investor understands.

Your profitability is based on the ratio between what you pay and what you collect.   Obviously, the less you pay, the better your return.

The challenge comes when you buy and then later the “rents” drop.

Of course, this is a risk every investor takes, so it’s wise to build in a little wiggle room, so you can afford to stay in the game even if the revenue declines.

Obviously, buying when rents are low can be good if the price you pay is also low…which it should be based on the lower rents.

Then later, when the rents go up, you’ve already locked in your costs, so your profitability is actually better.  So even though we hate to buy when prices are low (it’s scary), it’s actually the best time.

If you wait until the market is high, then you risk paying too much and not having enough cushion in case of a pull back in prices.

One HUGE difference between apartment investing and oil well investing is there’s typically no loan on the oil well.  So you don’t have to worry about foreclosure or negative cash flow.

The dollar is strong...for now.  But how long will it last?Something else to consider is the 100 year history of the U.S. dollar.  In spite of its recent “strength” (really, a reflection of a weaker Euro and an even weaker Yen), the dollar has lost 97% of its purchasing power since 1931 (the year the Federal Reserve was created).  The dollar has a 100 year history of LOSING value.The dollar is strong right now primarily because the Euro and the Yen are weak

That means anything REAL purchased in 1913 (real estate, precious metals, gems, etc.) retained its value, while the dollar did not.

Right now oil is soft because of a weak domestic consumer economy, softness in China, increased U.S.production. and (allegedly) geo-political games intended to punish Russia for its aggression in Crimea.

But like real estate, you have to ask yourself:  will the long term worldwide demand for oil is likely to increase or decrease?  And is the long term strength of the dollar likely to increase or decrease?

If you think the world will use more, not less oil…and the dollar will eventually resume its 100 year trajectory down (remember, the Fed, the European Central Bank and the Bank of Japan are ALL TRYING to INFLATE…i.e., devalue their currency), then when would be a good time to buy oil wells?

Paul thinks NOW is a great time because they’re on sale.  And that’s hard to argue with.

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2/20/11: The Coming Wave of Inflation – Profiting When the Levee Breaks

Central banks around the world have been pumping “liquidity” into their respective economies since 2008. In the USA, the Fed has gone through two rounds of “Quantitative Easing” (QE1 and QE2) and has been talking about a third.  Meanwhile, the government is piling up debt at a record pace.

What does it all mean?  And where is all this “liquidity” going?

Slogging through the headlines in our galoshes:

  • Your host and rainmaker, Robert Helms
  • Your co-host and chief drip, Russell Gray

Have you ever wondered where the Fed gets the money it uses to purchase government debt or toxic assets?  We’ve heard it said they have a magic checkbook – one whose checks NEVER bounce.  Hey! We want one of those!

So when the Fed buys stuff in the “open market”, where does the money go?  And once it enters the economy, how does it spread around?  Will any of it puddle up in real estate?

If you’ve been baffled by all of this, but can see gold, oil, gas, groceries, clothing and your Big Mac and Starbucks all going up, then you already have part of the answer.  Maybe those pundits who proclaim no inflation are really all wet?

Tune in to this episode as we explain how the added liquidity created by expansionary monetary policy dams up and then overflows through a series of levee breaks, eventually bringing a wave you can ride.  But you need to be on your board and paddling well before the dam flood comes.

Remember:  when asset values go up (denominated in dollars), equity happens. If you want it to happen to you, you have to get in while the tide is low, then be lifted by the rising waters.  So grab your rubber ducky and let’s get our feet wet.

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