Exploring Huge Tax Benefits and Unique Profit Strategies in Oil and Gas

Land is at the heart of real estate investment. Some investors build on the land. Others profit from growing on the land. 

But today we’re talking about the opportunities that lie UNDER the land … oil and gas. 

Many investors hop into real estate because of its tremendous tax breaks … but that often only applies to PASSIVE income. 

Oil and gas offer huge tax benefits that apply to ACTIVE income … that’s why high-income earners love this niche. 

No investment is perfect … some forms of oil and gas investing come with high risks along with high rewards. That’s why we called on a seasoned Texas oilman to learn more. 

We’re exploring exciting strategies for finding more predictable profits and tax benefits in oil and gas. 

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

• Your drilled-in host, Robert Helms
• His drilling-down co-host, Russell Gray 
• Founder of Panther Exploration (PANEX), Bob Burr

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A unique way to catch a break 

Today we’re talking about a niche within real estate that has some unique upsides and some great tax benefits … and it’s something you might not have considered before. 

Oil and gas is a very different type of investment … but there is a huge tax advantage to oil and gas investments that doesn’t exist in too many other investment categories. 

So, if you’re at the end of the year, and you’ve got a big tax problem, and you’re trying to figure out where to deploy some capital … you could make an investment and get a tax break. 

Energy is forever. It’s not a fad. It’s not an industry that shuts down … and any type of economic recovery is going to require the development and consumption of energy. 

Oil and gas has a history with the petrodollar in association with the dollar and other currencies. But it also acts as a hedge against currency, because it’s a commodity like gold. 

Another interesting aspect of oil and gas is it’s not JUST oil and gas. There are many peripheries of the business. 

There are actual businesses that are associated with the industry that aren’t directly oil … so you can make a profit based on the oil business without having the same level of risk.

We’re hardly experts in oil and gas … but we are learning. And that’s why we hang around with smart people who know a lot more than we do. 

One of those people is our guest is Bob Burr, founder of Panther Exploration (PANEX). He has been in the oil business for over 45 years … and he has plenty of expertise to share. 

Opportunities in oil and gas

The first thing to know about oil and gas is that there is certainly an economic benefit. Everyone goes to the pump and sees what happens to oil prices. 

But this time of year there is also a tax benefit. 

We often say that we don’t let the tax tail wag the investment dog … but this niche might be the exception. 

If you invest a dollar in oil and gas, the federal government will let you write off all the intangible cost of that drill. 

“That means if you drill a hole in the ground and it has no value, it’s a hole. They used to make us depreciate the equipment out over seven years and eventually you would write off 100 percent. Now we get to write off the equipment also,” Bob says. 

Bottom line … you’re talking about a 90 or 95 percent write-off against ordinary income the first year, right at the beginning. 

So, how do you get started?

There are really a couple of different ways to invest in oil. The first is exploration … trying to figure out where the oil is. 

Many of these properties are not owned. Instead, they are leased with wells that produce oil. 

Most people looking for the tax write-off don’t want to be involved in exploration … because most of the time you don’t hit oil. 

Instead, they want to be involved in wells that are already producing. Wells produce different amounts of oil each day depending on the location … but some wells have been producing for decades. 

The other option is to find other businesses associated directly with the oil and gas business that makes sense for investors. 

Three years ago, Bob and his team started to look at saltwater disposal wells. 

As wells produce oil, they also produce tremendous amounts of saltwater. You can’t dump saltwater on the surface … it kills everything. 

So, the government requires producers to pump this water back down into the earth at a safe level. 

Bob pays a landowner to lease their land and builds a well to safely pump this saltwater … and other drilling companies pay him to take care of their saltwater waste for them. 

“We’re operating a well now that in the first two years it was in production, it made $4.8 million,” Bob says. 

Bob has also built off of this business by finding a way to clean the water before pumping it … allowing them to separate and remove any leftover oil and “skim extra off the top,” if you will. 

“We’re disposing of 10,000 barrels a day, and if even one percent of that barrel is oil, that oil is ours, and it adds up,” Bob says. 

And the saltwater disposal investment gets the same tax benefit as oil and gas. 

For a niche like Bob’s saltwater well, investors can expect to put in $100,000 per unit. 

They can then … depending on the details of the deal and after consulting a tax professional … write off 90 to 95 percent as ordinary income. 

Syndication is sacred

Oil and gas investment has the potential to be higher risk than other investments … that’s why Bob and his team take their job so seriously. 

“I’m interested in one thing: Making money for us and our partners. That’s why I tell my team that they have a moral responsibility to get serious,” Bob says. 

That is one of the great messages that Bob has shared with us and with other investors at our Secrets of Successful Syndication event. 

Syndication is a sacred thing. You are working with somebody’s hard-earned money. They’re entrusting it to you. 

That’s why an investor who is looking for this type of potential upside in terms of returns, as well as tax benefits, needs to understand and be educated on their prospects. 

To learn more about oil and gas investing, listen in to our full episode. 

More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

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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Podcast: Exploring Huge Tax Benefits and Unique Profit Strategies in Oil and Gas

Mastering Market Trends to Find Late-Cycle Opportunities

They say the best deals go first … so it is too late in the cycle to find great real estate investment opportunities?

We say the answer is no. 

We’re visiting with a multi-market investor who is finding plenty of deals … even this deep into the economic cycle. 

Join us as we push past talk of bubbles and compressed cap rates to uncover deals still up for steals!

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

• Your dealing host, Robert Helms
• His reeling co-host, Russell Gray 
• President of ROI Turn Key Properties, Jared Garfield

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The complex market ecosystem

It’s not just important what you invest in … but where. 

Markets are different across the world. So, today we’re going to focus on studying market trends to find excellent real estate investments. 

There is a lot of talk about “the market cycle.” But you see, there’s not just one market cycle. And some market cycles run concurrently. Others lag … and some are completely opposite of others. 

The key is to make decisions on where to invest depending on where you think the puck is going. 

Remember that markets are more than just geography. They also take in demographics. 

Economic cycles affect markets too … and they are affected by the business cycle … the ebb and flow of supply and demand. 

It’s an extremely complex ecosystem. 

Because real estate moves slowly, you don’t day trade. You look out at the horizon and think about the long game. 

There’s also a lot you can learn from other people’s experiences. There are plenty of resources from people who have been through a market downturn or downward cycle before. 

Just don’t forget that in real estate, there is no one great, perfect real estate market. 

The trick is to match a market with your personal investment philosophy … who you are as an investor, what you’re trying to accomplish, your goals and dreams. 

Focusing on a handful of markets can make a lot of sense in the long term. 

Our guest is in a lot of markets and does a lot of thinking and research about this very topic … and he is here to talk about some of the markets he likes for investors today. 

Identifying and adapting to markets

Jared Garfield used to go to his grandfather’s real estate office, drink soda, and talk real estate. 

“From the time when I was a kid, I wanted to be in real estate and follow in the family business,” Jared says. 

But Jared learned from his family’s successes and failures … and what he learned was the power of diversification. 

Jared started buying houses in college. He bought foreclosures and flipped them for modest profits. After graduation, he built up a pretty large real estate portfolio. 

But Jared recognized that markets change. A market that is more cash flow oriented becomes more of an appreciation market over time. Dallas, Texas, is the perfect example. 

So, Jared spends a lot of his time watching that evolution and … to the best degree possible … anticipating it. 

“I developed a spreadsheet that analyzes 278 metropolitan statistical areas across the entire country on about 80 different metrics,” Jared says. 

Jared incorporated everything from poverty level to crime to test scores to media to affordability … and he looked at appreciation, building permits, job growth, population and more. 

“With that, we’ve identified some markets where you can really outperform many of the other markets,” Jared says. 

Jared also says it is important to think about submarkets. Investors tend to be the first in when there is an opportunity and the first to leave. 

So, Jared likes to look at secondary and tertiary markets. Take Huntsville, Alabama, for example. 

Huntsville is known as the Pentagon of the South. It’s home to NASA, Boeing, Lockheed, and Raytheon, and the FBI just moved 4,500 jobs from Langley to Huntsville. 

Jared bought foreclosed houses in C or C+ neighborhoods for $28,000 to $35,000. They put in an average of $30,000 into rehab. Five years later, those homes are selling for about $120,000. 

The cash flow is really good. 

But, Jared says, you have to deploy different strategies at different phases of the cycle. 

Now that Huntsville is no longer an absorption project … it’s expansion, full tilt … there is no reason to buy turnkey in C class neighborhoods. Instead, it makes more sense to buy new construction. 

“A market gives you what the market gives you, and you have to decide how to take that and turn it into something that makes sense,” Jared says. 

Selecting the right market for you

There’s a lot to learn about selecting and profiting in high cash flow markets … that’s why Jared has prepared a special report for our listeners. 

In this report, Jared shares how to choose markets … the metrics you should use and how to understand the difference between high cash flow markets and others. 

Jared also shares what things you should watch for in each of his top market picks. 

One of those big factors is the one-horse town. 

A one-horse town doesn’t mean small. It could also mean a big town with a very segmented workforce. 

Seattle took a bath when Boeing laid-off workers in 1990. Houston had it rough because it used to be pretty much just oil. You’ve got to have a diversity of employment and industries. 

“I like to invest in towns that are at least 300,000 in population and have a variety of employment sectors,” Jared says. 

With single-family investing, all the data is there for you to pick the right market and get high returns … you just have to know how to look. 

For more tips and experiences from Jared, listen in to the full episode!

More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

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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Podcast: Mastering Market Trends to Find Late-Cycle Opportunities

Clues in the News — The Fed, the Repo Market, and Real Estate Investing

When you’re an investor … the state of the financial system is always on your mind. 

The Fed shocked the world when it pushed an emergency infusion of cash into a distressed financial system. 

In 2008 … it took $85 billion per month to stabilize the U.S. financial system. 

Today, the Fed is injecting $75 billion PER DAY. 

Does this mean our financial system is in trouble? 

We’re searching for Clues in the News about the Fed, the Repo Market, and what it could mean for investors like you. 

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

• Your stable host, Robert Helms
• His fabled co-host, Russell Gray 

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Staying Smart in a Changing Market

We look at a lot more than just real estate. That’s how we stay smart in an ever-changing market. 

This week, we’re looking at what’s going on at the Federal Reserve … and we’re not just talking about the interest rate change. 

But let’s start there. 

The Fed came out and dropped interest rates by 25 basis points … which is one-quarter of one point. 

It’s important to note that the Fed doesn’t actually drop interest rates, because they don’t set interest rates. 

What they do is set a target and a range. 

They dropped the high end of the range down 25 basis points … and that manipulates the markets. 

The Fed also goes into markets and buys and sells bonds … again manipulating interest rates. 

So what is the effect of those actions on a real estate investor?

Sometimes it can be confusing … but it starts with understanding that yields … which are interest rates on bonds … are a function of supply and demand. 

When money floods into the bond market, it means that the interest rates come down. When money leaves the bond market, it means that interest rates go up. 

Many people think that if the Fed lowers the interest rates, mortgage rates are going to go down … BUT really the opposite is what would happen. 

Today, it’s different. 

The money that is moving around isn’t coming from the market. The Fed is putting more money into the system. 

That means investors are playing with new money that is in the system … and bonds go up and stocks go up. 

For the last decade, there has been a big infusion of money into bonds … so much so that it has driven interest rates yield down. 

There are $250 trillion of total bonds out there … $17 trillion of them are negative yields. 

It’s important to understand because, at the end of the day, a real estate investor is a user of debt. 

As investors, we have to pay attention to what the Fed is doing … and we should watch other investment categories like stocks and oil and gas and metals. 

All these things play together and play off of each other. 

The Repo Market

Now, something happened this week that hasn’t happened since 2008 … and it has got a lot of people nervous. 

The repo market dried up. People were going in to raise short-term cash … and there was no money. 

The repo market is like a pawn shop. It’s where Wall Street traders go to hawk a bond. It’s the same thing that house flippers do … but it happens in a day instead of over the course of several months. 

Remember that the bond that you hold is valuable because it has a rate of return. 

There’s a payment associated with it. It’s a poker chip in the Wall Street casino. 

Healthy markets require certain components. There has to be cash. There has to be assets. There have to be buyers. There have to be sellers … and there has to be trust. 

If any one of these components breaks down, then the system locks up until people fix whatever the problem is. 

On September 16, 2019, people showed up at the repo market … and there wasn’t enough. 

So, in order to get cash, they had to start bidding up or discounting what they were selling. 

Interest rates went all the way up to nearly 10 percent … and the Fed’s target is about 2 percent. 

So, the Fed had to step in. They pumped in $53 billion the first day. 

It wasn’t enough. The next day they had to put in another $75 billion. 

Still not enough. The third day, the Fed added in $75 billion more. 

That’s more than $200 billion in three days. And it STILL wasn’t enough. 

So, the Fed lowered the rates … and every single day of the following week they pumped another $75 billion into the market. 

The question for investors is … why did this happen?

Well, nobody knows. It’s a big mystery. 

Ultimately it all comes back to those key components … buyers, sellers, cash, assets, and trust. 

If there’s no cash, you can’t have buying and selling … and people don’t trust the marketplace enough to come in. 

What You Can Do To Prepare

Every listener out there that didn’t live through 2008 really needs to wake up and understand what can happen. 

For those of you that did live through 2008, this is probably like deja vu. 

But there are things you can … and probably should … do to be prepared just in case this is a real crash. 

It may not be. It may be just a little crash … but if you’re prepared, a crash is a great wealth-building opportunity. You can go into a marketplace and pick up bargains. 

The best thing you can do is get educated. Education is not just consuming knowledge and perspectives … it’s processing and thinking and conversing with experts. 

The second thing you can do is pay attention. We obsess about the news because there is so much you can learn from what is happening around you. 

From a practical portfolio management standpoint … right now you can lock in low rates for the long term. Take advantage of that. 

And you can take the combination of cheap interest rates and equity and pull some of that equity out and get liquid. 

Store that liquidity in something that allows you to pivot to other currencies. 

All of this is so you can be prudent as you look ahead into the unknown. 

Listen to the full episode to learn more about today’s Clues in the News!

More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

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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Short-Term Rentals for Long-Term Profits

Why do we like short-term rentals as an investment niche? Short-term rentals lead to long-term profits!

But don’t take our word for it. 

We’re talking with a real-life short-term rental investor to discover what it takes to be successful in the world of short-term rentals. 

Learn practical tips and tricks … and have some fun along the way. 

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

• Your long-suffering host, Robert Helms
• His short and sweet co-host, Russell Gray 
• International real estate investor, world traveler, and short-term rental guru, Tim Hubbard

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A Unique Investment Opportunity 

There are many ways to invest in real estate. 

You can put a tenant in a property and just let them stay for a long, long time … but there are actually reasons that shorter occupancy lengths can be really profitable. 

In fact, short-term rentals can be one of the most profitable ways to invest in real estate … and it can be one of the lower risk ways to invest in real estate. 

So, let’s set the stage. 

In most buy-and-hold situations, you have either a month-to-month rental period or an annual rental period. Sometimes a commercial property has a 5, 10, or 20-year lease. 

The amount of time that you’re tying up a property with the tenant completely depends on you, the property, and the marketplace. 

Recently, everyone has been enamored with vacation rentals. 

You buy a property in a niche market that people love to visit. Instead of renting it on a month-to-month basis, you rent it on a nightly or weekly basis … and that can up your returns. 

But there are also corporate rentals and contractor rentals … all kinds of ways to rent for shorter periods of time. 

And apps have made it possible for you to reach consumers without spending large amounts of money on advertising. 

One of the great things about short-term rental properties is that you can build up a clientele of repeat customers … people who fall in love with an area, have regular business in the area or come to visit family. 

When you develop that relationship with a client … just like you would with any tenant … they come back again and again … and maybe even tell other people. 

Another consideration is that many short-term rental opportunities also come with the potential for personal use. You could use the property when you travel and rent it for the rest of the time. 

But this is an area of real estate that takes a little more thought and education. You don’t just put a yard sign out in front of your property that says, “Available by the night.”

That’s why today, we’re chatting with an expert.

Making the Most of Your Short-Term Rental

We met Tim Hubbard many years back when he attended the Secrets of Successful Syndication. He then came on the Investors’ Summit, and he has been on every one since. 

Tim on his own account has more than two dozen of these types of short-term rental units. 

“All the properties I’ve acquired had long-term tenants in them. I just found traveling that you can get a lot more by the night, so I started doing that instead,” Tim says. 

Sometimes people stay in Tim’s properties for a longer amount of time … like for a month … but he is still getting nightly rates. 

Tim takes a unique approach to rentals. He doesn’t necessarily cater to just vacationers. 

“I try to find the best properties for business people first because they tend to come back more often, and they tend to travel alone. They’re professional, and they don’t have parties.” Tim says. 

But unlike a rental where tenants move in and out once a year, short-term renters are coming and going every few days. 

There’s a lot of housekeeping and a lot of operational pieces. 

It’s common for people starting out with their first property to clean themselves and handle guest messages … but by finding other ways to take care of that, you can scale quickly and continue to scale. 

Outside of having managers that run these processes for him, Tim has also found other ways to simplify the short-term rental experience. 

One way is by having digital locks with door codes on all the properties. This allows guests to check themselves in. 

Tim has also created guidebooks that go out digitally and give guests the necessary information they need to know about the property. 

“It’s really about figuring out what the guest is going to ask you before they show up and answering those questions before they even arrive,” Tim says. 

This cuts down on guest messages and increases the likelihood they will leave a great review at the end. 

You also need to offer some standard amenities. Think about the normal amenities you would find at a hotel like an iron and coffee. 

You Can Find Success

Many people think that you have to be in some big top market in order to attract guests … but that’s not true. 

There is a client that wants to stay at a unit like yours in almost any city that has commerce or industry. 

Like any other investment … it’s important to do your research. But with the right tools in place, you can find long-term success with short-term rentals. 

Listen to the full episode and learn more tips and tricks from Tim!

More From The Real Estate Guys™…

• Sign up for The Real Estate Guys™ Free Newsletter
• Check out all the great free info in our Special Reports library.
• Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
• Stay connected with The Real Estate Guys™ on Facebook,  and our Feedback page.

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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Podcast: Clues in the News – The Fed, the Repo Market, and Real Estate Investing

Podcast: Short Term Rentals for Long Term Profits

Ask The Guys – Recession Preparation, Note Investing, Gold Strategies

You’ve got questions. We’ve got answers. 

That’s right. It’s time for another segment of Ask The Guys … when we talk about trends, challenges, and investment opportunities. 

This time we’re tackling listener questions about investing in the face of a potential recession, the pros and cons of private note investing, whether it makes sense to leverage gold to invest in real estate … and more!

Remember … we aren’t tax advisors or legal professionals. 

We give ideas and information … NOT advice. 

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

• Your knowing host, Robert Helms
• His crowing co-host, Russell Gray 

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Preparing for a recession

James from Phoenix, Arizona, just moved to the area and is interested in purchasing a single-family rental property.

He wants to know what zip codes we feel offer the best opportunities for a solid cash flow, long-term equity investment.

He also wants to hear our thoughts on how we think a possible recession will affect the Phoenix housing market.

First off, we don’t get into the specificity of zip codes in any market. BUT we do know a great provider in Phoenix that absolutely has the answer.

It’s always better to find someone with boots on the ground knowledge to learn more about a marketplace. So, that’s our advice there. Find a good team member … and work with them.

But when it comes to recession … that’s something we can definitely talk about.

As a country, we recently had a tax code change. One of the biggest changes was that state and local taxes are no longer deductible on your federal income tax.

People who lived in high tax states like California are suddenly realizing what a big difference that deduction made … and they are moving to greener pastures.

Phoenix is a major metro that offers a lot of the quality of life amenities people want … and its close proximity to California makes it a hot destination for those fleeing the state’s high prices.

For investors, the key is to find properties with what we like to call “recession resistant pricing.”

If things go well, the value of the property moves up … but those rents are still in demand even when things in the economy aren’t doing as well.

So, your mission ought to be to get with a great local provider and work together to find properties that hit in this sweet spot.

The good news is that Phoenix is a market where we saw pretty good stability in the last downturn.

A look at note investing

Larry from Folsom, California, wants to know what we think about the notes business … and what we think about the notes business as a real estate business.

Some people like to invest in the property. Some people like to invest in the financing.

The note business means that you are writing mortgages, carrying back mortgages, placing private notes, or buying second-hand notes that are loans.

You get the note … and you get the interest … and you have the collateral against the property.

There are two primary reasons people invest in notes.

Some people invest in notes because they want the yield … they want the interest rate, which often can be higher than traditional mortgages.

Other people invest in notes or make hard money loans because what they really want is the property.

They make a loan to someone who is in need … if it pays off, great. If it doesn’t, they get the property.

So, the note business is an interesting business. It can be appealing because you are able to derive income without the hassle of landlording or the risk of the property going down in value.

But that doesn’t mean note investing is without capital risk. It all depends on whether you want to sell the note or not after you buy it.

Where the real money gets made in notes is when you’re trading in notes and you’re using distressed property.

You might go in and lend to somebody who may not be a prime borrower in an ideal situation … so they’re going to pay a premium.

That means you are going to get a little bit of extra interest … and maybe a little bit of extra protective equity.

You can also take things a step further and purchase loans from people who own them already and have decided for whatever reason they don’t want them.

So, you would offer them a discount to the face value of the note.

Now, you’ll be getting paid back more than you lend plus more!

And that discount is added to the interest that a person’s going to pay. That can bring your yield up quite a bit.

Another approach is to buy non-performing notes in the hopes that you can rehab them and get the person paying again OR that you’ll be successful in foreclosing on the collateral.

These types of notes can sometimes be bought for pennies on the dollar.

The key takeaway here is that there are a lot of different ways to get involved in the note side of the business for people who aren’t as interested in dealing with the real estate and tenant side of things.

You don’t have the landlord responsibilities … you do have the debt collection responsibilities.

Overall, we like the note business … but we don’t like the note business as a real estate business.

Now, this is just because of our personal investment philosophies. We don’t want to make a bunch of money because someone else had to be foreclosed on.

For us, it’s too messy and can be ugly. But if you have a more combative personality … it might work for you.

Leveraging against gold

Quentin from Mahomet, Illinois, is seeing the value of the dollar go down … and wondering why an investor shouldn’t just buy gold to use as collateral and leverage against it.

Quentin feels that if the dollar tanks, then your collateral … the price of gold … goes up all while your real estate cash flow asset makes money.

The question is … are there downsides to this approach?

Leveraging against gold has been on our mind for a long, long time.

It has only been in the last 50 years or so that gold hasn’t been money … there’s a good possibility it’s going to come back and eventually be money again.

Central banks are loading up on it. So, we don’t think it’s a bad idea to take some of your liquid reserves and put them into gold.

Gold shouldn’t be considered as an investment. Gold is a place to store wealth … just like cash.

But gold protects you from cash failing and has a longer track record of success.

Borrowing against gold is just like borrowing against any other asset. The equation always just comes down to being able to provide the cash flow to service all the debt involved.

If you lose control of cash flow … everything leveraged unravels.

Still, if you’ve done the math … and you feel comfortable … it’s not a bad way of thinking.

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