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.
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.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
Preparing for the mega-trends of the next decade …
We realize it’s only the START of 2019 …
But 2019 is the LAST year of the second decade of the 21st century.
And with our annual goal setting workshop coming up this weekend, we’re in the mood for thinking ahead. Like a decade ahead.
Perhaps you should too …
After all, real estate investing is based on long-term commitments … to markets, to properties, and often to financing.
Right now, there are more than a few reasons to think there are probably some MAJOR shifts coming … things which are important to consider in today’s investing decisions.
Consider this recent headline …
U.S. economy could slip from top spot in 2020 and keep slipping, analysts say – MarketWatch, January 14, 2019
“Standard Chartered predicts that China’s GDP will overtake the U.S. next year. What’s more, within another decade, India is pegged to push the U.S. even further down the list”
Think about that.
This isn’t some routine wave in an economic cycle. This is a complete global shift of economic (and probably military) power and influence.
Virtually NO ONE investing today has ever done so in a world where the United States and its almighty dollar aren’t the undisputed dominant economy and currency.
Of course, we’ve been talking for quite some time about preparing for the possibility of the U.S. dollar losing its unique and powerful position as the world’s reserve currency.
There are several internal and external forces working against it, in spite of recent relative strength.
In fact, Russia just dumped all its dollar holdings and traded them for Chinese yuan …
Russia Buys Quarter of World Yuan Reserves in Shift From Dollar – Bloomberg, January 9, 2019
These are both MEGA-trends … major shifts that are gradually taking place over a long period of time.
Back in 2016, Business Insider published an article about four mega-trends that could change the world by 2030 … including the U.S. losing top status.
Of course, we’re only a few years in. But IF you’re paying attention, you’ve been watching these trends slowly and surely develop.
Most people don’t even see it happening, much less have any understanding of what it might mean to them … or how to prepare.
We think that’s a mistake.
There’s an old investing adage which says, “the trend is your friend.”
In other words, it’s generally a losing proposition to invest against the trend. It’s just too powerful. Especially a mega-trend.
Sure, you can be contrarian and buy when others are selling or vice-versa.
But that’s just navigating cycles. If you get it wrong, you can simply wait it out because time often heals those wounds.
But a mega-trend isn’t a cycle. It’s a major long-term shift in the landscape. It fundamentally changes the way the world works.
The gradual erosion of the United States exclusive status is a powerful mega-trend.
Artificial intelligence is another.
In a recent news report, a leading expert predicts AI will displace 40 percent of world’s workers as soon as 2035.
That kind of disruption has the potential to impact economies, political systems, and your real estate investments.
So when thinking about the New Year ahead … we encourage you to start thinking about the next decade as well. Because big change is on the horizon.
Fortunately, real estate moves slowly … just like a mega-trend.
And because real estate is a permanent and essential part of human existence, there’s likely to be investment opportunity … so long as private property rights survive.
So what might all this mean to YOUR real estate investing?
It’s obviously way too much to unpack in a weekly newsletter, but here’s some food for thought as we approach the 3rd decade of the new millennium …
U.S. real estate could grow in appeal as a preferred wealth preservation haven for foreign investors.
Sure, the U.S. economy and dollar might get knocked out of the top spot. But the U.S. has a long and stable history of strong private property rights.
The same can’t be said for some these up and coming economies.
However, if the dollar loses reserve status, then dollar-denominated asset prices … along with interest rates … could surge in response to inflation.
So anyone who uses long-term fixed debt to acquire real estate BEFORE it happens could end up a two-time winner.
Rising prices against fixed debt makes equity happen. We like it.
The key is to pick markets and product types likely to see increased demand if economic conditions become more challenging for working class folks.
Of course, if economic conditions improve then all the better. But best to prepare for downward pressure.
These are themes we’ve been talking about for years … because the mega-trends driving them have been slowly developing for quite some time.
Be careful not to let routine cycles, political winds, or investing fads blind you to the mega-trends underneath it all. Mega-trends transcend all those things.
The good news is mega-trends move slowly.
So IF you’re paying attention, you’ll almost always have plenty of time to adjust your position to capture opportunity and mitigate risk.
The even better news is real estate is a tangible, essential asset … with a unique status. All stakeholders in society have a vested interest in keeping it valuable.
Not all investments can say that.
Of course, all investing involves risk. But so does NOT investing.
So it’s a matter of being strategic and taking well-calculated risks … which is why we think it’s critical to keep a keen eye on mega-trends as well as cycles.
When you play off the big picture, it smooths out short-term gyrations which can sucker Pollyanna investors to jump in … or spook skeptical investors into missing out.
That’s why we’re REALLY looking forward to spending a week with our incredible faculty members on our fast-approaching 17th annual Investor Summit at Sea™.
Of course, we hope you’ll join us.
But whether you do or don’t, we encourage you to get together with smart, experienced investors and discuss the way the world is changing …
… and how YOU can best position yourself to survive and thrive as the future unfolds.
Until next time … good investing!
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.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
The big story for 2019 will be …
As we’re winding down 2018, it’s time to rub our crystal balls and peer into the new year … and we see ….
Taxes.
For most high-earners, taxes are their biggest expense. And almost everyone who has to pay taxes would prefer not to … or at least pay less.
So while there are MANY trends and developments real estate investors should pay attention to in the new year …
… the biggest story may well end up being how market participants respond to their growing understanding of the revised tax code.
Thanks to tax strategy advocates like Tom Wheelwright, many people ALREADY investing in real estate are cashing in on the amazing tax benefits the new law gives to real estate investors.
But as investors of all stripes close the books on 2018 and start looking for tax breaks in the new year, we’re guessing many will discover real estate for the very first time.
Meanwhile, it’s quite possible stock investors will trade in their “buy the dip” strategy for “drop the falling knife” … and look for other, less volatile places to invest the proceeds.
While YOU may not be interested in the stock market, its recent tribulations are noteworthy because it may portend a shift of capital from Wall Street stocks to Main Street real estate.
And if you’re a syndicator talking with prospective investors, you should really have more than just a cursory understanding of what puts downward pressure on stocks.
After all, some of the jittery money still stuck in stocks just might be inclined to move your way … if you’re able to explain the case for real estate.
Besides tariffs and rising interest rates, there are two factors putting pressure on stocks but aren’t discussed much on mainstream financial news.
First, as interest rates rise, it’s less profitable for corporations to borrow heavily to buy back their own stocks.
Besides, many have already gorged themselves on cheap money while taking corporate debt to record levels. This alone is causing some concern.
And if rates resume their climb, debt service will begin to take a toll on corporate earnings as interest expenses rise.
There’s a second factor sucking the wind out of the corporate buyback sail …
The big tax break offered to corporations enticing them to bring their offshore money back to America has already worked most of its magic.
And a lot of the money ended up in stock buybacks.
But with the dual air pumps of cheap debt and repatriated offshore funds both losing pressure, stock buybacks are slowing … letting air out of the stock bubble.
Remember, asset values (prices) are largely based on “air pressure”. There always needs to be more money coming in to keep prices elevated.
On the other hand, income producing assets … like rental properties … derive their value from income. And because those incomes are relatively steady, so are the prices.
That’s why jilted stock investors often migrate into real estate.
Sure, they like flirting with the hot stocks when the punch bowl is full. But when the bowl runs dry, many investors choose to go home to old faithful … real estate.
And when you add in the new tax breaks, old faithful got a face lift … and is even MORE attractive.
But it gets better …
The world is really starting to buzz about Opportunity Zones.
O-zones promise huge tax breaks … and much of it is likely to provide long-term benefit to real estate in those designated areas.
Of course, like anything new, it takes time for folks to figure it out, to get in position, and make their moves.
That’s the advantage of being small. You can study fast and out-hustle the big money to get into position.
Then when big money finally shows up, you get to ride a wave.
So when we look at the upcoming year, we think the impact of the tax laws will continue to magnify a movement of money into real estate.
And even if the overall economy slows, it’s our guess real estate will continue to attract its unfair share of investor interest.
Now we’re starting to understand why Tom Wheelwright and Robert Kiyosaki get so excited about taxes, real estate, and infinite returns.
Until next time … good investing!
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.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
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.
Cover Your Assets Part 2 – International Structures for Extreme Protection
We live in a big world … one that offers benefits to those willing to step outside of their comfort zones.
In Part 1 of Cover Your Assets, we discussed domestic structures that can isolate and protect your assets in the case of legal trouble.
In Part 2, we’ll look at the bigger picture of asset protection.
We’ll discuss international asset protection structures and long-term wealth protection strategies … and we’ll also talk about what investors can do to protect their privacy and take advantage of tax laws.
It might sound complicated … but luckily, our guest Kevin Day is an expert in offshore asset protection and came on the show to simplify the topic for us.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your world-traveling host, Robert Helms
- His channel-surfing co-host, Russell Gray
- Best-selling author and lawyer Kevin Day
Listen
Subscribe
Broadcasting since 1997 with over 300 episodes on iTunes!
Review
When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).
Thanks!
Trusts 101
Kevin sat down to chat with us in breezy Belize.
He points out that U.S.-based investors have to be on their A game … because in this country of extreme litigation, “A lawsuit is equivalent to a lottery ticket” … for the person suing YOU.
One way to protect your wealth from lawsuits? Trusts.
Kevin took us through a brief history of trusts in the U.S.
Trusts were formerly designed solely to transfer wealth from one person to another. Revocable trusts were invented in the 1930s to allow people to set up a way to transfer their estates … and make tweaks to the structure along the way.
It wasn’t until the 1980s that the U.S. allowed people to name themselves as the beneficiary of a trust for the first time.
These trusts allow you to segregate your assets … so you still have a decent lifestyle and you can reduce your liability.
“It’s a way to firewall the various parts of your life,” says Kevin.
Trusts are unique because they don’t have an owner … they exist independently from you. That’s why their lawsuit proof, says Kevin.
If you set up legal structures, including trusts, while the seas are calm, you’ll be able to handle the lightning when it comes.
And once you go through the process, you can pay more attention to MAKING money than PROTECTING your money.
Getting started
Although setting up trusts can seem tricky, it isn’t that overwhelming if you take it step by step. Investors should get started early.
Most lawyers don’t teach clients about inter-entity planning … but when Kevin gets new clients, he takes them through a step-by-step process to help them protect their assets.
Kevin starts by completing a liability assessment to see how much liability the investor holds.
He looks at what protections that investor already has in place. This includes projecting the investor’s future plans to develop a streamlined structure. Assets are divided into three categories:
- Zero-liability assets, like your cash portfolio.
- High-liability assets; for example, a company that has employees or uses third-party providers
- Assets that are in between, like real estate … high-value, high-liability assets are included here.
He uses these three categories to see how exposed clients are. He then checks to see whether investors are holding the proper insurance … usually a moderate amount.
After that, he works with the client to set up the appropriate structures that will provide the most protection in the simplest way.
Are you an investor wanting to get started with a trust? Kevin suggests building up to an offshore trust by setting up a domestic trust with decanting provisions that will allow it to move offshore gracefully.
The WHEN and WHY of international trusts
We asked Kevin when it was appropriate for investors to consider offshore trust options.
He told us that investors with a net estate of over more than 4 million … and that includes their home, business, and rentals … should absolutely set up offshore options.
That’s the point where all your creature comforts are taken care of and any extra money you’re taking in goes toward growing your real estate business.
Under 2 million, an offshore trust is not appropriate, simply because of the cost-to-benefit ratio.
Between that 2 and 4 million mark is where there’s some leeway. If you have a high-liability business, you probably shouldn’t go international. But if you’ve just hit a home run and you’re growing exponentially, then you should consider an offshore account.
Offshore options allow investors to lower their profile in case of a lawsuit, says Kevin. Lawsuits feel like blackmail … and what you look like from a public view will change the lawyer’s perspective.
Trusts can help you manage privacy concerns about how much of your wealth shows up on the public record.
Why is this so important? If you’re sued, there’s a discovery period where the other attorney can look at your assets.
Eighty percent of the time, says Kevin, those attorneys don’t look into how your assets are structured … and the other 20 percent of the time, they see international structures and think getting that money is more trouble than it’s worth.
Worry less with offshore trusts
Kevin says investors have three things to worry about:
- Taxation
- Privacy
- Asset protection
According to him, the great thing is that trusts help in all three areas.
Lawsuit protection trusts are tax neutral … and don’t rely on keeping secrets from the IRS. They also offer complete bars to anyone who wants access to your money.
What if you own property offshore? Americans who own foreign companies don’t have to pay tax until their income is repatriated. Setting up your income to be non-subpart F can be very easy, says Kevin … with the right professional help.
There’s no point in building up your assets without also protecting them so you don’t lose everything when disaster strikes.
Exploring your opportunities for asset protection means looking at offshore options.
So much real estate education is fun and aspirational. Asset protection is a down-and-dirty topic … but it’s SO important.
Being a real estate investor means dealing with real threats and the possibility of bad deals and mistakes. It’s essential to discuss what could go wrong … while everything is still going right.
That’s why we’re so glad to have an expert in offshore protection in our fold! We want YOU to know your options for asset protection so that if the lightning hits, you can have one piece of your business fail without everything else falling apart.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
Cover Your Assets Part 1 – Protecting Your Wealth Today and Tomorrow
An essential element of real estate investing is protecting the assets you’ve worked so hard to acquire.
When you’re just starting out, your investment business is pretty low liability. But as you acquire properties, the liabilities build up … and a legal problem with one property could cascade and affect your other assets if you don’t have the proper protections in place.
In this show, we’ll talk with a Rich Dad advisor on how to sort your assets into buckets so you NEVER lose everything at once.
Part one of this two-part series is for beginners and experienced investors alike. As John F. Kennedy said, “The time to repair a roof is when the sun is shining.” NOW is the time to put in place protections to keep you safe if troubles arise.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your host, asset Robert Helms
- His liability of a co-host, Russell Gray
- Garrett Sutton, best-selling author and legal advisor to Robert Kiyosaki
Listen
***
Subscribe
Broadcasting since 1997 with over 300 episodes on iTunes!
Review
When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).
Thanks!
Firewall your assets
The society we live in is very litigious … and that’s not going to change any time soon. So what can investors do?
We talked to Garrett Sutton about precautions YOU can take to protect your assets as they grow.
Your best option, Garrett says, is probably an LLC, simply because they provide the best asset protection. An LLC allows you to firewall your assets so one lawsuit doesn’t set off a chain reaction that leaves you asset-less.
Why is an LLC better than a corporation? Besides better asset protection, LLCs offer more tax flexibility and charging order protection.
Charging orders are legal judgments that allow creditors to access the money you make through your business. But some states offer charging order protection to LLCs.
And, Garrett says, most lawyers prefer to go through insurance so they can collect right away. So ideally investors have two firewall protections … an LLC or corporation AND insurance to back them up.
Some states, like Utah, California, and New York, don’t provide great asset protection for LLCs. Creditors can blow through the LLC and force the sale of assets … not ideal.
What can you do if you live in a state that doesn’t have the best rules for entities? Garrett reminds us you DON’T have to form an entity in the same state as your property or your residence.
How to set up your own LLC
While setting up an LLC may sound onerous and difficult, Garret says it’s really not that hard. There are two main steps:
- Set up an LLC in the state you want.
- Pick a name and make sure the name is available
- File your articles of organization, operating agreement, and certificates.
- Transfer the title of your property into the name of your LLC. This is NOT a sale … simply a transfer.
While there are plenty of websites advertising do-it-yourself LLC help, it’s much better to talk to an attorney, says Garrett.
A certified legal professional can walk you through all the steps and help you understand which business decisions are right for you.
And, an attorney will help you stay aware of formalities … the easy-to-follow rules that will keep your LLC safe from legal troubles.
Fine-tune your asset protection strategy
Garrett is a best-selling author. His books on starting your own corporation or LLC cover the strategies and techniques YOU can use to increase wealth and reduce risk.
A technique SOME people use is changing their LLC from partnership taxation to C or S corporation taxation.
That’s fine, says Garrett … as long as you don’t forget to amend your operating agreement.
Business decisions as simple as tax changes have many permutations we don’t even think about … another reason an asset protection attorney is essential.
Other investors are looking into offshore asset protection trusts. Something some investors don’t realize is that more than 10 states have created onshore trusts. But while these trusts make your money bulletproof, recent cases have demonstrated that it’s only bulletproof in the state where you’ve set up the trust.
Although there are many tricks for upping your protection level … and your wealth … investors don’t need 17 layers of LLCs.
They also don’t need to spend a ridiculous amount of money to form an LLC. For example, a Wyoming LLC provides great protection levels, for only $50 a year (plus any legal fees).
And LLCs don’t mean you’re locked into operating decisions. You have the latitude to make changes. LLCs are flexible!
Interested in delving deeper into the legal realm of asset protection? Delve into what Garrett has to offer on his website.
And while Garrett provides affordable asset protection and legal services, that doesn’t mean you shouldn’t seek out your own legal help … just make sure the people you work with are serious about helping small investors stay on top of corporate formalities.
In part two of our asset protection series, we’ll delve deeper into the legal world with a discussion of offshore asset protection strategies. Listen in for info on taking your profits outside of the States!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
The Market Detective – Uncovering Clues for Finding Great Markets
Across the country, real estate markets are hot … and getting hotter. That means compressed cap rates … which in turn mean a lower rate of return for investors.
So how can investors find a market that will offer great returns in good times and bad? In today’s show, we’ll discuss the market fundamentals that can make or break your next real estate investment deal.
Luckily, markets leave clues. If you’re an excellent market detective, you’ll be able to spot subtle indicators that will help you make an educated guess about the market’s future.
For this episode of The Real Estate Guys™ show, we recruited the best private eye we know to guide us through his analytical approach to investigating and choosing new investment markets.
You’ll hear from:
- Your sleuthing host, Robert Helms
- His clueless co-host, Russell Gray
- Real estate developer and author Victor Menasce
Listen
Subscribe
Broadcasting since 1997 with over 300 episodes on iTunes!
Review
When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).
Thanks!
Stepping into new markets with Victor Menasce
Victor Menasce is the author of Magnetic Capital and a successful U.S.-based real estate developer. He’s a strong believer in the principle that the best markets aren’t necessarily the ones you live in … or near.
Instead of automatically going for nearby markets, Victor undergoes a thorough evaluation process for potential markets, whether they’re near or far.
One of the things we look for when we’re analyzing a new market is net in-migration … essentially, we want to know whether there are more people entering the market than exiting.
Metrics like these can help you predict whether a market will serve your investment goals.
For Victor, market evaluation begins with the most basic metric of all … supply and demand. That means choosing a market where demand outpaces supply.
He says investors should focus on three things when entering a new investment deal, in the order listed:
- The market.
- The team who has boots on the ground in that market.
- The specific investment opportunity.
If you perform due diligence on the market and the team and something doesn’t line up, then you need to step back and reassess … before you even look at specific investment opportunities.
Philadelphia market analysis
To model his process for market choice, Victor guided us through an analysis of one of his current investment markets … Philadelphia.
“You have to look on the macro level,” Victor says.
Like many large American cities, Philadelphia has a large low-income population. This is a benefit, says Victor, because it creates areas where high-priced real estate and low-priced real estate brush up against each other.
The key is to find the arbitrary line between high and low properties … and then move that line by creating value.
Another reason Philadelphia is so successful is because of its proximity to an overpriced, overcrowded market … New York City. Victor says he sees a lot of renters moving from the New York market to Philadelphia because of its relative affordability and proximity to the Big Apple.
Two other big factors Victor looks at are population influx and job creation and availability.
He also evaluates cap-rate compression. That’s how he discovered that he can build new for 25 to 30 percent less than he can buy used. “That’s a competitive advantage,” Victor points out. “We’re creating opportunity out of thin air.”
Another point of consideration is rental rate per square foot. In Philadelphia, Victor can charge between $1.50 and $1.75 per square foot … $1,200 to $1,400 per month for an 800-square foot B-class apartment.
Victor compares that to Raleigh, North Carolina, where the average rents average $1.15 per square foot, even for class A properties. That’s about $920 for the same 800-square-foot apartment, for context.
Although rents differ, the cost of building in Raleigh and Philadelphia is comparable. That’s why Philadelphia makes far more financial sense for Victor.
Victor also walked us through the process of finding a team in the Philadelphia market. “I only go to Philadelphia one to two times a year,” he says. He started by making friends with an active group of investors already in Philadelphia who had good connections to local contractors and businesses.
Then, he amassed property by buying land and derelict structures for “pennies on the dollar.”
Lake Charles, Louisiana market analysis
Although big markets like Philadelphia generally make more sense for real estate investors and developers than smaller markets with fewer resources and infrastructure, Victor is currently investing in properties in a small town in Louisiana.
Why? The town, Lake Charles, has several compelling factors that make it a great place for long-term investing.
He walked us through his process of discovery and analysis.
Through personal relationships with people in the Louisiana real estate market, Victor came across Lake Charles, a town on the I-10 corridor.
The town is poised to produce 118 BILLION dollars of natural gas over the next decade … now that’s a staggering number.
Because of its increasingly important status as an exporter of natural gas, jobs and ancillary services are expected to increase over the next decade … and with that, the population is expected to keep rising.
With 48-50 billion dollars of construction in the works or anticipated, the population growth isn’t solely temporary workers, but also new permanent residents.
This is a town where skilled labor prevails, so the average household income is north of 90k a year … not the typical tenant profile. That means rents in Lake Charles average around $1.50 per square feet, even though it’s not a major city.
Because Lake Charles is growing so rapidly, it needs construction of all kinds. So Victor has dipped his feet into several markets, including workforce, family, and senior housing as well as medical offices.
It’s a lesson to investors … start with the market, then discover the needs and assemble a team to address those needs. Investors who go into markets operating only in a small niche may miss the best opportunities.
Why is Victor so confident in Lake Charles? “This is a town that has embraced heavy industry,” he says. He expects few obstacles to pop up as the town continues to grow. And he’s confident in his assessment because he has relied on folks who have their boots on the ground.
Treat real estate investing like a business
Victor has a pragmatic approach to market analysis. He’s logical and thorough and treats every investment decision like it’s a business decision.
We like to say that most people know a little about a lot, but Victor knows a lot about a lot. But he also knows his limits.
It’s really hard to be involved in more than a handful of markets at once … careful investors can’t do the kind of analysis Victor has done for Lake Charles for 30 markets simultaneously.
And Victor has spent the time to cultivate relationships with his teams in Lake Charles and Philadelphia. That’s important too.
We think Victor is a great resource for investors looking to take a careful approach to market choice and more. Looking for more real estate wisdom? Listen in to his Real Estate Espresso podcast, a 5-minute, interview-style briefing he puts out 7 days a week.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
Profitable Niches – Agricultural Investing
Throughout our Profitable Niches series, the message has been clear … there’s more than one way to invest in real estate. It’s so much more than single-family homes and apartment buildings. And, in today’s market, when some of the more traditional investments are stretched, it’s a good idea to think about something new and fresh.
Agricultural investing may not have been on your radar, but that’s about to change! And no, you don’t have to have a green thumb to participate. We’re talking with an expert guest who has blazed a trail into a market that’s energizing AND tasty.
As a sweet bonus, you can support a socially sustainable program as well. Check it out!
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your cultivating host, Robert Helms
- His growing co-host, Russell Gray
- Friend and farmer, David Sewell, Founder of International Coffee Farms
Listen
Subscribe
Broadcasting since 1997 with over 300 episodes on iTunes!
Review
When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).
Thanks!
From beans to mug or bar … picking a crop
Just like everyone needs a roof over their head, everyone has to eat. That means there’s a demand for agricultural products and an opportunity for investors to do well in agriculture.
All it takes is a little education on the language of agricultural investing. In housing, it’s all about markets and demands. Agriculture has the same learning curve. Once you understand the geography, the demand for products, and a little of the science behind growing, you’re on your way to getting a foothold in agriculture.
But, agriculture is a wide world, so we’ll narrow our focus.
Our guest, David Sewell, started in agricultural investing with one product: coffee. It has a long shelf life, doesn’t perish quickly, and there’s enormous demand for specialty coffee with limited supply.
Specialty, socially sustainable coffee has been David’s niche since 2014. He purchases farms that are managed poorly, spends time working on the soil, understanding the climate, planting trees, and building a system that delivers product at a great return.
“Specialty coffee is a unique product that’s managed by the tree,” David says. “Specialty coffee is hand-picked, one cherry at a time.”
One of the best things about specialty coffee is that the limited growing geography drives up demand. But it takes some time to get a farm turned around to producing. Just like any gardening project, it takes patience and skill.
Since David started his business in 2014, he has worked through plenty of challenges and developed an amazing model that is blazing a trail in agricultural investing.
And now, he’s moved into a second crop.
“A good way to start the day is with a good cup of coffee and, in the evening, end it with a couple pieces of chocolate,” David says.
The demand for specialty, fine-flavored cacao is rising, and the supply is even MORE limited than specialty coffee. David’s cacao choice is particularly a specialty in Belize.
David took what he learned from coffee in Panama and rehabbed a few farms in Belize with the same, successful model.
With a little science, ingenuity, and care, David has capitalized on the demand for specialty products. He has 154 farmers who sell their crop exclusively to him, in his centralized processing facility.
“It’s what they needed,” David says. “So, we can control the cacao.”
David has three farms as well as a trading company that buys and sells literal tons of beans every weekend.
They’ve all been trained on organic processes, and together, they use the centralized processing systems he has built to make an efficient product that is ready for market.
Socially Sustainable Investing
Conditions on a coffee farm aren’t known for being great. That is different on David’s farms. He takes care of his 35 farm hands, and it has paid off.
“We’re proud to say that with the compensation program we’re able to provide and with the love and attention we’ve paid them, we haven’t had one turnover in 3 years,” David says. “We take care of the people.”
David’s farms change the way workers live. They receive good rain gear, so they aren’t picking cherries or tending to trees in the rain wearing a trash bag. Kids aren’t allowed on the farm … they attend school.
Families live in provided housing with electricity, flushing toilets, and other amenities that we often take for granted.
And, while these benefits for employees are key to David’s business, it’s not all altruistic. Labor turnover is expensive, and taking care of workers keeps them from leaving.
Beyond just the living conditions, workers are sent to seminars and congresses to build up their skills so they become even more educated and grow with the company.
This dedication to his workers shows by the passion and dedication they bring to the field and to the job every day. His workforce is expert in cacao and coffee, and that drives the superior flavor … and price.
That makes investing in opportunities like David’s even more exciting and sweeter for investors. Not only can you make money, but you can also make a difference.
Small-scale agricultural investing
One of the drawbacks to agricultural investing is understanding the science and process to growing, processing, and distributing a product. It takes time and experience to know a good opportunity and to succeed.
For instance, David learned early on that the biggest hurdle was the deeding process for international property. He warns that it is difficult to do on an individual basis.
But, David has found an interesting way to let people play with agricultural investing.
“We’ve focused on the delivery part of the investment vehicle,” David says. “That’s the hard part and where failure happens in many cases.”
With David’s business, he wanted to use his knowledge of syndication to make agricultural investing more accessible for people, regardless of their knowledge level and even for those who couldn’t buy an entire farm.
David’s farms are broken out into ½ acre parcels that can be bought individually or in groups. The parcel is deeded an individual investor or entity’s name, and it’s essentially a turnkey investment. It’s managed and operated by David’s team and investors not only get the returns, but also the knowledge that they’re participating in a socially sustainable program.
For investors looking for a legacy investment to pass on to their kids, or to invest in a program that’s socially sustainable, this is worth a serious look.
To learn more about David’s coffee and cacao operation and how you can get involved, send an email to beans [at] realestateguysradio [dot] com, and we’ll get you his special report on both opportunities!
And, we’d love to see you in September with David at our Secrets of Successful Syndication seminar. Here’s where to sign up!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
MANY lessons from Amazon’s HQ2 search …
You’ve probably noticed Amazon is taking over the world. There’s a lot we could say, but we’ll narrow our focus to lessons for real estate investors …
In the May Housing News Report, there’s an article about Amazon’s ongoing search for their second headquarters (HQ2).
Even from just a real estate perspective, Amazon is a fascinating company to watch. There are SO many lessons to be gleaned from watching what they’re doing … and how the world is reacting.
In case you’re new to the Amazon HQ2 story …
In 2017, Amazon put out a Request for Proposal (RFP) to bait cities across the U.S. into falling all over themselves to win Amazon’s coveted second headquarters …
… and the 50,000 high-paying jobs (average salary = $100,000 per year) that come with it. We commented on this story at the time.
At first, there were hundreds of cities in the hunt. We said at the time we think there’s an excellent chance Amazon will pick Atlanta.
Early in 2018, the race narrowed to 20 finalists … and Atlanta’s still on the list.
Which brings us to now …
In the Housing News Report article, there’s a link to an analysis by Daren Blomquist of Attom Data Solutions. Daren ranked the 20 finalists by comparing the cities on certain criteria defined in Amazon’s original RFP.
It’s the same process we did, except Daren used actual data … we just guessed.
Here’s Daren’s actual chart for your viewing pleasure …
Notice Atlanta’s ranked #2. So our hunch is holding its own … so far.
Meanwhile, there several useful things to glean from this chart and the story behind it, so let’s dig in …
Single family homes are NOT an asset class
We’ve said it a thousand times, but just look at the median prices. They range from $130,000 in Indianapolis to $1.445 MILLION in New York.
When people say, “Housing is in a bubble!” … what housing are they talking about? Indy? Seems pretty cheap based on median price and affordability.
And when high-priced markets start hitting the top of their affordability range, people MOVE … to more affordable markets. People ALWAYS need a place to live.
So while it’s true that migration patterns drive prices … demand rises or falls as people move in or out … it’s often economics that drive migration patterns.
So an alert investor can get in front of growing demand and ride a wave up. That’s exactly what the folks who got into Dallas five years ago have done.
Equity happens … but not evenly
Look at the disparity in five-year appreciation rates among these markets … from just 8% in Montgomery County to 246% in Dallas. HUGE difference!
Even in markets where median prices are similar … say Dallas and Miami… the five-year appreciation variance is substantial … Dallas coming in at 246% and Miami at “only” 71%.
So price doesn’t seem to be the deciding factor for appreciation.
And neither does property tax … as Dallas is second highest behind New Jersey (hey, New Jersey had to win at something), but Dallas is still king of appreciation.
Meanwhile Denver has the lowest property tax … half of Atlanta … yet their appreciation rates were about the same.
And price-to-income ratios don’t seem to make the difference either … as Los Angeles and New York are both equally unaffordable, yet New York has half the appreciation.
Keep it simple …
Obviously, this is just one chart … and it’s easy to get lost in the weeds. We don’t want paralysis from analysis. So charts like these are just the start of a deeper dive.
But it doesn’t have to be complicated. Here’s what we look for …
What do winners have in common?
Dallas and Austin are both triple-digit appreciators … even though Dallas grew at twice the rate of Austin. Is it just simply they’re both in Texas or is there more to the story?
Of course, 10 years ago, Dallas was coming off being one of the slowest appreciating markets in the country. So something changed that dramatically…
What’s driving appreciation?
Prices get bid up when supply is growing more slowly than demand with capacity to pay.
So though you can see affordability based on income on this chart, you can’t see supply and demand drivers. Neither can you see the economic drivers.
But you need to look at them.
That’s why we say you can’t study 20 markets well. It’s too much. Use a chart like this to pick your top three … and get to know them very well.
What markets are poised for growth?
Once you understand what makes a market like Dallas tick … and how it went from no growth to explosive growth … you can watch for similar factors in sleepy markets.
When you spot something interesting, you go in for a closer look. If things go your way, you get there before the masses … and you get to catch a rising star!
What are the big players doing?
Big players can do research you can’t. But that’s okay because you can piggy-back on their hard work. It’s like cheating off the smart kid in school, except you don’t get detention.
Amazon is a juggernaut in American business … and their power is impacting real estate of all kinds … retail, industrial, and even office and housing in markets where they have a footprint.
That’s why SO much attention is being paid to their search for HQ2.
But another reason to watch is they’re leaders in business decision making too. Other employers are watching what Amazon does and being influenced by it.
So when Amazon ultimately picks a city, we’re guessing other companies will cheat off their homework … and pick the same city.
The reason we bet on Atlanta is because many other Fortune 1000 companies had already chosen Atlanta as a great place to set up shop.
We don’t know what process they went through to get there. We just know they did. So as Amazon goes through its process … they may reach similar conclusions.
Of course, Raleigh is also home to a comparable number of big companies.
But based on the world-class airport, huge labor pool, access to higher education, major distribution, and a business-friendly environment … though it’s close, we still think Atlanta has the edge.
Then again, Jeff Bezos isn’t consulting with us, so we’ll just have to wait and see like everyone else.
Meanwhile, as the field narrows, we’ll continue to learn where corporate leaders think the best location is for their businesses, employees, and new job creation.
Until next time … good investing!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
Ask The Guys – Unraveling the Mysteries of Real Estate
It’s one of our favorite segments … answering YOUR real-world questions about real estate investing.
In this batch of mail, we run through where to start with syndication and investing to how to think about self-directed retirement funds and everything in between.
As a reminder, our show is about offering ideas and information, but we are not legal or tax professionals and do not give advice. Always see a pro for advice on your specific situation.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your problem-solving host, Robert Helms
- His unraveling co-host, Russell Gray
Listen
Subscribe
Broadcasting since 1997 with over 300 episodes on iTunes!
Review
When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).
Thanks!
Question: I’m a real estate agent and would like to start investing for myself. How do I get started?
Kristen in Seattle, Washington, brought us this wonderful question. First of all, hats off to you for wanting to be your own best client!
Starting with the right education is so important and so is developing your network. You might consider joining an investment club, but you could also think even bigger and start your own!
Starting a syndication or investment club can be very successful if you surround yourself with the right people and experts. Here’s a few people you’ll probably want to include:
✓ A CPA to help with understanding tax benefits
✓ A mortgage broker to extract excess equity
✓ Other real estate agents … especially those with investment knowledge
You can convert your pursuit of education into a profitable business. Start by going to events with meetups and investment clubs. Remember, it’s not just the presenters who have a great story. It’s also the people in the seats. Make lasting connections with other attendees, and bring them into your network.
Question: Which materials … books and blogs should I read for getting educated in investing?
Our best advice to Luca in Croatia, who submitted this question, is to not just read a book … STUDY a book. Prepare your mindset to start thinking like an entrepreneur.
What does this mean? Find a group of people who are interested in investing, and get together and discuss a book.
You’ll learn by listening to what others have to say AND teaching different concepts. Repeat the process of learn, study, teach, and use these discussion groups to build your network.
Recruit people who are further along in the investment process than you to learn from them. You want to discover not only the technical aspects of what they do, but also how they think. Explore their mindset and examine how it makes them successful.
Question: I want to self-direct my retirement funds after I leave my job. How can I use this money to invest in real estate?
This question comes from Jason in Stokesdale, North Carolina. Some aspects of this type of investing can get a little tricky, so remember to always seek advice from a tax and legal professional.
For money that’s in a 401k from an employer, you might have access to what’s called an in-service withdrawal. You might also consider taking out a loan on your 401k.
As with any investment, make sure that the numbers add up, especially since there are important tax considerations to make when you’re investing borrowed money. This is also where a CPA will come in handy.
The vast majority of custodians do not allow for traditional investing and don’t charge a lot in fees and maintenance charges because they make a piece of what you’re investing in. Non-traditional custodians may charge more fees upfront because they do not make a piece of anything you invest in, but they can offer more flexibility in what you invest in.
If you want to know more on this topic, we have a couple reports that might be helpful on Qualified Retirement Plans (QRP) and Individual Retirement Accounts (IRA). You can get both of those by emailing QRP (at) realestateguysradio (dot) com AND IRA (at) realestateguysradio (dot) com.
Question: For those who don’t like all the work of real estate investing, how do you find a trusted syndicator?
Roy in Bridgewater, New Jersey, and Patrick in San Diego, California had similar questions about passive investing through a syndicator. They both want to break into the bigger real estate deals, but are worried about putting their money into the wrong hands. Syndication is a powerful tool that we’re big fans of here on the podcast, but vetting your syndicator is key!
First, look up all the info you can on your sponsor and know who you’re dealing with. Ask them upfront if there’s anything important you should know about them or their business, and then, go searching.
Referrals are a good way to get to know your sponsor. Careful Google searching (watch out for false information on the internet!) and looking up professional licenses and potential trouble with regulators are also essential before doing a deal.
Also, make sure their attorneys and legal documentation all checks out.
As we’ve said many times before … develop a relationship with the sponsor. Take the time to get to know them and the types of deals they do to make sure it’s a good match.
We’d love to talk to you more about syndication at our Secrets of Successful Syndication event on September 13-14. Register now!
Question: I have a commercial property near the end of its lease. Should I sell it or keep the passive income?
Colleen in Savannah, Georgia, has had a triple-net (commercial) property for 13 years, but the lease will be up in 4 years. She enjoys the passive income from the property, but wants to know if it might be time to let it go.
We discussed the advantages of commercial property in detail with Tom Wilson in our Profitable Niches series, and the longer leases and steady income are definitely big pluses!
Lease negotiation can happen before a lease is up, so that’s an option to make the deal sweeter for a potential buyer. But, here are a couple questions we would ask to determine if selling is the right choice:
✓ Knowing what you know now, would you buy it?
✓ If you did sell it, what would you do with the money?
Ultimately, the decision to sell or keep the property is up to you, but evaluating the lease with fresh eyes is a good way to keep your investments in line with your goals!
Question: How can I make some of my assets more liquid to prepare for an economic downturn?
Marty in Richmond, Virginia, has some real estate investment experience, but he’s concerned about a possible negative turn in the economy and how to protect some of his assets he’s received after selling a property.
We discussed the state of the economy and how to protect and grow wealth at great length in our video series: The Future of Money & Wealth. Take a look at that seminar for valuable insights from incredible experts.
To answer the question, if you think the market is going to downturn, you’ll want to play your investments differently. There are pros and cons for stock market investment and even bank investment, and they all carry different risks.
If you want something that is liquid and fairly stable in relation to the dollar, you could consider a couple options like currencies, precious metals like gold, or putting your money in the bank or a safe.
Some other creative strategies are looking into a private mortgage or note or even paying cash outright for a property. As long as you’re able to cover property taxes, having a property in a stable market is a good way to keep cash flowing in a down market. Even in a poor economy, people need a place to live.
Question: How many times a year is your syndication class given?
This was an easy one from Floyd in Las Vegas, Nevada. We do our Secrets of Successful Syndication podcast twice a year. The next one is coming up in September, and we’d love to see you there!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter and visit 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.
Lastest Tweets