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

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

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

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

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

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

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


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!


How do I find a property management company?

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

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

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

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

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

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

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

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

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

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

How do Section 8 rentals work?

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

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

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

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

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

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

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

Should I invest now, or later?

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

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

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

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

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

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

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

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

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

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

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

How do I create residual income with little savings?

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

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

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

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

Some options …

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

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

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

Can you recommend turnkey management companies?

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

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

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

But we do know lots of other great folks.

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

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

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

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

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

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

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

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

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

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


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

5 Things I Wish I Knew Before I Started Wholesaling Real Estate

5 Things I Wish I Knew Before I Started Wholesaling Real Estate

 

Find a good deal … find an investor … and get paid!

Wholesaling real estate is one of the fastest and easiest ways for new investors to get into the game.

You don’t need a license. You don’t need a lot of money. You don’t need good credit … and you can get started with just a few hours a week.

Wholesaling is simple … but it takes unique know-how to make it into an explosive source of passive income.

In this special report, Tom Krol, founder of Wholesaling Inc., shares the biggest lessons he has learned in this investment niche.

Dive in and discover:

  • What the wholesaling process looks like in the real world
  • How to generate a LOT of passive income
  • True success stories of investors like YOU

Do more deals, own more properties, and make more money. Simply fill out the form below to get your free copy of “5 Things I Wish I Knew Before I Started Wholesaling Real Estate.

Physical Precious Metals – A Guide to Getting Started

Physical Precious Metals – A Guide to Getting Started

 

Gold, silver, platinum, and palladium … oh my!

Diversify your investment portfolio with a real asset that stands the test of time.

Physical precious metals are widely traded and competitively priced. This makes coins and bullion … from gold and silver to platinum and palladium … a great arena for beginning investors.

Dana Samuelson has worked for some of the most influential precious metals trading companies. In this exclusive guide, Dana shares knowledge gleaned from more than thirty years of experience with YOU.

Jump in and learn:

  • The dos and don’ts of dealing in precious metals
  • Which products Dana recommends and why
  • Why scarcer, historical coins are viable investment options
  • And much more!

Simply fill out the form below to get your free copy of “Physical Precious Metals – A Guide to Getting Started…”

Exploring the Tax Advantages of Oil & Gas

Exploring the Tax Advantages of Oil & Gas

 

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

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

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

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

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

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

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

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

Preparing for the Future of Interest Rates and the Dollar

We’re concerned about interest rates … and you should be too.

Consistently rising interest rates affect your ability to borrow money for investments.

In this episode of The Real Estate Guys™ show, we dig into how the Federal Reserve and central banks affect interest rates. We talk about the future of the dollar. And we discuss how rising interest rates affect YOU.

We met with two knowledgeable experts in the economics field. You’ll hear from:

  • Your interested host, Robert Helms
  • His uninteresting co-host, Russell Gray
  • James Grant, economic expert and author of eight books on the U.S. financial system
  • Nomi Prins, former Wall Street analyst, journalist, and six-time author

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


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!


James Grant on interest rates and securities

James Grant was named by Ron Paul as his likely candidate for Chairman of the Federal Reserve. Over the years, he has been a voice of reason … he calls himself “a ‘yes, but’ guy in a ‘gee whiz’ world.”

We got right into the subject of interest … interest rates.

Are rates going up? “Rates tend to trend over the long term,” James says.

They’ve been on the down-swing since the 1980s, but they may be on the up-swing again … and although rates are currently rising, James emphasizes we’ll have to wait and see whether the trend continues.

James says investors should look to the bond market for clues.

A 10-year treasury bond delivered a yield of 1.37 percent in 2016 … the lowest yield since the year 1311, according to a study by the Bank of England.

In the early 80s, a 30-year security would’ve netted you a 14 percent yield. That’s a big difference.

Today, almost every security is priced next to nothing when investors account for taxes and inflation, James says.

Who manipulates interest rates? The Federal Reserve.

“It’s an act of malpractice that the Fed and central banks worldwide are manipulating these rates,” he says.

And real estate cap rates are driven by interest rates.

To James, this means we now live in a world of great danger. “We live in a kind of hall of mirrors,” he says.

On forecasting the future and investing in gold

James notes forecasts are for people who think they know what’s going to happen … when the reality is, no one actually knows.

“We can’t know the future, but we can know how it’s being handicapped in the present,” James says.

He finds it helpful to remind himself of how our descendants will think of us.

And he says, “Successful investing is about having everyone agree with you … later.” Investors must imagine plausible outcomes before the market catches up.

We asked him his thoughts on gold investing. “Gold is interesting because it’s where people flee,” James says. “But it’s really an investment, not a flight asset.”

Gold is a way to step outside of orthodox institution investments. “Gold is simply money to me. It’s a cash balance. It’s something the central bankers can’t debase.”

To hear more from James Grant … and keep your eye on interest rates … check out Grant’s Interest Rate Observer, an independent journal covering financial markets.

Nomi Prins on the Federal Reserve and the world market

Journalist Nomi Prins was a member of Senator Bernie Sanders’ panel of advisors on Federal Reserve reform. She’s coming at this from a different angle than James Grant … but both guests are incredibly informed, with lots of great things to say.

In 2007, Nomi wrote that there could be a problem if financial institutions and the government continued the credit derivative system and high leverage.

No one wanted to hear it. But then ’08 happened.

Nomi says that over the last 10 years, “The Fed has subsidized a lot of credit problems that existed before the ’08 crisis by creating electronic money.”

That has raised the level of artificial leverage.

And THAT means the next market collapse will come from an even higher height than in ’08, she says.

Even worse, many central banks around the world created electric money and dropped rates when the Fed did. Nomi examined this situation in her book Collusion.

“We’re in a very precarious situation going forward,” she says.

Quantitative easing … the introduction of new money onto the market … causes inflation and collapses markets, starting with emerging markets.

In order to retain capital, central banks in these countries have to raise rates and increase the value of their currency. That’s what’s happening now.

This, in turn, lowers the value of foreign currencies relative to the value of the dollar. So, any debt these countries have has to be paid back or renewed at a higher rate.

Apparently, however, the U.S. is back to quantitative tightening now, says Nomi.

The Fed’s statements and its actions and reports tell different stories.

Fed Chair Jerome Powell SAYS current quantitative tightening is official. That means the government will continue to sell … but not re-invest … assets.

But in reality, the Fed is selling much more slowly than they’ve said they will.

The reason? “They know that if they sell too much too fast, rates will increase too fast, and the value of assets will go down too fast,” Nomi says. “They want to be in a holding pattern.”

More on quantitative easing, coming crisis

Nomi wants people to know there is NO correlation between GDP growth and quantitative easing. However, there is a very high correlation between quantitative easing and the stock market.

She thinks the next financial crisis will look like a bunch of smaller crises that add up to big gaps in liquidity and credit availability.

Nomi says she sees a few things happening around the world … bond defaults are creeping up in emerging markets, and certain countries are starting to have major credit problems.

“I think all of that will come to bear on the Fed.” And because of that, Nomi says, “I think their language will start to move toward growth slowing.”

Think two rate raises over the next year, instead of the forecasted four.

She predicts extreme appreciation is not going to happen. Rates will stay low, although they might continue to rise a bit relative to the Fed.

What about real estate? “Commercial real estate may have more leverage, so rate hikes will have more impact.”

Instead, Nomi recommends “any area where rent can overcompensate for an increase in cost.”

She says there are currently opportunities in emerging markets where there’s still room for upward growth in prices.

Mexico City, for example, is a place where prices are low, the government has a strong growth strategy, and there is opportunity in the near team.

Lessons learned

Debt doesn’t operate in a vacuum. Interest rates have a HUGE impact on whether your investments will be successful.

You don’t need to understand ALL the mechanics … but you should have a basic understanding of WHAT will affect interest rates and WHERE they’re headed.


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Seven lessons for better investing …

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

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

Lesson# 1:  Invest in yourself first and frequently

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

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

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

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

Lesson #2:  Focus on relationships, not transactions

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

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

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

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

This is where YOUR education and network come into play …

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

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

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

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

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

Lesson #3:  Emphasize mission and values

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

It’s true.  But it goes further …

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

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

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

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

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

But the timeless lessons are as applicable today as ever.

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

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

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

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

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

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

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

Lesson #5:  Develop and maintain a clear vision

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

The challenge for many is the picture is fuzzy.

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

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

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

What’s the difference?

Clarity.

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

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

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

Lesson #6:  Always see the downside

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bonus Lesson:  Use firewalls to avoid portfolio contagion

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

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

The mid-term morning after …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The point is that money and markets like gridlock.

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

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

So bringing it all back to Main Street …

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

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

So gridlock inside the beltway means stability on Main Street.

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

Until next time … good investing!

More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Opportunity Zones – Reduce Taxes by Investing in Main Street

It’s easy to figure out where tax incentives lie in wait. Just study the tax code.

The latest version of the tax code introduces a new tax shelter … opportunity zones. But … what are opportunity zones?

In this episode of The Real Estate Guys™ show, we dive into what we know about opportunity zones … including three MAJOR benefits.

You’ll hear from:

  • Your opportunistic host, Robert Helms
  • His inopportune co-host, Russell Gray

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


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!


Opportunity zones: The basics

There’s a way to pay no tax on certain investments AND heal struggling communities. We’re talking about opportunity zones.

These new geographic tax shelters are encoded in the version of the tax code passed in 2017 … but they’re not totally finalized yet.

That doesn’t mean they’re not important … savvy investors will be absorbing all the info they can BEFORE opportunity zones go into action.

The idea of opportunity zones is to offer a tax-favored investment vehicle for people who already have capital gains in other investments.

Opportunity zones will be located in low-income communities ripe for revitalization … and will be located in every state in the U.S.

The fundamental purpose of opportunity zones is to encourage long-term investments in struggling communities.

Congress has established an incentive framework that is flexible and unique. This is essentially a new class of investment.

These opportunity zones complement existing community development plans. In essence, the project is treating the U.S. like a giant rehab project.

You’ll basically be moving yourself into a pre-identified path of progress. There hasn’t been a ton of incentive for investors to come into these run-down, lower income areas. But NOW there is.

The benefits of opportunity zones

Like we said earlier, the idea of opportunity zones is set, but the legislation is not in action yet. The appropriate documentation and legislation will be in place by the end of 2018.

So NOW is your time to prepare for the future.

There are definite differences between this opportunity and other investments. Generally, you’re required to pay tax when you liquidate capital gains.

But investing in opportunity zones provides three unique tax benefits. Before we get into those, we do want to clarify … this investment is only available for investors who already have capital gains from previous investors.

But not to worry … if you’re a newer investor who doesn’t have any capital gains yet, there are ways to get in on the action. We’ll get into those in the next section.

Now, the three tax benefits …

  1. You can defer your original capital gains tax for up to 10 years. As you probably know, it’s always better to defer taxes than to pay now.
  2. You also get a 10 to 15 percent discount on your original capital gains tax.
  3. AND …when appreciated capital gains are put into an opportunity zone investment, the gains you make from that investment are completely tax free.

There is a timeline. You have to sell the appreciated assets and invest the capital gains into one or more opportunity zone investments within 180 days.

But we want to emphasize … your capital gains from properties in opportunity zone areas will be completely TAX FREE.

No capital gains? How to invest in opportunity zones

The government has a goal here … they want to bring a ton of investment capital to certain areas and swing them around.

In that vein, there is a certain requirement you have to follow to invest in opportunity zones … there is NO tax incentive if you own property in an opportunity zone under your own name.

You have to invest in opportunity zones through opportunity funds.

If you don’t have appreciated assets, you may be wondering how you can start an opportunity fund and get in on this great opportunity.

There are a few options …

  1. Invest in an area near an opportunity zone. You’ll be boosted up by the wave of capital increasing asset values all around you.
  2. Invest as a syndicator. Set up an opportunity fund … and get other investors to contribute their capital gains.

This last point is something to seriously consider … especially when you start thinking about the stock market.

The stock market is hot, but it’s showing signs of faltering. People want to take their capital gains out … but they don’t want to pay taxes.

A fantastic solution? Opportunity funds.

All about opportunity funds

What does it take to put together an opportunity fund?

Opportunity funds do not have investment limitations.

They must be organized as a corporation or a partnership.

They do not require official IRS approval … the fund manager can self-certify the fund simply by submitting a form to the IRS.

The process is designed for speed. It cuts out bureaucracy … and brings locally driven change to areas that need it.

But it also requires investors to make REAL change … for example, one requirement we expect to see is that investors put as much into rehab and construction as they spent to acquire the property.

Opportunity zones mean sending money to the bottom of the market … and making the subsequent changes LAST for the long term.

For a map of tagged and categorized opportunity zones, plus more information, simply send us an email at opportunityzones [at] realestateguysradio [dot] com.

And don’t think this is the last you’ll hear about opportunity zones … we expect this to be a BIG wave in the real estate investing sea, and we’ll be providing more information to our listeners as this new opportunity develops.


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

American Real Estate Investments – Private Money Lending

American Real Estate Investments – Private Money Lending

 

Diversify your portfolio AND “be the bank” with private money lending!

 

The party in the most secure position during an investment deal is the bank … and American Real Estate Investments (AREI) makes it possible for YOU to step into the bank’s shoes.

Syndications typically offer investors a chance to invest in the equity of a project. You put money into a project and, for better or worse, your return is dictated by the success or failure of the project.  And, if it’s a development project, you don’t see your profit until the project is completed months or years down the road.

There’s another option!

AREI brings you an opportunity to invest in a syndication on the DEBT side of things.  Whether the project is a wild success or not, YOU get a PREDICTABLE RETURN and MONTHLY CASH FLOW that begins IMMEDIATELY.  

Plus, your debt-investment is SECURED by a DEED OF TRUST.  If for any reason, the project is abandoned, you get the property.

AREI gives you the opportunity to invest in the debt on development projects in Dallas-Fort Worth and Houston … Dallas-Fort Worth is one of the strongest markets in the country, with many development opportunities … and it’s where AREI happens to be headquartered.

Another pretty cool thing … Invest in these private loans using your self-directed retirement account!

Watch your retirement savings grow with ALL the tax advantages and continuous returns.

Why is this a winning strategy?

  • With genuinely passive investments, all you have to do is watch your investment grow.
  • Earn monthly cash flow immediately at the annual rate of return.
  • Choose a low-risk investment with security in appreciating assets in a stable market

Learn about American Real Estate Investments’ latest projects.  Make double-digit annual returns in your 401k, IRA, or other account in a project of your choice!

Simply fill out the form below, and AREI will be in touch with the information you need to get started in private money lending.

There’s MORE money headed into real estate …

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

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

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

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

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

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

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

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

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

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

Opportunity Zones

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

According to The Wall Street Journal,

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

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

 Private Equity Funds

 Another Wall Street Journal article says …

“Real estate debt funds amass record war chest

“Property funds have $57 billion to invest …”

Pension Funds

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

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

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

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

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

Start by watching the flow …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Watch for the over-flow too …

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

Silicon Valley is a CLASSIC example.

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

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

That’s when you see headlines like these …

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

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

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

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

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

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

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

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

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

We encourage YOU to do the same.

Until next time … good investing!


More From The Real Estate Guys™…

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


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Next Page »