Trickle down Trump-style …

In a financialized economy, it’s easy to obsess over the dollar, Bitcoin, gold, forex, the Fed, interest rates, stock indexes, etc.

Financialization is when an economy emphasizes making money from money … as opposed to making money from making things.

Think of it as the difference between Wall Street and Main Street.

But there’s currently a subtle shift taking place we think is noteworthy.  We call it …

Trump-style Trickle-down

It’s said Donald Trump got elected by working-class people … those who aren’t at the financialization party.

These are folks whose manufacturing jobs trickled overseas for the last three decades.

When you’re underemployed with no savings, you can’t play financialization.  Your balance sheet is missing all those paper assets being pumped full of air from cheap money.

Wall Street’s trickle-down has been Main Street’s “bleed out.”

Does 3-D printing trump paper printing?

When we first asked then-candidate Trump about his plan for the American real estate dream, he simply answered, “Jobs.”

Since then, Trump has been emphasizing manufacturing jobs.  We think the distinction is important.

Manufacturing jobs … or the lack thereof … is something multi-time Summit at Sea™ faculty member Peter Schiff has railed about for years.

Peter insists no economy can print its way to prosperity.

Peter contends a prosperous economy MUST produce things …  and not just blow up paper asset bubbles.

Simply making money from money isn’t enough to keep Main Street off the welfare rolls. There’s no role for them in play in a financialized economy.

Main Street needs good-paying jobs … the kind that come from production and not just consumption.

For residential real estate investors, it’s more than just a philosophical discussion.

It’s central to strategically selecting the right geographic markets, demographics, and product-types.

After all, real estate is about the local economy … and the flow of cash from productivity into rents.  In short, the best tenants have jobs.

Not all jobs are created equal.

While any rent is good, to really understand your real estate investing, it’s a good idea to look further up the food chain … to see what’s trickling down and from where.

People who pour coffee, clean clothes, mow lawns, cut hair … activities we call tertiary employment … usually do so for folks with primary or secondary employment.

So if Acme Manufacturing sub-contracts to Dan’s Welding … and Reuben the welder is buying coffee from Bonnie the barista (your tenant) …

… where does YOUR rent REALLY come from?

And what’s the core economic strength of the local economy … the coffee shop, the welding shop, or the manufacturing company?

What happens to the local economy if Acme moves away?  Who does Reuben weld for so he can buy coffee from Bonnie?

Sure, Acme might not be the only primary employer in the market …

… but if the reasons Acme moved also motivate others to leave … the market loses eventually its anchors and starts to bleed out.

Financialization vs Industrialization

“Trickle down” can be a polarizing term.  But it doesn’t mean the same thing to everyone.

President Trump has the White House, so whether we like or agree with him or not, he’s pulling the levers and we aren’t.

After a year of observing, it seems like Trump’s got his own version of trickle-down and is pushing it forward.

Trickle-down Reagan-style was running up the debt and military spending, which pumped lots of cash into the economy and created a boom.

Yes, tax reform was involved … which blew up real estate and the savings and loan business.  But that’s a discussion for a different day.

Reaganomics “worked” because starting out, the US had a good balance sheet, lots of manufacturing capacity, and high interest rates.

Just like a household with very little debt, lots of income, and adjustable rate loans in a falling rate environment …  you can rack up a LOT of debt for a long time before it starts hurting.

Trickle-down Greenspan / Bernanke / Yellen style was financialization.  De-regulation opened the door, but cheap money from the Fed fueled it … and continues to.

Advocates of trickle-down financialization say pumping up paper assets will make uber-rich people uber-richer … on paper.

Then, the theory goes … the uber-rich will lend to Main Street, who will then spend on Main Street … and eventually the cheap money ends up with Bonnie the barista.

Sounds a little like leftovers to us, but you can decide for yourself if it’s working.  We think Trump’s shocking win says Main Street didn’t think so.

Trickle-down industrialization appears to be Trump’s game plan.

The idea is to create an environment attractive to Acme Manufacturing to start, return, and expand … on Main Street.

It’s a mix of Reagan-style tax cuts and military spending, more Greenspan / Bernanke / Yellen-style cheap money pumping the stock market …

… but it’s all strategically aimed at boosting domestic manufacturing.

If Trump can get his agenda implemented, only time and math will tell if it works.

Oh, and about that math …

How do YOU measure success?

Now that we’ve got you jazzed about… okay, moderately interested in … paying attention to the direction of domestic manufacturing …

… we’re going to complicate things ever so slightly. But for good reason!

We live in a world of perverted units of measure.  It’s something Steve Forbes warned us about the very first time we talked to him.

Most reports we read measure productivity in dollars.  But a fluctuating dollar can give false readings.

Think about it …

If your business produces 1,000 widgets per month at $100 each, you have a $100,000 per month business.  Good job.

If inflation (a falling dollar) causes your widgets to go “up” to $120, you’re a $120,000 per month business … BUT, your production is the SAME.

Have you grown?  Not in terms of real production.

THIS is why it matters to real estate investors …

If at the $120 price, 10% of your customers can no longer afford your widgets, your production falls by 10% to only 900 widgets per month.

At $120 each, 900 widgets sold is $108,000 per month.

Hmmmm …

Measuring in dollars, your business is UP by 8% … from $100k/mo to $108k/mo.  Your look good on paper (there’s a lot of that going around) …

But by production, you’re DOWN by 10% …  so you need 10% less labor, supplies, space, sub-contractors, etc.

It’s like reverse-trickle down, but not really.  Money isn’t flowing up.  It’s really more like bleeding out.  This is why some folks don’t like inflation.

Here’s the point … and thanks for sticking with us …

The U.S. economy looks good … measured in dollars.  But some say there’s still a LOT of work to get real productivity up.

Still, the November jobs report had a ray of sunshine with a spike in manufacturing jobs …  and this article says U.S. manufacturing executives see growth in 2018.  Good.

But if those indicate this is the front-end of trickle-down industrialization that brings prosperity to Main Street, it could be a fun ride for real estate investors.

We’ll keep watching … and so should you.

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.

High performance wisdom for the New Year …

Sometimes the most profound tidbits of wisdom are unexpectedly found in unlikely places.

Here’s a great one we picked up along the way …

“Most people figure it out … eventually.  The GREAT ones figure it out EARLY.”

We heard this during a casual conversation in the bleachers at a small college football game.  The subject was athletes, but it really applies to any endeavor … including real estate investing.

Most of us want to be great.  We want substantial success by whatever criteria we define it.  And we usually want it quickly … which brings us to our next profundity …

“More sooner is better.”

It all SEEMS so obvious.  But too often we find ourselves distracted and delayed with half-started projects, trivial pursuits; urgent, but unimportant tasks.

Meanwhile, minute by minute life speeds by … and we fall further behind.

But over time, we become more productive.  Through trial, error and pain we slowly learn to focus.  We gain skills and get more organized.  We learn when to say yes and when to say no … eventually.

But … the GREAT ones figure it out EARLY.

And when it comes to skills, organization, wisdom, discipline, and all the results those bring … more sooner is better.

Of course, this applies to ALL of life … including the business of real estate investing … so let’s think about HOW we can “figure it out” faster.

First, no matter how old you are, today is as young as you’ll ever be.  And no matter how young you are, it almost always seems life is too short.

So using today as ground zero, the goal is to figure it out early … and gain more (knowledge, wisdom, relationships, assets, cash flow, etc.) sooner.

Another lesson from athletics is learning to slow down and relax in order to go faster.

If you’ve ever been trained to sprint … or watched a slow-motion video of a world-class sprinter … you’ll see they’re very focused, relaxed, fluid … with no wasted motion.

Amateurs are tight … they try too hard … they’re inefficient … and they waste a lot of energy.  They work harder to go slower.

Sound familiar?  Sometimes the busiest people are the least productive.

Now here’s the next paradigm breaker … direct from furry green lips of Master Yoda in The Last Jedi 

“The greatest teacher, failure is.”

Of course, this doesn’t mean we seek failure.  Or does it?

While we don’t set out to do something intending to fail, whenever we attempt something we always run the RISK of failure.

So occasional failure is inevitable … especially when doing something new.

But just as you don’t have to save money in order to invest, because you can syndicate capital from people who’ve already saved it …

… you can syndicate wisdom from people who’ve already failed and gotten the lessons.

Or, as Bob Helms, the Godfather of real estate says …

“You don’t have to give natural childbirth to ideas.  You can adopt!”

 So we don’t seek out failure, but it’s not bad to seek out failures … people who’ve already failed and gained valuable wisdom through the process.

The key is to find the right people … and then get close enough to learn from them … and it’s about MUCH more than simply information.

It’s about culture.  It’s about the environment you’re in … the peer group you’re a part of … the ideas, attitudes, and opportunities you’re consistently exposed to.

As the new year rapidly approaches and you consider how to “figure it out” faster in 2018 … so you can get more sooner … take a strong look at your environment.

Do you have enough exposure to people who are pushing themselves through failure and are striving diligently to figure it out faster?

Are you as focused as you need to be to avoid resource-wasting distractions?

And perhaps most importantly, do you have a healthy attitude about your own failures … or do you let setbacks put you on the sideline too long?

Here’s more wisdom from brilliant minds … 

“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.” – Robert Kiyosaki 

“I never see failure as failure, but only as a learning experience.” – Tom Hopkins

(By the way, both Robert and Tom will be with us again for our next sensational Investor Summit at Sea™)

Every year, in every economy, people find a way to win … and others find a way to lose.

And if both can happen in the same conditions, then the difference must be in how each individual behaves in the same environment.

Most of us are somewhere in the middle of the pack in whatever we’re working on … some folks are ahead of us, and some are behind.

In a marathon, each runner has to run their own race … but smart ones use the power of the pack to pick up the pace and pull them forward.  Sometimes it’s uncomfortable.

Of course, if it were easy then everyone would do it, and the achievement would be unremarkable.

“What is the point of being alive if you don’t at least try to do something remarkable?” – John Green

We hope you’ve had a successful 2017 and are eagerly looking forward to a remarkable 2018.

We appreciate having you in our audience and hope to see you very soon at a live event.

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.

Intoxicating investments can be toxic …

It’s the time of year to get together and have a good time celebrating the holidays.  Sometimes this involves indulging in some intoxicating activities.

Those who want to enjoy themselves know their limits … and prudently rely upon a sober person to get them safely home.

Naturally, we’re talking about investing.

Just take a look at just a few of the many recent intoxicating headlines …

It’s important to remember … investing vehicles are supposed to get us to our financial destination SAFELY.

Crashes are DANGEROUS … which is why sobriety is advised.

Of course, in a room full of intoxicated partiers, a sober person can come off as a party-pooper … and NO ONE likes a party-pooper.

So let’s see if we can serve up some investing eggnog and with a dash of optimism … and no nasty hangover or risking a life-threatening crash.

First, let’s take a quick dive into the aforementioned headlines …

Housing

Home-builders are REALLY confident … presumably because they believe conditions are ripe for them to buy land, materials, and labor … turn them all into homes which they can sell at a profit.

That’s because home prices are UP … unlike those dark days in the wake of the recession when existing homes were selling below replacement cost … making it nearly impossible for home builders to build profitably.

Stocks

The U.S. stock market … and most global stock markets … have been rocketing higher.

In fact, the U.S. stock market has taken out all-time highs … over SEVENTY times in 2017 … an all-time record.

All this amid rabid share buybacks by corporations flush with cheap cash from low interest rates… and now from tax breaks which appear inevitable in the new tax bill.

Of course, when corporations take stock OFF the market (reduce supply), while demand surges as bullish investors are piling in … prices rise.  Go stocks!

And speaking of rising prices …

Bitcoin

Of course, the meteoric rise of Bitcoin is THE asset price boom story of the year … perhaps of our lifetime.  It’s gotten to where accidental Bitcoin multi-millionaires are even starting hedge-funds.

Are we jealous?  Maybe just a lot.  But we’re not sure missing the Bitcoin boom makes us stupid … any more than Bitcoin billionaires are suddenly investing geniuses.

“Stupid is as stupid does.” – Forrest Gump

Pre-2008, we knew a lot of people who thought they were real estate investing geniuses because real estate was going up fast everywhere.

They’d put $20,000 down and buy a little house, and a year later it was worth $100,000 more.  There’s NOTHING wrong with that.

BUT … it’s a mistake to think you’re an investing genius because you bought a bubble asset at the right time.

Of course, if you’re not smart enough to get out before the bubble deflates, it can take all gains … and your investing “genius” … with it.  We know.

“I may be drunk, Miss … but in the morning, I will be sober … and you will still be ugly.” – Winston Churchill

Rising asset prices are FUN.  Easy equity is intoxicating.  Who doesn’t like to see the spread between assets and liabilities grow?

But asset price parties can turn ugly fast if you’re not careful, which brings us to the point of today’s musing …

In good times and bad, always remember what REAL investing and wealth are …

… and no matter how intoxicated with bubble wealth you are, be sure you get home safely.

How?

To our way of thinking, the purpose of investing is to accumulate units of real value and the productivity of others.

Wealth is measured by how many useful items you own … like buildings, trees, crops, barrels of oil, ounces of strategic or precious metals, etc.

These are things people MUST have in order to live, work, or make things of value.

When you have more units of real value, and more people sending you a portion of their productivity, you are WEALTHY.

And when you pick items of real value which also reduce exposure to counter-party risk, your wealth is even safer.

Intoxicated investors look at their balance sheet and celebrate their net worth … perhaps even borrowing heavily to spend on consumption.

In fact, this is EXACTLY what the government and banks WANT you to do.

Sober investors look at their balance sheet as merely a tool for building their CASH FLOW statement.  Spending comes out of the productivity of the asset … not it’s equity.

This is no small differentiation … because what you do with equity defines you as an investor.

The investor who buys low, sells high, skims some spending money, then pushes the stack back in and rolls the dice again, needs to keep playing the game … or the cash flow stops.

You can be a full-time investor, but you’re still on the treadmill.

The investor who buys low, then uses equity gains to acquire streams of positive cash flow will eventually become free from the need to personally produce to eat.

Robert Kiyosaki calls this “out of the rat race” … and it’s an enviable place to be.

The world is awash in paper (balance sheet) equity right now … in stocks, real estate, and now cryptos.  None of them are bad.  Equity is awesome!

But the market giveth equity … and the market taketh equity away.

We think it’s smart to take equity off the table before Mean Mr. Market takes it first … and then use your new equity to acquire productivity … cash flow.

It’s even better when you can pair equity with cheap long-term debt, so you can own MORE units of real value (properties) and income (tenants).

Of course, the right real estate is an ideal vehicle to acquire an income producing asset with cheap long term debt.

If prices decline, the income provides a basis of value and control.  And if prices take off, your bigger collection of assets will create even more equity faster.

If you haven’t already, now’s a good time for a portfolio sobriety check.  It doesn’t mean the party’s over … but it just might make it a bit safer.

Happy holiday and 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.

The MOST interesting story of the year …

What a wild ride 2017 has been … and 2018 is looking even MORE intriguing!

There’ve been SO many fascinating stories.  Trying to pick the MOST interesting is a real challenge …

… a historic and unorthodox Trump presidency

… the record-breaking ascent of the stock market

… the record-breaking U.S. and global debt

… the meteoric, hyperbolic rise of Bitcoin, and crypto-currency’s move from libertarian fringe to mainstream …

And of course, there’s the ongoing saga of China’s drive to dethrone King Dollar; the drama in the House of Saud; and the (allegedly) strong U.S. jobs market.

All these things affect the financial eco-system our real estate investments live in … so we pay attention to them.

After all, we don’t want our backs to the beach if a tsunami is coming.  We did that once and it was NOT fun.

So what’s the biggest story as we end 2017 and press into the new year?

We think it could be oil.  But perhaps not for the most obvious reasons.  Here’s why …

Currency is like the blood of an economy.  It circulates … transporting energy to individual cells … many of which are organized into vital functions.

We teach our syndication students the importance of designing an effective business model … a circulatory system … to be sure cash flows to all vital functions.

Failure to nourish all cells (individuals) and vital organs (critical activities conducted by groups of individuals) can result in sickness, permanent disability, or death.

This is true for individuals, for businesses, and for nations.

After World War II, the U.S. dollar was crowned the world’s reserve currency.

Backed by gold, the dollar circulated the globe … transporting economic energy to individuals, businesses, and nations.

In 1971, the gold-backing was removed, and the dollar became severely ill … with a disease called “distrustitis” … commonly known as rejection.  Nations didn’t want it.

So, they began aggressively trading in their dollars for gold …. bidding the price of gold up from $35 an ounce in late 1971 to nearly $700 in early 1980 …

Ironically, U.S. citizens were locked out of gold ownership until December 31, 1974 when President Gerald Ford revoked the ban imposed by President Franklin Roosevelt way back in 1933.So what does all this have to do with oil in 2017 … and why do we think it’s important heading into 2018? And how does any of this tie into real estate investing?  We’re getting there!

First, a little more history …

Uncle Sam discovered an un-backed dollar wasn’t very popular.  And when nations dumped dollars, it created The Great Inflation of the 1970s.

Back then, the cure for the dollar’s “distrustitis” was to force dollar demand through oil (the petro-dollar) and high interest rates (they reached 20% in 1980).

Cheap labor from China sucked up some inflation … while a recession slowed economic velocity to suck up even more.  But those are topics for another day.

The point is there’s a long linkage between the dollar, gold, and oil … and all three have substantial influence on geo-politics … even today.

Of course, now there’s a new kid in town … crypto (a.k.a. Bitcoin) … which started a ridiculous run in 2017 …

Interesting Image

 

Hmmmm … that chart pattern for 2017 looks a lot like when gold took off the last two times there were outbreaks of dollar distrustitis …

Probably just a coincidence.

But it makes you wonder if crypto and oil might get together as a way for Uncle Sam’s adversaries to escape the dollar … oh, wait …

Headline:  Russia may turn to cryptocurrencies in oil trade to challenge sanctions & the petrodollar

Headline:  Venezuela to Launch Oil-Backed Cryptocurrency

… which brings us to why we’re closely watching oil going into 2018.

In many ways, oil is the asset of choice to back currency.  It’s been the backbone of the dollar since the 1970s and the world knows it.

That’s because the world runs on oil.

And unlike gold, every productive nation MUST have oil.  It isn’t a philosophical commodity … it’s pragmatic.

As Investor Summit at Sea™ faculty member Chris Martenson reminds us, EVERY economy needs energy to operate.

Because oil is the world’s most in-demand commodity, whatever currency it trades in is sure to be in high demand.

China, the world’s #1 buyer of oil, knows this.  And they’re using their economic muscle to position their currency, the yuan, for a greater role in global trade …

Headline:  China will ‘compel’ Saudi Arabia to trade oil in yuan — and that’s going to affect the US dollar

Of course, with $20 trillion in debt and a debt-to-GDP ratio over 100% … more than THREE times what it was when high interest rates were used to crush inflation …

… the U.S. economy probably couldn’t handle 10% interest rates, much less 20%.

So if all the forces aligned against the petro-dollar succeed, might the U.S. experience some painful inflation?

Quite possibly.

Of course, when you own real assets … especially those which produce (like farmland or oil fields) … or channel productivity (like rental real estate) … you’re hedged … you preserve wealth.

But the key to PROFITING from inflation is to short the dollar.  And that’s done with debt.

When you can fix the debt and own the asset, as the asset’s dollar price goes up against the fixed debt, the debt becomes smaller.

Of course, as we’ve discussed before, income-producing real estate is the safest way to play this game.

Now if we’re Uncle Sam and worried oil might end up backing a rival currency, we need to prepare for role reversal.

When the world wants dollars, all Uncle Sam had to do is print and import.  The world gets dollars, and the U.S. gets stuff.  Nice.

But if something replaces the dollar, then Uncle Sam needs to export stuff the world wants, in exchange for whatever currency is now in demand.

Are we saying the world will stop taking U.S. dollars?  No.

But they might want a lot MORE dollars to buy the same stuff (inflation), which would weaken the U.S. economy.

Not surprisingly, the U.S. is taking steps to stimulate domestic oil production.

HeadlineThe GOP Tax Bill Is A Big Win For U.S. Oil And Gas

And agree with it or not, the Trump Administration is very friendly towards the oil industry.

Bringing this all back to Main Street and our daily real estate investing …

First, the relationship between oil and the U.S. dollar has the potential to impact the purchasing power of our dollars, interest rates on our mortgages, and the cost of living for our tenants.

We’re very interested in ALL those things.

Next, if Uncle Sam stimulates domestic energy production with investment incentives and regulatory easing, it might lead to economic booms in energy-rich geographies.

Remember, energy was a top driver of job creation post-2008 … with Texas being the biggest winner.

That’s what took us into Dallas after the recession … and keeps us interested today.

Oil, gold, the dollar, China, new faces on the Fed, tax reform, Bitcoin …

… are all converging in 2018 for potentially massive changes to the future of money and wealth.

And they’ll all be very important topics of discussion on our 2018 Investor Summit at Sea™ … which just might be the MOST important Summit in our history.

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.

Clues in the News – Robots, Housing, and High Rises

In our latest episode, we take you to lively Las Vegas, where we’re at the National Association of Broadcasters Show.

Visiting this city brings back a lot of memories.

You see, we witnessed firsthand the glut of real estate in Las Vegas pre-recession and the freefalling prices that followed when the market crashed in 2008.

In this podcast, we’ll delve into Clues in the News to analyze what’s going on in today’s market. We’ll discuss how headlines today parallel the past … and why emerging market trends should make a difference to YOU.

In this fast-paced episode of The Real Estate Guys™ show (we have a lot of ground to cover!) you’ll hear from:

  • Your super-sleuth host, Robert Helms
  • His clue-cracking co-host, Russell Gray

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Rising home sales

We found clear evidence home sales are rising in many markets. An article in Business Insider, New home sales unexpectedly jump in March, states sales of new single-family homes went up by 5.8% in March, according to the Department of Commerce.

This is a departure from what economists had predicted … the big shots imagined that new home sales would fall by 4% this month.

Notice we’re talking about new homes … this is a subset of the entire housing market.

The article also pointed out the confidence rating of the National Association of Home Builders is at a nearly 11-year high. It hasn’t been on fire like this since around 2005.

The news clearly points to rising confidence in the market … which means more free-flowing money. Catching any similarities between today’s market and the past?

We want to remind you we don’t have a crystal ball (although if you can procure one for us, we’ll happily take it!). The best we can do to predict the future is use our knowledge about the past to gauge where we think things are heading in the present.

Today’s market reminds us of what happens when money starts to flow freely. Too much free flowing money means money is mal-invested and people get sloppy.

Investments that make sense at zero cost often don’t make sense at a higher interest rate. In a market that’s beginning to be flooded with money, real estate investors have to be careful about the ways they consume debt.

New homes aren’t the only market subset currently thriving. In this MarketWatch article we learned the average number of days a house is on the market is 34 days.

That’s a tight market with sturdy demand! And with high demand comes high prices … until there’s a change.

If you’re in the building business, high demand and low supply might seem great … until you’re one of the hundreds of contractors who decided to take advantage of that high demand, inadvertently creating a glut of products.

At first look, rising demand might look good if you’re on the selling or building side of things. That’s why it’s SO IMPORTANT to put all the info you get in the blender … and figure out what kind of soup you’ll really be getting.

The MarketWatch article stated the national median sales price for existing homes is up 6.8% … on average.

The word average is key. Prices were up by almost 10% in the Northeast … and down by 1.8% in the West. All real estate is local.

We thought it was interesting to pair what we know about rising home sales with our knowledge that home ownership is at a 100-year low. So WHO is buying all these houses?

Clearly, real estate investing is trending up. But what’s the big picture?

Skyrocketing home prices

There are a ton of indicators that the market might be heading for another crash. Rising home sales to investors and speculators is one.

Our friend Dr. Doug Duncan, former chief economist for Fannie Mae, told us during the Summit that this has been the longest recovery in U.S. history … and the weakest.

People who’ve been recovering from the crash of 2008 are finally dipping their toes in the market, thinking it’s normal. But if you’re a professional investor, you know most people end up buying high and selling low (to you, we hope!).

If you’ve been waiting for things to go on sale, the current market might be getting ready to serve up a lot of sunshine for you! If you’re prepared, a big pullback from the market could be one of the greatest possible gifts.

We noticed another interesting MarketWatch article. It says that U.S. home prices grew at fastest rate in nearly three years.

That’s more evidence we might be nearing the top of the market. But it’s not time to be scared. It’s time to be smart.

You have to be careful about how and where you’re investing. And you absolutely must have a Plan B.

If the market crashes, you may have to sit on your properties for ten years … and you have to be willing to do so.

Ask yourself: If interest rates go up, will my deals stay stable? If prices go down, will I be in a position to buy?

It’s very dangerous to put your fingers in your ears and ignore what’s happening in the news. After all, the Titanic sunk because nobody thought it could.

The big question is how YOU will respond to what you’re hearing. Take a look at the past … analyze the present … and prepare for the future.

Plunging sales, soaring inventory in one market

Our next article, Condo Flippers in Miami-Dade Left Twisting in the Wind, featured on Wolf Street, could have been published 10 years ago.

If you go to Miami, you’ll see new high rises going up across the city. Yet sales fell 10% year over year.

If you’re a regular subscriber to our events and podcasts, you might remember that we were doing Miami field trips at one time.

It wasn’t that we weren’t plugged in. We examined the data and asked for details. And we let ourselves be persuaded the rapid growth in the Miami market could continue … because it seemed great.

But sure enough, the unthinkable happened.

Although there were people who had a plan and are holding on now, Miami is not a market you want to be in right now. Based on current construction, there’s a 432-year supply of new high-rise condos.

Miami demonstrates what can happen when there’s a temporary spike in demand. Now, we’re not saying temporary spikes in demand are always bad. In fact, they can be a good thing!

But you HAVE to be prepared for the worst to happen.

Are robots taking over the world?

Our last article discusses a very different phenomenon. We were fascinated when we read an article in Nikkei Asian Review. They share robots can handle a high percentage of our work tasks.

What do robots have to do with you? Well, that’s EXACTLY the question we want you to be asking!

The study the article cites found that 75% of 77 sample tasks could be handled by machines. So think … how does this affect the fast-food worker? The factor employee? The Lyft driver?

And what if those people are your tenants?

As landlords, we have to think about how every change will affect us, good and bad.

There are so many factors that affect the real estate “ecosystem” … blowing winds, undercurrents, waves, and sudden storms.

It’s essential to keep a sharp lookout as you navigate your portfolio through both sunshine and swells. As the saying goes, “A smooth sea never made a skilled mariner.”

Successfully navigating through rough seas can only make you a better sailor. As veteran real estate investors, we’ve learned to be grateful for devastating events like 2008 … because they forced us to become sharper students. Now we see downturns as opportunities!

We urge you to watch what’s going on the market and evaluate how each new factor makes an impact on you. The best time to repair the roof is when the sun is shining. Now is the time to be proactive … before you have a leak in your dining room.

Like the Boy Scouts say, “Be prepared!”


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

Why Now May Be a Great Time To Invest in Dallas Real Estate

Finding a strong market to invest in is as simple as looking for population growth, job growth, and a diverse economy. That’s why some of the smartest minds in real estate are focused on the long term strength of Dallas, TX.

POPULATION GROWTH: The Dallas-Fort Worth area’s population has grown by nearly 1.3 million from 2000 -2009.  That is more than any other metropolitan area in the United States.  The Dallas–Fort Worth–Arlington MSA is the largest metropolitan area in Texas, the largest in the South, the fourth-largest in the United States (SOURCE: Wikipedia on DFW).

The Dallas, TX metro is forecasted to add 4 million new people from 2010 – 2040 according to the Texas Data Center  and the North Texas Water Board.   That’s one new person every 4 minutes!!! In 2009, the population of Texas grew by 231,539.  That is more growth than Florida, Arizona, California, Nevada and Colorado, combined.

A demographer at the Brookings Institution attributes the population growth to a more diversified economy in Texas and more conservative lending practices during the real estate boom. When combined with the state’s steady growth earlier in the decade, Texas is projected to receive three new seats in Congress.  (SOURCE: Recession Cuts Migration to Sun Belt, New Figures Show 
New York Times).

JOB GROWTH: “Diversified industry and relatively stable housing fundamentals have provided local residents with comparatively secure standards of living. Cities where home prices don’t fluctuate wildly are particularly well-positioned to ride out this recession, because they were spared the domino effect of foreclosures, lost jobs and lost productivity. Rather than chasing rising home prices or apparently plentiful jobs in one-industry towns, families looking for long-term economic stability should seek spots where industry is diverse and housing price shifts are benign.”  (America’s Fastest Recovering Cities
 – Forbes Magazine)  According to the US Bureau of Labor & Statistics, Dallas job growth is twice the national average.  An educated populace and a cost of living below the national average, make Dallas enticing to companies seeking a lower cost but highly qualified workforce.

DIVERSE ECONOMY: The Dallas economy is primarily based on banking, commerce, telecommunications, computer technology, energy, and transportation.  North Texas has 28% of the state’s workforce, employing more than 350,000 in healthcare, 225,000 in high-tech and 68,000 aviation-related jobs.  North Texas has 20 colleges and universities, 17 graduate schools, 3 medical/dental schools, 2 law schools and 20 community college campuses (SOURCE: North Texas Commission).  The Dallas/Fort Worth Metroplex is home to over 10,000 corporate headquarters making it the largest concentration of corporate headquarters in the United States.  The Dallas metro area is home to 25 FORTUNE 500 company headquarters and 7 FORTUNE Global 500 companies which bring more than $819 billion in revenue to North Texas. (Source: Fortune Magazine 2009)

  • WORLD CENTER OF AVIATION
    • DFW International Airport is the third busiest airport in the world
    • There are more than 850 aviation-related businesses in North Texas – more than any other area of its size in the world
    • There are more than 68,000 documented aviation-related jobs in the region
  • LOGISTICS HUB
    • DFW is a major logistics hub and has the lowest distribution costs to the top 50 U.S. consumer markets of any region
    • Since the passage of NAFTA, DFW trade to Mexico and Canada has more than doubled – in large part due to the proximity of Interstate 35 – the NAFTA Superhighway
  • FINANCIAL AND BANKING CENTER
    • North Texas is a major financial center and is home to one of 12 regional Federal Reserve Banks, as well as several regional bank offices and corporate headquarters to Comerica
  • HIGH TECHNOLOGY CENTER
    • North Texas is a national and global leader in the high-tech sector, and 8.3% of the region’s total 2.7 million labor force is employed in high-tech fields, according to the Metroplex Technology Business Council
    • North Texas’ 225,000 high-tech workers account for 52% of Texas’ total technology workforce, and North Texas boasts 6,215 high-tech firms
    • Although the high-tech industry employs 8.3% of the North Texas workforce, the high-tech sector accounts for nearly 13% of wages paid to North Texas workers – indicating the relatively high-paying nature of these sophisticated jobs
  • RETAIL CENTER
    • North Texas is the 10th largest retail market in the country. Dallas Market Center, the world’s most complete wholesale marketplace, hosts approximately 50 markets each year attended by more than 200,000 retail buyers from all 50 states and 84 countries, and conducts more than $8 billion in wholesale sales annually
  • HEALTH CARE EXCELLENCE
    • North Texas is known for its extensive state-of-the-art health care facilities with more than 90 major hospitals and two major medical schools
    • Health care is one of the largest and fastest growing industries in the Dallas-Fort Worth region with more than 350,000 health care jobs

LOW TAXES:

  • No personal or corporate state income tax
  • Maximum state and city sales tax of 8.25%

QUALITY OF LIFE:

  • North Texas features world-class athletes, teams and sports facilities, including the new Cowboys Stadium, host of the 2010 NBA All Star Game, 2010 World Series, 2011 Super Bowl XLV, and the NCAA Men’s Final Four in 2014
  • The region is growing as an arts hub with 7.9 million people attending arts and culture events annually
  • Low cost of living
  • Affordable housing
  • Plentiful water
  • Public transportation and excellent highway system
  • Strong k-12 schools and universities
  • Centrally located
    (SOURCE: North Texas Commission)

For more information about Dallas, visit our Dallas Market page or find a local market expert in our Resource Network.