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™…

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

Beware of bubble genius …

Hard to believe it’s nearly 10 years since Fannie Mae and Freddie Mac collapsed and were taken over by Uncle Sam.

Time flies when you’re getting rich.

It’s been a GREAT run for residential real estate investors … especially apartment investors.  Free money in the punch bowl can really juice up a profit party.

But after 10 years of equity happening to real estate bull market riders … it’s a good time to think about where we are, where things are headed, and what to do next.

And looking forward comes in two parts:  external and internal.

The external is the world of variables outside your control.  Like driving down the freeway, there are lots of other drivers whose actions affect YOUR safety and progress.

But the key to your success isn’t what’s going externally. It’s how YOU navigate those external circumstances … based on what’s going on inside of you.

It’s about financial and emotional intelligence.

Because what you think and believe affects what you do … and what YOU do has the greatest impact on the results YOU experience.

One of the biggest dangers of riding a wave of easy money into gobs of equity is thinking you’re an investing genius.

We know … because it’s happened to us … and we see it happen all the time.

It’s much harder to be humble, curious, teachable and innovative when you already think you’re smart.

It’s important to know the difference between luck and skill.

True financial genius is being able to make money when everything externally is falling apart … like a pro race car driver deftly navigating a multi-car melee at 180 miles an hour.

That’s REAL skill.  Anyone can rocket down an open road.

Fannie Mae’s chief economist Doug Duncan told the audience at Future of Money and Wealth he thinks recession is likely in the not-too-distant future.

And Doug made those comments after reminding everyone his last year’s Summit predictions were all essentially spot on.

So based on both his pedigree and track record, Doug’s qualified to have an opinion.  And we’re listening.

“The time to repair the roof is when the sun is shining.” 
– John F. Kennedy

The sun’s been shining on real estate investors for ten years now.  Maybe you’re one of the many who’ve made tons of money.  We hope that trend continues.

But as our friend Brad “The Apartment King” Sumrok reminds us … it’s time to approach today’s market with a little more sobriety.

Money and margins are both getting tighter.

This means paying better attention to detail, increasing your financial education, and being careful not to rationalize marginal investments to bet on positive externals.

In other words, beware of being a bubble market genius … and thinking what worked in a bull market will work when things change.

Better to work on sharpening your skills at finding and creating value.

Of course, real estate is FULL of pockets of opportunity … the polar opposite of a commodity or asset class where everything’s the same and moves together.

Real estate’s quirkiness befuddles Wall Street investors … but thrills Main Street investors.

A case in point are apartments …

On the one hand, lots of brand new inventory is coming on the market … and it’s putting pressure on landlords to offer profit reducing concessions.

On the other hand, more affordable existing stock is attracting lots of interest… from both tenants and investors.

So “housing” isn’t hot or cold.  And neither are “apartments”.  Real estate defies that kind of simplistic description.

Of course, it takes financial education to recognize the difference between momentum and value.

It also takes time, effort, and relationships to actually find the markets, team and properties to invest in.

For most people, that’s way too much trouble.  They’d rather sit in their crib with their trading app … or turn their financial future over to a paper asset advisor.

That’s all peachy until rates rise, recession hits, and paper prices plunge.

History … and Doug Duncan … says the inevitable bear market is getting closer.

Of course, as we’ve previously commented … when paper investors get nervous, one of their favorite places to seek safety with return is real estate.

So for active and aspiring syndicators … it really doesn’t get any better than right now.

Think about it …

MILLIONS of baby-boomers are retiring.  They need to invest for INCOME.

And they’re sitting on stock market equity, home equity, and retirement accounts …

… holding many TRILLIONS of wealth needing to (literally) find a home withreliable income and inflation protection.

Their paper asset providers will try to meet the need, but their toolbox isn’t properly stocked.  They can’t do private real estate.

But as boomers struggle at squeezing spendable money out of sideways or stagnant stock markets, they’ll look towards dividends and interest.  Cash flow.

The challenge with dividend stocks is … in a volatile market, investors face capital loss on share prices.  Worse, dividends can be cancelled.

Compare this to rental real estate, which produces far MORE reliable income than dividends with LESS price volatility.  And no one is cancelling the rent.

So dividend stock investors would LOVE income property … IF it just wasn’t so darned hard to find, buy, and manage.

What about bonds and bank accounts for income?  (Try not to laugh out loud)

Remember, a deposit is a LIABILITY to a bank.  When you deposit money in the bank, the bank needs to create an offsetting ASSET … a loan.

But the Fed has stuffed banks full of reserves … and there aren’t enough good borrowers to lend to.

Banks don’t need to offer higher interest to attract deposits.  So they don’t.

As for bonds …

Yes, it’s true bond yields are edging up, which means bond holders earn a little more income … but at a what price?

Rising bond yields also mean falling bond values.  So bond buyers are understandably very nervous about capital loss on their bonds.

WORSE …, bonds carry the added risk of default or “counter-party risk.”

A bond default is TOTAL loss. Yikes.

Real estate to the rescue …

The relative safety and performance of income property or income producing mortgages secured by real estate is extremely attractive right now.

The biggest problem for passive paper investors is real estate is hard to buy, messy to manage, and takes more financial education than just knowing how to click around an online trading app.

And THAT is the BIG opportunity for skilled real estate investors to go bigger faster with syndication.

Whether you decide to explore the opportunities in syndication or not … it’s important to stay curious, alert and proactive.

Most real estate investors we know are preparing for the next recession … because that’s when true financial genius pays the biggest rewards.

Until next time … good investing!


More From The Real Estate Guys™…

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

Rising rates, oil, and an angry Amazon …

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

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

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

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

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

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

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

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

Now back to oil …

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

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

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

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

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

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

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

Pension Problems Potentially Pinching Property Owners

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

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

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

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

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

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

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

Don’t Slap an Amazon

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

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

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

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

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

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

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

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

 Think about this …

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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

Profits, jobs, and opportunity …

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

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

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

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

Consider this Yahoo Finance headline:

Small business earnings hit all-time high, NFIB declares

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

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

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

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

Job openings hit record high of 6.6 million

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

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

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

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

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

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

But there are two more parts to the story …

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

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

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

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

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

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

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

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

And speaking of wind …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Until next time … good investing!


More From The Real Estate Guys™…

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

Doomsday scenario …

Imagine a scenario where a giant asteroid is on a collision course with Earth.  When it hits, a huge portion of the world will be destroyed.

Scientists and politicians know it’s coming.  But it’s years away.

Fearful of triggering panic, the information is suppressed.  Even when leaks get out, they’re spun to seem insignificant.

Of course, those in the know realize real estate and businesses in the region facing obliteration will become worthless.

They also realize values in safe areas will skyrocket once people realize what’s happening and flee the danger zone … bidding up anything available where it’s safe.

So insiders begin quietly divesting themselves of assets in the danger zone … and begin to systematically accumulate assets in the safe zone.

They know there’s time to warn people, but want to make all their moves before acknowledging to the world the gravity of the situation.

Along the way, astute observers piece together the clues.  They realize what’s happening and use all means available to sound the alarm.

Some are dismissed as conspiracy theorists.  Others as doom porn profiteers.

Meanwhile, news feeds are filled with sensational, but trivial headlines … keeping the masses distracted.

So most people go about their daily business, completely unaware a disaster of epic proportions is slowly, steadily looming closer.

Most will be caught completely off-guard.  Some will reap huge profits simply through happenstance … because they accidentally own property in the safe zone.

Most in the danger zone escape with their lives, but not their fortunes.  Because their wealth and income are all based exclusively in the danger zone, they lose everything.

However, a few alert people in the suspected danger zone decide to hedge by acquiring property and expanding their businesses into other areas.

They reason that so long as the underlying investment makes good sense in its own right, even if a disaster never strikes, they really aren’t worse off for diversifying.

Sure, it takes extra time and effort to learn a new area, build relationships, and make the investments … but the incremental expense is accounted for as an insurance premium.

What would YOU do? 

And what does this have to do with your investing?

Perhaps obviously, the asteroid is a metaphor for a catastrophic financial event … say, the collapse of the U.S. dollar or the global financial system.

Could it happen?  Will it?

Of course, no one knows.  But there’s plenty of smart people out there who think it’s already started … and is inevitable.

It may not destroy the entire world.  But it could destroy yours … depending on how well you’re prepared … or not.

Robert Kiyosaki says the stock market will eventually collapse under the weight of baby-boomers hitting age 70-1/2 and beginning forced liquidations.

It hasn’t happened yet, but that doesn’t mean his premise is false.

It can be reasonably argued massive money printing and Central Bank interventions are propping markets way up … at least temporarily.

Chris Martenson says an economic system reliant on compounding growth and abundant energy is doomed to fail.  You can print money, but you can’t print energy.

So when energy production fails to compound as quickly as debt, an economic implosion is inevitable.  There’s no economic activity without energy.

Worse, Chris says, collapse will happen quickly because of the exponential nature of debt.

You can double the straw on the camel’s back many times … but the final doubling ends it all very quickly.

Consider the growth of only U.S. debt (the rest of the world is just as bad) …

1992 – $4 trillion

2000 – $6 trillion

2008 – $10 trillion

2012 – $16 trillion

2017 – $20 trillion

Notice the speed at which the debt is growing.  It’s compounding like a cancer.  And at some point, it consumes the host.

In 2006, Peter Schiff warned the world about the 2008 financial crisis.  People scoffed.

Peter says the next crash will be even bigger because everything wrong in 2006 is MORE wrong today.

Critics of Schiff’s theory point at the stock market … and the fortunes being made … to claim all is well.

Maybe.  But Venezuela’s had one of the best performing stock markets in recent history … and it’s plain all is not well in Venezuela.

Not surprisingly, people are fleeing Venezuela… a reminder of how economic conditions, harsh or otherwise, stimulate migration.  Of course, that’s of interest to real estate investors.

But this isn’t about Venezuela.  It’s about human behavior in the face of possible disaster.

Some ignore facts they don’t like.  Others deny them.  Still others spin them, while most simply don’t understand and can’t be bothered to try.

A few will remain rational, curious, diligent, and proactive.  Common sense says those folks generally fare better.

Clues in the News …

Bloomberg recently reported China is considering slowing or even ending lending money to the United States.

Markets responded by dumping bonds, which drove up interest rates.

So yes, what China does with its balance sheet affects YOUR interest rates on your Main Street USA rental properties.

Of course, China doesn’t want bond prices to fall when it’s holding a bunch of them … especially if they’re thinking of selling.  They just want to quietly unload.

Unsurprisingly, China decried the Bloomberg report as “fake news”.

But if U.S. news is “fake”, what are non U.S. news sources saying?

Here’s an interesting headline from Sputnik News on January 16th …

Chinese Media Explain How Russia and China Can Escape “Dollar Domination”

You should read it, but two important components are oil and gold.

“ … both Russia and China are also stepping up with exploration and acquisition of physical gold reserves, hedging against the implications of a possible collapse of the de-facto world currency.”

Of course, the de-factor reserve currency they’re referring to is the almighty U.S. dollar.

Hmmm … maybe China and Russia see an asteroid on the horizon.

Doom porn?  Conspiracy theory?  Or clues of a possible cataclysmic event coming to an economy near you?

We don’t know.  But we took Robert Kiyosaki’s warnings in 2006 too lightly and paid a BIG price.

Since then, we’ve gotten to know Peter Schiff, Chris Martenson, and Simon Black.

Peter keeps us sufficiently freaked out.  He makes sure we don’t fall asleep at the watch.

Kiyosaki teaches us to keep an open mind, to seek out diverse perspectives, and talk with other interested and thoughtful observers.

Chris Martenson reminds us to pay attention to energy.  And he’s accurately predicted the recent run-up in the price of oil.

Simon Black advocates the pragmatic wisdom of having a Plan B … not being overly dependent on one location, economy, currency, or investment.

Simon says you’re no worse off to be prepared … and it could make all the difference in your future.

All of these very smart friends … and many more … will be with us for our Investor Summit at Sea™ in April.

It’s unfortunate not everyone reading this can afford the time and expense to be there.

Even more unfortunate are those who can, but choose not to.  They have the most to lose … and gain.

We don’t know if the “asteroid” reports are true or not.  But every investor owes it to themselves to consider the arguments and the options.

Better to be prepared and not have a crisis, than have a crisis and not be prepared.

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 disrupted American Dream …

One of today’s most popular buzzwords is “disruptive”.  It describes an event, idea, or invention that upends the status quo in some aspect of life or society.

“Disruptive technology” is used for everything from Amazon to Uber.

And as we’ve previously discussed, many of these things impact real estate and investing.

But disruption transcends technology.

Donald Trump’s election and Brexit are two examples.  The world appeared to be on one course … then boom.  A new direction.

So, political norms, societal norms, government and business models …almost everything is being disrupted right before our eyes.

In fact, disruption is so commonplace, it’s become the new normal.

But really, disruption is nothing new.  It goes back to pre-historic times.

The wheel was disruptive … and revolutionized the world (sorry, we had to…)

Farming was disruptive.  It changed the entire societal model … accelerating labor specialization, commerce … even banking.

The printing press was disruptive … connecting human minds past and present at greater speed, for lower cost, and with greater accuracy than ever before.

The U.S. Constitution was disruptive … protecting private property rights for the common man … the foundation on which all personal wealth is based.

That’s a personal favorite. 😉

Radio, telephone, personal computing, the internet, smart phone … all disruptive … each one taking idea sharing to never-before-seen levels.

Trains, automobiles, and airplanes all disrupted the transportation norms of their time … allowing people and their possessions to circulate faster and less expensively.

Now blockchain technology … at least for now … is threatening to disrupt how freely money and wealth circulate.  And governments have noticed.  Uh oh.

Of course, history shows with every disruption, there are winners and losers.

For every railroad baron or millionaire automobile maker, there were thousands of wagon-makers and liveries put out of business.

So while disruption isn’t new … the rate is unprecedented.  The world we live and invest in is evolving at a dizzying pace.

Blink and you miss huge opportunity.  Or worse, you get wiped out by a trend you didn’t even see coming.

The faster the world is going … the further ahead you need to look.

 So with this mindset, here’s a headline that caught our attention …

Why it makes more sense to rent than buy – Market Watch, 1/13/18

Obviously, a real estate headline.  But disruptive?  Seems pretty mundane.

After all, the rent vs. buy debate has been going on forever … usually linked to temporary circumstances favoring one side over the other at the time.

But this article references two interesting reports …

One is the ATTOM Data Solutions 2018 Rental Affordability Report.

It notes … buying a home is more affordable than renting in 54 percent of U.S. markets, but 64 percent of the population live where it’s cheaper to rent.

Hmmm …

Looks like folks prefer to rent where they want to live than buy where the numbers make sense.  Apparently, buying just isn’t that important to them.

Which leads to the second report, A Revision of the American Dream of Homeownership.

This one’s a premium report, so the link’s to the press release … but look at the title … “a REVISION of the American Dream”.

The idea that something so foundational as the American Dream is being … disrupted … is something worth thinking about.

Market Watch did another article based on this report … “Renting is better than owning to build wealth – if you’re disciplined to invest as well.”

Some might say it’s a hit-piece on real estate to entice millennials to put their savings in the stock market rather than a home.

But that would be cynical.

More interesting is the possibility there’s really a disruptive trend developing in terms of the way society views home ownership.

Consider this …

We have a friend who’s a very successful millennial, who can easily afford to own any kind of car … several of them … if he wanted to.

He doesn’t.

Now that he’s discovered ride-sharing, he sees no value in owning a car … not as a status symbol or an investment.

We’re not suggesting this guy’s viewpoint represents the millions of millennials out there.  But it’s worth noting.

Millennials are a big, powerful demographic rolling through the seasons of life … just like the baby boomers did.

Except millennials aren’t like Boomers …they live in a different world and view it through their own lens.

Career, opportunity, family, community, home ownership … roots … are very different today compared to 50 years ago.

In a world where you may change jobs a dozen or more times in a career, and you operate in a global economy, with a social network that’s not local, but virtual …

… home ownership can go from being stabilizing to burdensome.

The sharing economy is changing the way people think about the value of owning things they simply want the use of.

Absent paradigms of ownership, sharing is arguably more efficient.  But for the first time in history, it’s logistically possible.

No generation before has had as many options for sharing as there are today.  

And while pay-per-use seems like a no-brainer when discussing a depreciating asset like a vehicle, Market Watch isn’t the first to argue a home isn’t a great investment.

The pioneer in the “your home is not an asset” mindset is none other than our good friend (and boomer), Robert Kiyosaki.

Of course, Robert’s an avid real estate investor, so his issue isn’t real estate.  It’s about respecting the difference between consuming and investing.

Investing is about profit.  But when you consume, you want value … the right mix of quality, service, and price.

Some people rent their residence because they get a better value, have less responsibility, enjoy more flexibility and variety …

… and it frees up money to invest in rental properties.  They get a better ROI.

So they own real estate … just not the home they live in.

If there’s a new attitude about home ownership working its way into the marketplace, it could lead to a new experience in landlording too.

Because now you might have more affluent, well-qualified tenants competing for longer term tenancies in nicer properties in better areas.

Stable people with good jobs and incomes, who want to live and keep a nice home in a good area, but don’t want the responsibility of home ownership … can be great tenants.

They can also be a way for you to collect premium properties while someone else pays for them.

It’s a trend we’re watching.

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.

Where people are moving and why …

Real estate investing scientists are avid researchers of the migratory patterns of Homo americanus.After all, population affects demand … and monitoring supply, demand, and capacity to pay is an important part of strategic geographic market selection.

So we’re excited because it’s that time of year when all kinds of reports start coming out about the year past … and we can geek out on data and analysis.

North American Moving Service recently released their report on which states experienced the most inbound and outbound migration.

Of course, strategic investing is more than just chasing trends reflected by data.

It’s about digging into the why behind what happened … and infer what might happen in the future … so you can get in front of a trend and ride the wave.

So let’s take a look …

If you know anything about any of these markets, the map and lists might already be talking to you.

Consider that actions … in this case, people moving … are motivated by running towards and getting away.  It’s wise to look at both.

Avoiding problems is just as important as chasing opportunities.  Losses offset wins.  So we study falling markets as well as rising ones.

We’ve previously discussed the mess in Illinois, which you can read here.

And while the above map is just an overview of the information provided in the complete North American report, it’s enough to think about what these migratory patterns might be indicating.

For additional color, check out a similar report from United Van Lines.  You’ll note that their top and bottom states vary from North American’s.

Also, the United Van Lines map is fun because it’s interactive.  You can look at moving patterns all the way back to 1979.

U-Haul also produces a similar report … and their results also varies from the others.

So why the variances?

Perhaps obviously, each company is reporting its own stats … and not every company is equally represented in every state.

Remember: one point of view never tells the whole story.  Always look for supporting and differing perspectives, and corroborating and disagreeing data.

Once the data’s on the table, you can start to dig in and look for commonalities and trends … clues about what’s happening, where, and why, so you can be more strategic than the lazy investor.

Of course, there’s a danger in over-analysis, so don’t get lost in the weeds and forget to invest.

It takes assets, not ideas, on your balance sheet to build wealth. 
Think of it as “investigation for effective action.”

Remember, you’re not looking for the perfect market or perfect property.  There’s no such thing.

You want to find a good market, with good fundamentals, and a great team.

When it comes to migration, our goal is to understand the motives behind the movers … so we can anticipate whether trends will continue, change direction, or otherwise shift.

Because when people leave, they take demand for housing with them.  Lower demand could lead to lower rents and prices.

If the phenomenon is only temporary, it might be a great time to grab some bargains.

But if the reasons people are moving away are permanent or worsening, you might be buying into a downward trend … that could be unprofitable and expensive to escape.

Of course, there are lots of reasons people move to and from places.  Some are non-financial such as family, friends, lifestyle, and weather.

But financial considerations are also powerful motivators to change locations.  A job, the cost of living, and taxes are typically top of the list.

While things like family, friends, hobbies, and weather preferences are all highly personal and subjective …

… things like job growth, cost of living, and taxes are all relatively objective.  They’re easy to identify and measure.

So it’s a useful exercise to evaluate the locations at the top of the list and see what they have in common in these terms.

Then do the same for those on the bottom, and it may start to paint a picture.

Now this is a newsletter and not a seminar, so we’ll let you dig in and do the research if you’re so inclined.

The great news is this is the information age, so there’s terabytes of data available.

But to speed you along, here’s some resources … and some additional food for thought …

Tax Burden

Taxes have been in the news quite a bit, and it’s that time of year when people are reflecting on the past year … and settling up with taxing authorities.

If Christmas is the most wonderful time of the year, tax time is probably quite a bit further down the list.  It’s Uncle Sam’s turn to open his presents … from you.

To see which states are naughty and nice, Wallet Hub publishes a ranking of states by total tax burden here.

Then keep in mind … information workers and retired boomers are largely free to live anywhere.  Total tax burdens could be an important consideration where they go … or leave.

So when you look at the states with people moving in and out, and compare it to the states in light of their total tax burden … you might find a correlation which could infer taxes are a motivator for moving.

Cost of Living and Affordability

While taxes are an important consideration, we’re guessing even more important is overall cost of living and affordability.

US News puts out an analysis of states by affordability.  The 2017 version isn’t out yet, but here’s the 2016 version.

Like taxes, people whose incomes aren’t tied to a specific geography, might consider making a move to a more affordable area.

Of course, if you study some of the rent-to-price ratios of various locations, you’ll find some of the best residential rental property returns come from affordable areas.

Jobs

Housing health is really a direct reflection of jobs.  While academic politicians think housing creates jobs, it’s really the other way around.

So while people might want to live in the country, on the beach, or on a hilltop … most choose to live where they can find work.

Keep in mind, many characteristics of a locality are affected by state-wide considerations such as tax rates, weather, and regulatory climate … while jobs are local.

Fortunately, Wallet Hub also publishes a pretty handy ranking of Best Cities to Find a Job. Now you’re looking at data at a more local level.

Not Rocket Surgery

While real estate investing isn’t as intellectually demanding as many types of investing (that’s why it’s perfect for us!) … it’s more than just picking out a pretty property with nice curb appeal and putting up a For Rent sign.

Each property sits in a market … and neighborhoods, cities, counties, and states all have their own appeal … or lack thereof.

Migration patterns can help you see a bigger trend so you can pick markets likely to rise with the tide of demand.

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.

Certainty in uncertain times …

Sometimes when the world seems to be spinning out of control and not much makes sense, it’s helpful … even necessary … to cling to something stable.

Headlines are filled with wars, rumors of wars, natural disasters, senseless murders, endless divisive vitriolic political rhetoric, greed, corruption, hypocrisy …

And that was just last week.

No wonder so many Americans love to just veg out and get away from it all by watching some football … oh wait.

When it comes to investing, it’s easy to go “full turtle” … retreating into our shells, hunkering down until the storm passes.

History says that’s not a winning strategy.

After all, there have ALWAYS been wars, disasters, corruption, and a zillion reasons to pull the covers over our heads and wait for morning.

But is there ever a time when looking back 20 years, you wish you would NOT have bought more real estate?

We’re guessing folks in 2015 wish they bought more in 1995.  And those in 1995 probably wish they bought more in 1975 … and those in 1975 wish they bought more in 1955 …

You get the idea.  And if you know history, there was a LOT of crazy stuff that happened in the world during each of those 20-year periods.

But one thing’s been SURE … real estate’s been among the safest places to build and protect wealth from the storms.

Yes, the cynics out there can point to individual cases where a real estate investor took some lumps in a downturn.  We’re on that list for 2008.

But it wasn’t real estate’s fault … it was how the portfolio was structured.

Otherwise, how do you explain people like Ken McElroy and many others who THRIVED with real estate investing during the same period?

It’s easy to ride an upside wave on a sunny day when a rising tide is lifting all boats.  Everyone’s an expert sailor in good weather.

But when the storm comes, you find out who really knows how to sail and has prepped their ship for the INEVITABLE tough times.

However, there’s a BIG difference between being in just a rowboat versus a truly seaworthy vessel.  The rowboat is much more easily tossed about in rough water.

So with everything going on in the world … and real estate getting tossed into the conversation of bubbles about to burst in all “asset classes” … we thought it’s a good time for …

Making the Case for Real Estate

This could be a book, so we won’t expound each point.

We’ll leave it to you to think, research, debate, and discuss these items with your friends … even and especially those who are prone to disagree.

Real estate is eternal, essential, and easy to understand. 

It’s been around forever and will continue to be necessary to support human existence.

The business model is simple … people or businesses use your property and pay you rent.  No Ph.D. needed.

Real estate markets are inherently inefficient.

That might sound bad, but it’s good.  The less of a commodity something is, the easier it is for pricing to be more subjective than objective.

Real estate markets are really hard to manipulate.

Many paper asset markets are “influenced” by power players to create spreads through profitability.

Because traders can’t deal in large blocks of properties to push prices around … they don’t.

Real estate is supported by the power players.

To the extent real estate can be manipulated, all the incentive for anyone big enough to do it … government, central banks, industry … is to support it.

No one attacks real estate to drive it down.

Real estate is financeable with cheap long-term debt.

Even 20% down with an 80% loan, producing 5 to 1 leverage, is considered “conservative” … and qualifies for some of the cheapest long-term money in the market.

There’s no margin call if a property’s value drops.  As long as you keep making those payments … using the tenant’s money … you’re okay.

Real estate mitigates counter-party risk.

This is a REALLY important point because we’re guessing the VAST majority of paper asset investors are quite unaware of the counter-party risk pervading their portfolios.

Bank accounts, brokerage accounts, insurance contracts, bonds (and any mutual fund or investment containing bonds) are FULL of counter-party risk.

When you own real estate, you own it.  It’s a real asset, not a promise.  It’s not someone else’s liability, where if they default you have nothing but an IOU.

Real estate allows you to switch out debtors.

Some might argue if a tenant defaults on their lease, it’s the same as if a bond issuer defaults on their payments.

No.  Real estate is VERY different.

To our previous point, if a bond issuer defaults, your bond is worthless.  It’s only a promise whose value is dependent on the counter-party (the bond issuer).

When a real estate tenant stops paying, you still have the property.  You can evict the tenant and replace them with someone who will pay.

Good luck doing that with a bond.

Real estate provides a hedge against both inflation and deflation.

You might have to put your thinking cap on for this one.

Obviously, with inflation, real assets go up in dollar value.  Inflation is why a 3-bedroom home purchased in 1960 for $10,000 is worth $200,000 today.  The dollar got weaker.

Deflation is the opposite.  The dollar gets stronger (try not to laugh) and it takes LESS dollars to buy the same real asset.

So now, a $200,000 property might fall to $100,000 or less.

But if you only put 20% down … or $40,000 … and the tenants (whose paychecks goes farther as prices are falling) pay off your property …

… at some point, you have a property that’s paid for.  So you’re in for $40,000 and the property is “only” worth half what you paid for it, or $100,000.

Did you lose?

Real estate provides certainty in an uncertain world.

We could go on and on, but there’s the point …

There’s no guarantee with investing.  It’s about taking thoughtful, mitigated risks for an attractive risk-adjusted return.

And while you can’t just throw a dart at a map, pick any property and haphazardly structure the deal, financing, and management …

… history says properly structured properties in solid markets are proven long-term winners no matter what’s going on in the world.

Your mission, should you choose to accept it, is to …

… focus your education and networking on finding markets, teams, and properties which provide a high level of certainty in uncertain times.

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.

Lessons from Puerto Rico for real estate investors …

“Those who do not remember the past are condemned to repeat it.”

   – George Santayana


This is one of our favorite quotes.  It’s simple yet powerful wisdom … useful for individuals, businesses, governments … and certainly for investors!

We could take this theme in a thousand different directions, but this CNBC headline caught our attention this week …

Here’s how an obscure tax change sank Puerto Rico’s economy

With tax reform in today’s financial headlines … and our memories of what happened to real estate after the 1986 tax reform …

… we think it’s a good time to consider the impact of tax policy on the economy, jobs, and real estate.

As for Puerto Rico … it’s a huge mess after Hurricane Maria.  Lots of infrastructure and real estate have been destroyed.

Of course, the financial mess in Puerto Rico was in the news long before Maria showed up.  The natural disaster just made the financial disaster a whole lot worse.

Let’s dig in and look for lessons for real estate investors …

The CNBC article points out, “Even before a devastating hurricane … the government was struggling with an economy in shambles …”

And, “That fiscal mess has its roots in the repeal of a controversial corporate tax break that helped spark an exodus from the island that sent its economy into reverse.”

Yikes.  Will people and businesses really move just because of some “tiny” tax law?

Yes.  Yes, they will.  It turns out taxes (and avoiding them) are kind of a big deal to people and businesses.

In this case, a tax break, “enacted in 1976, allowed U.S. manufacturing companies to avoid corporate income taxes on profits made in U.S. territories, including Puerto Rico. Manufacturers … flocked to the island.”

This lead to an economic and employment boom in Puerto Rico.

Of course, when politicians see money they just can’t help themselves.  The Puerto Rican politicians started spending, and borrowing to spend even more.

Meanwhile, back in the U.S., the CNBC article says …

But by the early 1990s, the provision faced growing opposition from critics who attacked the tax break as a form of corporate welfare.”

So in 1996, a ten-year phasing out of the tax break began and “plant closures and job losses followed.

Which bring us to tax policy and real estate investors …

The law had nothing to do with real estate or investors … but then again, it had EVERYTHING to do with real estate investing …

… because real estate investments are highly dependent on JOBS.

And whether you think it’s fair or not, corporations make decisions about where to do business (or not) based partially on tax policy.

In this case, tax breaks attracted corporations to set up shop and were good for jobs and real estate.  The removal of those breaks had the opposite effect.

Of course, the law in question was passed and repealed at the federal level.  It wasn’t under Puerto Rico’s control.

But Puerto Rico got the lesson.

So in 2012, Puerto Rico passed Act 20 and 22 … effectively becoming an attractive tax haven for both businesses and individuals.

We first heard about this from Summit at Sea™ faculty member Peter Schiff … who moved his asset management company and himself to Puerto Rico to save taxes.

He’s not the only one.  We have several other friends who’ve done the same thing.

Right now, the tax law still exists … though much of Puerto Rico doesn’t.

We think there’s probably a way to combine those two circumstances to create an opportunity for real estate investors.

Of course, back in the U.S., tax reform is in the air again …and corporate tax breaks are in the mix.

Will corporate tax breaks bring businesses to the U.S. and create an employment boom? If so, where?  And will the breaks be permanent or temporary?

It’s too soon to tell, but it’s something we’ll be watching closely.

Meanwhile, there’s another lesson from the Puerto Rico story …

We know a tax break brought in a tide of corporate investment, and the removal of the tax break decades later took the tide back out.

But there was a lot of opportunity in between.

Of course, to catch a wave, you need to be watching the horizon.  And when you see the wave forming, you need to paddle quickly into position.

In Puerto Rico, as in Florida, Houston, and the several Caribbean islands all decimated in varying degrees by the back to back hurricanes …

… there’s going to be a big tide of capital flowing in to repair everything.

And because of the scope of the problems, the season of rebuilding could last quite a while.

Recently, we talked with our boots-on-the-ground turnkey property provider in Orlando, and he says he sees a lot of opportunity in his market right now …

Problem properties are popping up with pricing that leaves some meat on the bone for investors.

That’s good news … not just for investors, but for the community at large … because investment capital is needed to help with the recovery process.

The same is true in Houston, Puerto Rico and other areas ravaged by the storms.

Of course, conditions in each market are different.  Orlando is in far better shape than Houston which is far better shape than Puerto Rico.

All that to say there are different levels of distress, bargains, risk and reward in each market.

Unfortunately for the average individual part-time investor, the gap between seeing opportunity and being able to take advantage can be too big to bridge.

For most U.S. citizens, their “investment” into these disaster zones will be a de facto donation through their taxes, as federal relief funds pour into each area.

Of course, many kind-hearted individuals will make modest personal donations, which is admirable.

But to get LARGE amounts of private capital into each area to help rebuild, it’s going to take an investment opportunity.

And we think private syndicators have a role to play.

Motivated real estate entrepreneurs with skills and availability have an opportunity to start a private investment fund to aggegate private capital and make profitable investments in each of these areas.

Busy qualified investors who don’t have the time or skills, but see the opportunity, can make an investment in these private funds and earn a profit while helping heal ravaged markets.

This is the kind of capitalism that makes a positive difference in the world …  people helping themselves by helping others.

Or as our good friend Gene Guarino often says, “Do well, by doing 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.

Investing, infrastructure and you …

Timeless real estate wisdom says three things matter most when deciding what to buy … location, location, location.

It’s tongue-in-cheek, but the point is real estate derives its value from demand.

The key is choosing properties most likely to surge in demand relative to supply.

Of course, deciphering supply and demand means looking at demographics, economics, migration, and the potential for increases in supply.

The concept is simple.  But understanding actual market dynamics is more complex.

Still, it’s worth the effort because real estate investing is about buying and holding a property for the long term.

And even if your time horizon is shorter, you still need new buyers coming into a market to take you out.

So getting the market right matters a lot more than simply making sure the property’s free of termites and the plumbing works.

When it comes to residential rental real estate, some major demand factors are jobs, affordability, and quality of life.

Sure, everyone would LOVE to live in Tony Stark’s mansion in Malibu … it’s got a GREAT location and is low in supply.  But it’s not affordable.

And with so many retail jobs being automated or Amazoned … and manufacturing jobs still more off-shore than on …

… what kind of jobs and geographies offer the kind of growth potential likely to support working class folks?

We’re keeping our eyes on infrastructure for clues.

Both the Obama administration and now the Trump administration have said U.S. infrastructure needs attention.

It’s not a blue or red only issue, so maybe something will really get done.

We’ve commented before on Trump’s plan to spend a trillion dollars on infrastructure … and though it may seem to have fallen off the radar, infrastructure might be making a comeback.

First, even though the Fed backed off on the last rate hike, they’re still talking about reducing their balance sheet.

That’s code for tightening “monetary stimulus”.

This puts pressure on President Trump and Congress to fire up some “fiscal stimulus” … which is code for good old-fashioned government spending.

And while the military is quite likely to be on the receiving end of a chunk of it, we think some funding will probably find its way into infrastructure.

Of course, we’re not the only ones paying attention to this possibility.

Check out this headline from Bloomberg …

Buyers Bet on Infrastructure, With or Without Trump

The article is about one big company buying up another big company to get in position to feed off government spending on infrastructure.

“This rush to get positioned for an infrastructure-spending boom is a striking contrast to the stalled progress in Washington on legislation of any kind, let alone Trump’s proposed $1 trillion infrastructure plan. But like the private-equity firms raising buckets of money for infrastructure-focused funds, industrial firms are wagering the country’s roads, bridges and sewer systems have gotten so bad they can’t be ignored for too long.”

Of course, the big question for real estate investors is … where???

Some clues can probably be gleaned from the prospectuses of the private-equity and industrial funds … all of whom are presumably spending considerable resources on researching their mega-investments.

But there are also clues in the news.

The New York Times published an article claiming Trump Plans to Shift Infrastructure Funding to Cities, States and Business.

More recently, Reuters reports U.S. Construction Spending Falls as Government Outlays Tumble.

U.S. construction spending unexpectedly fell in June as investment in public projects recorded its biggest drop since March 2002 … The decline pushed public construction spending to its lowest level since February 2014.”

So even though Uncle Sam wants to spend money on infrastructure, they’re not doing it in earnest … yet.

But think about this …

Big companies and private-equity funds are getting positioned for big infrastructure spending.  They expect it to happen.

President Trump says he wants to spend a trillion dollars in infrastructure.

We can’t imagine Congress not wanting to spend money.  It’s what they do best.  Then again, getting anything done is what they do worst.

But everyone seems to agree infrastructure is in bad shape. And we’re guessing some places are in worse shape than others.

So like the big players, we think at some point, the need is going to force the spending … ready or not.

Now if the Feds don’t pay … or if Trump puts more responsibility on the states … it seems like those states which already have the best infrastructure … or the best economic ability to build or improve it … will have a big advantage.

And because we’re always looking for an advantage, we decided to look up those U.S. states in the best fiscal shape.

Not surprisingly, several of our favorites are in the top ten …

  1. North Dakota
  2. Wyoming
  3. Texas
  4. North Carolina
  5. South Dakota
  6. Vermont
  7. Tennessee
  8. Indiana
  9. Utah
  10. Florida

Of course, when picking a market to invest in there’s more than just fiscal strength.

Affordability, market size, business and landlord friendliness, quality of life … and your boots-on-the-ground team … are all important considerations also.

Nonetheless, with record levels of debt at every level, rising healthcare costs, pensions in crisis, and fiscally cancerous unfunded liabilities growing daily …

… we think companies and governments in relatively good financial shape are best positioned to make critical investments, gain competitive advantages, and attract an unfair share of population and business.

The goal, as Wayne Gretzky says, is to skate to where the puck is going.

Until next time … good investing!


 More From The Real Estate Guys™…

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

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