11/3/13: Agricultural Real Estate Investing for Cash Flow, Equity Growth and Asset Protection

Whether times are good, bad, uncertain or chaotic, it always makes sense to focus on fundamentals.  And there’s nothing more fundamental than food.

In this episode, we visit with the CEO of an international investment company.  He shares the path of discovery his firm and their clients explored in the wake of the 2008 financial crisis.  The conclusions they came to and where those lead are the focus of our conversation.  We found it fascinating and think you will too!

Planted in the studio and calling in from the field for this fulfilling episode of The Real Estate Guys™ radio show:

  • Your host and cultivator of conversation, Robert Helms
  • Your co-host and fertilizer of radio frequency, Russell Gray
  • Special Guest, CEO of Liquid Investments, Anthony Archer

Even though the world is now in the “information” age, it didn’t abandon the industrial or agricultural age.  It’s more like each age stacks on top of the other to create a bigger economy.

But when things get shaky, sometimes it’s safer to get closer to the base.  This is our interpretation of Liquid Investments post-2008 investment strategy.

We know the stresses of the Great Recession compelled us to broaden our horizons and deepen our understanding of the macro-economic factors affecting real estate investors. In addition to our obsession the Fed and the bond, gold and oil market, our interest in both international real estate and farmland has been blossoming.

What makes agricultural investing so appetizing?

First of all, it’s real estate.  So for all the reasons we like real estate, we like farmland.  Except for depreciation.  You can’t depreciate dirt. But you can appreciate it, and of course, we do.

After all, farmland is real.  It serves an essential human need.  And while they aren’t making any more real estate, apparently whatever it is that makes more people remains popular, and so the world’s population is growing.  Of course, all those new people need food… no matter where they live.

Which brings us to a very important distinction between rental real estate and farmland

Discover agricultural investing in coconut farmland in BrazilRental real estate, whether it’s residential, commercial or industrial, provides a service (the tenant gets to use the building) that is LOCAL.  That’s why we do field trips and spend time studying the micro-economic factors supporting the people and businesses in any community where we’re considering investing in rental property.

But the product of farmland is a commodity (food) that can be sold ANYWHERE.  So whether you’re growing coconuts or coffee beans, just like oil, gas and gold, these food commodities can be sold and shipped to consumers worldwide….even places like China, India or Russia.  It doesn’t really matter where the people live, as long as they like to eat.  So you can invest locally, but derive income globally. Yummy.

But wait!  There’s more…

You may have heard about central banks (The Fed, the ECB, the Bank of Japan, etc.) practicing an economic rain dance called Quantitative Easing.  The stated goal of this “easing” is to inflate prices.  They allege this is desirable.  We might beg to differ, but they’re not calling us for our opinion, so it is what it is.  At last glance, the stock market seems to agree with the bankers – at least for the short term.

But along with the fruit of high stock prices come the weeds of soft employment and rising consumer prices.  For folks that have enough money to get in on the rising stock market (and enough brains to get out before the next crash, er…”correction”) can offset their lost purchasing power with more capital gains.  Good for them.

But the working class people…you know, the kind of people who live in your rental property…can’t afford to invest in the stock market, so they get squeezed between soft wages and rising prices.  There’s no wealth effect in their portfolios to compensate them for the loss of purchasing power.  This is one of the main reasons we focus on lower priced residential markets right now.

But we digress (shocker)…

The point is that while QE squeezes your tenants and puts downward pressure on residential rental income, it puts UPWARD pressure on commodity prices.  So if you’re a producer of commodities (which you are as a farmland owner), you’re hedged against inflation, and diversified against local economic disruptions.  That is if the cost of food goes up, so does your income.

Think about it.  Food, in it’s most basic form, may end up in a lot of places.  Cheese can end up in a cheap frozen pizza you grab at the market, on in a high end pasta dish prepared at a fancy restaurant.  But when you trace it back to the root (or udder, in the case of cheese), it came from the farmland.  So whether the economy is soft and more frozen pizzas are sold, or the economy is hot and more people eat out at fancy restaurants, the cheese producer gets the order.

But it gets even better….

Long time listeners to The Real Estate Guys™ radio show know that we’ve been longtime advocates of international diversification.  There’s a whole crop of good reasons including privacy, asset protection, generating offshore income in a low tax jurisdiction (the same way Google, GE and other corporations do), and our personal favorite: having a business related reason to travel.  We could go on, but you get the point.

Of course, as in all investing, there’s a lot to consider.  What country?  What crop?  How do you find opportunities?  How does it all work?

We knew you’d have more questions.  So we got our British friend Anthony Archer on the line (it’s like talking to James Bond) because he’s been researching all of this for several years.  And it isn’t just theory.  Anthony and his team have been weeding out opportunities, cultivating relationships and growing their investors’ cash flows and equity by putting these principles into practice.

So listen in and harvest the benefit of Anthony’s experience.  And to reward you for your diligence in listening through the whole episode, at the end, we tell you how to get his excellent free report on the topic.  In fact, since you’ve made it all the way to the end of this post, your reward is you can go ahead and click here to get the report now.    Good job!  But remember to listen to the show too!

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7/28/13: From the Floor at Freedom Fest – Coffee, Coins and Capital Controls

The real estate we love to invest in floats in an economic sea teeming with other financial and political life forms.  And each of these denizens of the dollar (after all, the greenback is the world’s reserve currency…at least for now), have an impact on the overall financial ecology.  There are symbiotic relationships, predators and prey, natural and man-made disaster (can you say “derivatives”?), and a host of other factors which affect where we find opportunities and how we manage them.

That’s why we like to attend Freedom Fest each year.  It’s like an ancient watering hole (to switch metaphors) where all kinds of different creatures gather to refresh themselves.

This year was no different.  We arrived with our microphones, set up shop, and started talking to a variety of extremely interesting people.

In the past, we would go for the “big game” and proudly bring back to our tribe (that’s you) interviews with folks like Steve Forbes, Herman Cain and Peter Schiff.  We still like all those guys (Peter’s returning as a faculty member for our 2014 Investor Summit at Sea™), but since Forbes, Cain and Schiff are all on TV and radio all the time, we want to bring some thoughts from people you might not otherwise every hear from.

So, behind the microphones, wearing our real estate wetsuits and diving into the deep sea of discussion at Freedom Fest:

  • Your intrepid hunter of interesting ideas, Robert Helms
  • His gatherer of great guests, Russell Gray
  • International agricultural real estate investing expert, Wayne Kurtz
  • Coffee farmland investing executive, David Sewell
  • Rare coin and precious metals dealer, Van Simmons
  • Economic collapse prepper, Max Wright
  • Freedom Fest founder, economist and author, Mark Skousen

As you can see, we have a pretty full dance card for this episode.  Freedom Fest really is a smorgasbord of ideas. And the first one that whet our appetite is the notion of offshore agricultural investing.

Our first guest is Wayne Kurtz, who is the Chief Commercial Office for Liquid Investments.  We first met the Liquid Investments gang at last year’s New Orleans Investment Conference.  Back then, we were intrigued by their whole program, so we were excited to see them at Freedom Fest and grabbed Wayne for a quick chat.

Liquid Investments offers investors the opportunity for cash flow and long term equity growth through coconut farmland in Brazil.  Really.

But if you think about it, it makes sense.  After all, many Americans and Brits are looking to get their money off-shore.  And while the U.S. is chasing down foreign bank accounts, it’s still relatively private to own real estate offshore.  Even better, it’s nearly impossible to confiscate.  But even if you’re not paranoid about an over-reaching government, the investment still has attractive merits.

Coconuts, like oil, corn, copper and coffee, are a commodity.  And coconuts are surprisingly useful and growing in demand.  So like an oil well, you can turn a coconut farm into a cash flowing machine.  Of course, it all happens on real estate, which is a tangible asset and can be a great hedge against inflation.  Unless you’ve been asleep, you’ve probably noticed that every major country is printing money at a record pace, so a hedge against inflation is probably a good idea.

So we get the quick overview, and invited Liquid Investments to come back on the show to go into more detail. Stay tuned!

Keeping with our theme of agricultural real estate, next on deck is David Sewell.  David is the VP of Investments for Terra Cafetera in Colombia.  Once again, we’re offshore (unless you happen to be from Colombia), and we’re talking farmland.  Except this time, the crop is coffee.  We probably don’t have to tell you how popular coffee is.  Or how unlikely it is that people will ever stop drinking it.  Or that Colombia is renowned for producing some of the best coffee on earth.

So David gives us an overview of what he and his company are doing.  Good stuff…kept us awake. 😉

Next we switch from coffee to coins as we welcome Van Simmons to the microphone.  Van is a numismatic coin dealer.  Mark Skousen says when it comes to this topic, Van is the Man.  That’s good enough for us, so we pried him away from his impressive display of collectible coins and sat down to talk.

What do coins and precious metals have to do with real estate investing?

Directly?  Nothing.  But as we noted at the top of this post, all these various financial vehicles either affect each other or are indicators of potential market changes.  Besides, “real estate” is really just a preface to the core function of being an investor.  So we’re always interested in all kinds of investments.  Yes, it’s true.  We’re investors first, and real estate guys second (don’t tell our producer).

It used to be that the U.S. dollar was “as good as gold”.  In fact, before August 1971, Federal Reserve Notes (those green pieces of paper with pictures of dead presidents) were redeemable in gold.  But after the U.S. went on a giant spending binge in the ’60s, Uncle Sam started hemorrhaging gold, so President Nixon slammed the door to Fort Knox.  It’s took awhile, but after an orgy of money printing at the turn of this century, investors began stocking up on gold as way to hedge against a falling dollar.  You probably know gold was THE investment of the 00’s.

But lately, gold (and silver) have fallen on hard times.  Does that mean the dollar is back?  Maybe.  If it is, then interest rates will likely rise. Now THAT matters to real estate investors.  So while we watch bonds to see how the market feels about the dollar, gold helps us understand how the market feels about currencies (of which the dollar is only one).

(If your head is already spinning, just take a deep breath and make plans to join us on the 2014 Investor Summit at Sea™, where we’ll be talking Schiff with our friend Peter…you’ll catch on fast).

Of course, numismatic coins and bullion are two different animals.  Going into the interview, we weren’t necessarily fans of collectible coins.  It seems like when times get tough, premiums for rare coins would fall, right?

But then when you muse on it a little longer, you realize that (to quote our friend Robert Kiyosaki), “the poor are getting poorer, the middle class is getting wiped out, and the rich are getting richer.”  That’s the impact of inflation.  While consumers’ purchasing power is being eroded by incessantly rising prices (albeit slowly right now, thanks to a very weak labor market), anyone with means is buying investments which hedge or even benefit from inflation.  The uber-rich are playing arbitrage (borrowing cheap and investing for a profit) and buying tangible assets.  And while commodities markets are very volatile (some say manipulated), collectibles are more stable.

Interesting stuff.  As soon as we’re super rich, we’re buying rare coins and fine art.  But in the meantime, it still might be fun to put a coin or two in the portfolio to see what happens.

Our next guest is even MORE interesting…

Max Wright represents an organization called the Success Council.  The short story is they belief the greatest wealth transfer in history in underway right now, and they want to help people be on the right side of it.  Of course, they aren’t the only ones who think this is happening.  But sounding the alarm is one thing, guiding people to safety is another.

Our visit was far too short to draw any conclusions about their theories and practices, but there’s enough credible people proclaiming the same thing that we’re always interested in getting another perspective.  Long time listeners of The Real Estate Guys™ radio show know that since the mortgage meltdown, we’ve sought out a litany of opinions on the topic.  And as the markets continue to gyrate and convulse, you can be sure we’ll continue to bring you a diverse range of viewpoints.

Because when the foundations of the economy are fundamentally changing, it’s important for diligent investors to test their paradigms and make sure they aren’t snoozing when a big economic shift happens.

Last, but not least, we visit with Freedom Fest’s founder and a 2013 Summiteer, Mark Skousen.  He shares with us that this year’s 7th annual Freedom Fest is their best ever -with record attendance and national television exposure.  So while not everyone agrees on policies or priorities, everyone wants to be enjoy more freedom and prosperity – and that’s what Freedom Fest is all about.

So tune in to this edition of The Real Estate Guys™ radio show recorded at Freedom Fest 2013.  Enjoy!

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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed. Visit our Feedback page and tell us what you think!