Podcast: Ask The Guys – Markets, Growth, Condos and Credibility

A litany of listener questions about how to choose a great real estate market to invest in, how to build a bigger portfolio faster, whether or not an office condo makes sense, what it takes to create a rock-solid reputation in a relationship business, and more.

So listen in as The Real Estate Guys™ answer listener questions!


More From The Real Estate Guys™…

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


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

Adding fuel to the high housing price fire …

High housing prices continue to be a concern in many major markets.

While there are varying opinions on how to solve the problem, history says … and recent headlines concur … that adding fuel to the fire will be the likely “solution.”

Here’s how it works and why it’s likely to create a lot of equity right up until it doesn’t …

First, it’s important to remember prices are “discovered” when willing buyers and sellers meet in the marketplace and cut a deal.

Buyers want the lowest price and sellers want the highest. They meet somewhere in the middle based on the supply and demand dynamic.

When there are lots of buyers for every deal and a seller has the ability to wait for the best price, buyers compete with each other and bid the price up.

When there are lots of sellers relative to buyers, sellers compete with each other by dropping the price or offering more favorable terms and concessions.

Duh. That’s real estate deal making 101.

Of course, the real world is a little more complex … especially when you have powerful wizards working to manipulate the market for whatever reasons.

To our way of thinking, “capacity to pay” needs to be broken out of “demand” when looking at the supply and demand dynamic.

After all, if you’re crawling through the desert dying of thirst and you come across a vending machine with bottled water for sale at $100 per bottle, you’re probably willing to pay.

But if you don’t have any money in your pocket, limited supply and high demand alone don’t matter. You have no capacity to pay.

When it comes to housingcapacity to pay is a combination of income, interest rates, and mortgage availability.

To empower purchasers with more capacity to pay, you need higher real incomes, lower interest rates, money to lend, and looser lending guidelines.

Of course, these do NOTHING to help make housing less expensive.

In fact, they actually make housing more expensive because they simply increase the buyers’ ability to pay MORE.

Yet, this is where the wizards focus their attention. And to no surprise, they have an excellent track record of creating real estate equity (inflating real estate bubbles).

And that’s exactly why real estate is such a fabulous hedge against inflation.

While renters watch prices run away from them, owners ride the equity wave up … and up … and up.

And when paired with debt, real estate becomes a super-charged wealth builder … growing equity much faster than inflation, while still hedging against deflation.

After all, if you put $20,000 down on a $100,000 property and the price falls to $80,000 and NEVER recovers … eventually the tenants pay the property off.

Now your $20,000 investment has grown to $80,000 … even though the property deflated 20 percent.

But it’s hard to imagine any serious sustained deflation will hit real estate absent a catastrophic sustained economic collapse.

Of course, it’s probably smart to have some cash, gold, and debt free real estate as a hedge against catastrophe … but probably not the lion’s share of your portfolio.

That’s because the history and headlines favor higher prices over the long haul.

This brings up a very important point for every serious student of real estate investing …

The ONLY real way to truly lower housing prices in the face of growing population is to increase supply.

But there’s NO motivation for the wizards to reduce housing prices.

They’ll SAY they want to, but they can’t deliver.

Think about it …

No politician wants to face home-owning voters who are watching their home values fall.

No banker wants to have a portfolio of loans secured by homes whose values are falling.

And in spite of their sometimes-public spats, politicians and bankers have a long track history of working together to enrich and empower themselves.

So does it make sense that politicians and bankers are really going to do anything meaningful to cause housing prices to fall?

We don’t think so. All the motivation is to cause housing prices to rise.

And as we saw in 2008, on those rare occasions where housing prices fall, bankers and politicians rally to revive them as quickly as possible.

Your mission is to structure your holdings to maintain control if prices take a temporary dip. And of course, positive cash flow is the key.

Meanwhile, the Wizards are hard at work to make expensive housing more affordable …

This means fostering an environment to increase jobs and real wageslower interest ratesloosen lending guidelines, and get more money flowing into funding mortgages.

Are these acts of frantic Wizards desperate to keep the equity rally going into an election year? Maybe.

But until and if a total financial crisis happens again (which you should be diligently prepared for) …

… we think the bubbliest markets will see softness, even as nearby affordable markets increase as priced out home-buyers migrate.

Nonetheless, keep in mind that real estate is not an asset class … even a singular niche like housing. Every market, property, and deal is unique.

So it’s possible to find deals in hot markets, and it’s possible to overpay in a depressed market. Think big, but work small.

And while the financial media complains about over-priced housing and rings the bubble bell, consider that if housing remains unaffordable to buyers, it only creates more demand for rentals.

The properties you lose the most on are the good deals you pass on because you’re focused on price and not cash flow.

Is the housing boom … like the stock market boom … late in the cycle? Probably. But that doesn’t mean there’s not a lot of opportunity out there right now.

Podcast: Finding Great Properties in Growing Markets

Real estate investing is a pretty simple business. It all comes down to buying great properties in growing markets.

Of course, just because it’s simple doesn’t mean it’s easy.

In this episode, we visit with a seasoned investor who’s evolved as market conditions shifted … and talk about how he takes on the challenge of finding properties that make sense and markets poised for growth and resilience.


More From The Real Estate Guys™…

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


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

Trick, treat or terrific tax break …

Late filers in the U.S. just got finished assessing last year’s tax damages.  For some, it was a pre-Halloween shocker.

Fortunately, there’s still some time left in the current year to make some smart moves and take advantage of some of the most generous tax breaks available to investors

First, consider setting up a Qualified Retirement Plan.  Even if you don’t fund it until next year, you’ll need it in place by end of year or you lose the option.

Be aware that not all retirement plans are created equal.  In fact, there’s one specific plan that can 10x your tax savings! 

Of course, there’s a lot to consider when deciding how a QRP makes sense for you. 

That’s why we asked tax strategist CPA Tom Wheelwright and QRP expert Damion Lupo to get on a video conference with us to talk through the pros and cons. 

One thing we’ll talk about FOR SURE … is how to avoid the most dangerous and expensive mistake many real estate investors make with their retirement accounts. 

That ALONE makes it worth the time.  Plus, it’s free. It’s informative. And nothing’s for sale.  

So click here now to register for The Tax Truth About Real Estate Investing with Retirement Accounts featuring Tom Wheelwright and Damion Lupo. 

But wait, there’s more!  And that’s not hype …

Another great opportunity for a HUGE current-year tax break comes from investing in oil and gas.

We know.  Energy isn’t REALLY real estate … but it comes out of the ground, provides BIG tax breaks and passive income.  So it has a lot to offer real estate investors. 

Robert Kiyosaki first exposed us to the idea of using oil and gas for tax breaks.   

Since then, we’ve invited long-time oilman Bob Burr to join us aboard the Investor Summit at Sea™ to teach us about oil and gas investing. 

Bob’s always a BIG hit.  We learn a lot. And we’re happy to say, Bob will be back for our next Summit.

But you don’t need to wait to have Bob explain oil investing.  You can click here now to listen to our recent interview with Bob Burr. 

Of course, today’s topic is taxes … and while most real estate investors understand depreciation when it comes to buildings, most don’t understand it when it comes to energy.

So we asked Bob and his team put together a short video to help you understand the terrific tax benefits of energy sector investing.  Click here now to request free access.

Last but not least on our list of year-end tax saving opportunities is … buy an investment property!

After all, investment real estate offers some of the best tax breaks available

As CPA Tom Wheelwright explains in this fantastic Investor Summit at Sea™ presentation … the current tax law’s bonus depreciation provides HUGE tax benefits. 

Of course, you should never let the tax-tail wag the investment-dog.  Do your homework and be sure to pick a strong market and a great team.  

But accelerated depreciation schedules can make even a late addition to your property portfolio a big-time contributor to your tax-saving strategy.

So there you go … some great ideas about how YOU might save BIG on your 2019 tax bill.  Sure, it takes some effort, but the return on time could be HUGE!

Keep in mind … we’re The Real Estate Guys™ and NOT the Tax Guys.  So be sure to work with your own qualified tax advisor to figure out what makes sense for you.

And if you need help finding a brilliant CPA who’s well-versed in how to get maximum tax benefits out of your investments click here to connect with Tom Wheelwright

Happy Tax Planning! 

Finding High Yields in a Hot Market


Everyone loves a hot market! But hot markets have their disadvantages. 

When markets heat up … prices go up … and yields go down. 

But that doesn’t mean investors are stuck. 

There are things you can do to adapt and keep cash flow up … without having to change markets. 

We sat down to chat with our good friend John Larson to find out how he has made the most of one of the hottest markets in the last ten years. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your heating up host, Robert Helms
  • His hot-head co-host, Russell Gray 
  • Managing Partner of American Real Estate Investments, John Larson

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Adapting in a hot market

Dallas, Texas, has been a hot spot for real estate investors for the last decade. But .. like any market … the tide is starting to turn. 

After 2008, the rules of the market changed. 

Dallas stood out because it had not one … not two … but multiple drivers. 

It had population. It had education. It had transportation. It had a business-friendly environment, low income tax, medical finance, tech distribution … it was the whole package. 

It ended up being the best real estate market of the past ten years … and it’s not over yet … but yields have changed a lot. 

So, what’s an investor to do?

As Managing Partner of American Real Estate Investments, John Larson has had to adapt to the changing Dallas market. 

Many people knew John and his team as the Turnkey Single Family people in Dallas … but his company has had to change what they do while maintaining the big picture of WHY they did it. 

Debt syndication and using your retirement to make money now

John says that the Dallas market is hotter than ever … but in 2017, the cap rates on the single family homes started to get compressed. 

“You can only push rents up so far,” John says. “The values of homes kept going up because of the demand, so property went up as well.”

John says his investors came to him primarily for cash flow. They were looking for passive income. 

So, John needed to find some new ways to provide that cash flow that investors came for in the first place. 

The first project they took on was debt syndication … partnering with a developer and syndicating funds on the debt side. 

“We came in as lenders to buy the lot and get the construction completed and get those units leased as office space,” John says. 

A debt investor is someone that wants to have predictable income flow again, and it’s not as risky as other ventures … with the opportunity for BIG returns. 

At some point, you have to graduate from single family houses and move to the next level, like multifamily or office space. 

John says there are great deals to be found … but you have to do a little nosing around. 

And you can’t beat the opportunity for passive investing. 

With debt syndication, investors can be very hands-off and get as high a return as possible

Especially for the investor who is looking to lend money from their IRA or 401k, debt syndication is a great passive experience for them and a great way to maximize their retirement accounts. 

Many people don’t understand that they can put their retirement dollars to work … but as soon as you can self direct your retirement funds … you’ve opened up a whole world of alternative investments. 

Because of the nature of a retirement account, you can’t have a current benefit. It is really for tomorrow, not for today … so passive investments just make sense. 

These are solid deals in solid marketplaces … but people have a hard time getting their minds around why someone would want to use debt. 

In good deals, the asset pays back so quickly that there’s not a lot of risk on either side. 

It really just depends on how your personal investment philosophy fits in. 

Keep your money working 

If someone is looking to put their money to work in a debt syndication type of deal, the big question is … how long is this deal going to take?

John says that the longest term he has done so far was with a new construction project … that was 18 months. 

The average term for a deal is usually about one year. 

“We want to get you money back within a year and have another deal lined up for you so you can keep your money working,” John says. 

Keeping your money working … that’s the key to finding high yields in a hot market. 

Learn more about the Dallas market and how John and his team are finding new ways to create cash flow without changing markets by listening in to the full episode. 


More From The Real Estate Guys™…

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


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

Podcast: Seasteading – Investing Opportunities on the High Seas

This show’s a little quirky … in more ways than one!

Imagine owning real estate without the dirt …

Just as freedom seeking pilgrims fled Europe for the brave new world of the Americas, there’s a growing movement among ruggedly independent entrepreneurs to set up homesteads on the high seas.

It’s called “seasteading”.

Listen in to this fascinating episode as we visit with a pioneer of the seasteading movement … and consider whether there’s investing opportunity in floating properties.


More From The Real Estate Guys™…

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


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

Podcast: Finding High Yields in a Hot Market

When markets get hot, prices go up and yields go down.

What’s an investor to do?

You can change markets … or change strategies to take advantage of what the market is giving you.

In this episode, we visit with an investor to find out he’s adapted to keep cash flow up in one of the hottest markets of the last decade.


More From The Real Estate Guys™…

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


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

How to Find a Mentor and Make It Work

If we’ve said it once, we’ve said it a thousand times … a mentor makes a difference.

Finding, vetting, and thriving, with a mentor is one of the quickest shortcuts to success.

Talk to a successful real estate investor, and chances are that they can point to one or more people whose example and encouragement helped them along their way.

But finding a great mentor … and making the relationship work through real world challenges … isn’t always easy. We’re here to share our tips with you!

In this episode of The Real Estate Guys™ show, hear from:

  • Your master mentor host, Robert Helms
  • His mental co-host, Russell Gray

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


What makes a mentor

Your success in real estate is going to come down to a few critical things … and one of those things is your relationships.

We never would have had the success that we’ve had in our lives … in business and personally … without input from the people we consider mentors.

Real estate investing is a people business.

Yes, you need to know numbers, property, and markets … but you also need a team. One of the most critical members of that team is a mentor.

A mentor is an experienced and trusted advisor … a guide, a confidant, and a counselor. And a mentor is different than a coach.

Coaching relationships are finite. They’re focused on specific behaviors and needs.

A mentor is a long-term relationship that supports you in your development. They’re interested … but not financially tied necessarily … to your results.

If you do it right, you’re going to have a lot of mentors in your career. You should always have people in your life who are further down the path.

A mentor doesn’t have to be older than you … but they do need to have more experience and more success in the area you are interested in.

A lot of people think of a mentor as a technical teacher … but that’s not necessarily true.

If you really think about what investing is, it comes down to exercising good judgment.

Judgment is something you learn by being in close proximity to someone … seeing why they make the decisions they make and absorbing what they’ve gleaned from their life experience.

Your mentor should be an example … a role model … of what you aspire to be.

What you bring to a mentoring relationship

There are lots of people that believe they can learn everything they need to learn from the internet, webinars, books, and podcasts … but that’s not our experience.

Those types of learning are a great starting point … but you’ve got to get into conversations with people that have been there, done that … in the REAL WORLD.

It’s very tempting to align yourself with people who are just like you … but you actually want to align with people who are a little bit different than you.

Take a look at yourself and ask, “What is it about my personality that’s holding me back? Where am I not being effective?”

You know what your weaknesses are. Your mentor can be someone who is strong in areas where you struggle.

By being around people with attributes that don’t come as easily for you … you will improve!

You also want to consider your strengths. The best mentor relationships are equitable … each side brings something to the party.

Brainstorm ways that you can be a value add to the mentor you have in mind.

Mentoring is also a cyclical relationship. You may be green around the ears today … but a few years from now you could be a mentor yourself.

Finding a mentor in the real world

One way to get a mentor is to hire one. There ARE organized mentor programs … we have one ourselves.

Before you pay money for a mentor relationship, check out the reviews. Just remember that the results people get have a lot more to do with how they react to the advice their mentor gives.

Paying for a mentor collapses the timeframe it takes to find one … but often … in our experience … the best mentor relationships happen organically.

This type of strategy DOES take more time and effort. You have to be in the right environment to meet the right person … that’s a lot of trips, events, and social engagements.

Beyond that, your mentor relationship is really what you make of it. You have to have the mindset that you are going to be one of the top people out there when you’re done.

If you’re looking to be average and ordinary … to just go with the flow … you might get a trophy for being on the team, but you’re not going to get the paycheck.

So, keep asking yourself, “What are the people at the TOP doing? How can I be more like them?”

Begin to think the way they think … and you’ll begin to do what they do. And ultimately, you can find yourself producing the same results.

A great mentor knows exactly what you need and what you have to go through to get there … and they create an environment for that to play out.

You mentor can’t make your success happen for you. You have to make it happen.

Our motto has always been, “Education for effective action.” Finding a mentor is one of the most educational … and effective … paths you can pursue.


More From The Real Estate Guys™…

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


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

Real estate just got a BIG boost …

Something BIG is happening for real estate … and while it’s not a surprise, it’s a development every real estate investor should be aware of.

Here’s some context …

First, remember real estate investing is essentially a business of managing debt, equity, and cashflow.  

That’s YOUR job.  You can get your property managers and team to handle most everything else.

Equity (the difference between the value and the debt) comes from savings (down payment), the market (value increase), or amortization (pay down of loan).

Cashflow is a function of rental income, operating expenses, debt service, and taxes.

Debt is like the air in a jump house.  When it’s flowing in, it props everything up.  When it stops, everything deflates pretty fast.

That’s why real estate investors (should) pay close attention to debt markets.

The 2008 financial crisis devastated the supply chain of debt into real estate. Mortgage companies failed in droves. We know. We owned one.

Real estate went from too-easy-to-finance to nearly impossible.  Lack of lending crashed real estate prices and created a big mess.  The air came out.

It’s why we became such outspoken advocates for syndication.  There was (and still is) a huge need and opportunity to aggregate capital for real estate.

Banks and Wall Street had been the primary channels for capital aggregation and distribution.  But they were broken.  Main Street needed to be empowered.

The government agreed.

So in 2012, the JOBS Act passed. And since September 2013, regulations are in place which make raising private capital MUCH easier.  We like it.

But while the JOBS Act helps investors raise EQUITY …

… earlier legislation (the Dodd-Frank Wall Street Reform and Consumer Protection Act) actually impedes lending … especially at the local level.

But now that’s changing … and it’s an EXCITING development!

You may have seen this headline …

Trump signs bipartisan bill rolling back some Dodd-Frank bank regulations – Los Angeles Times, 5/24/18

“ … with the key support of some Senate Democrats, the legislation focuses relief on small and medium-sized banks …

 “‘This is a great day for Main Street in rural America, and a big testament to what’s possible when members of Congress put partisanship aside and work together to help our communities grow and thrive,’ [Sen. Heidi Heitkamp (D-N.D.)] said in a statement after the signing.” 

Community banks, which enjoy broad support among Republicans and Democrats, will be freed from Dodd-Frank’s mortgage rules if they make fewer than 500 mortgages a year.”

Even in today’s highly charged political environment, this bipartisan effort shows Main Street real estate is very important to politicians.

The Dodd-Frank rollback aims to improve the flow of money into real estate, which is awesome for real estate investors.

Of course, just because politicians aim at something, doesn’t mean they hit it.  Politicians are notoriously bad shots.

So what do LENDERS think of the Dodd-Frank rollback?

Local bankers say reforms to Dodd-Frank are welcome – Herald-Whig, 6/5/18

“Mark Field, president and chairman of Liberty Bank, said most of the benefits from the recent reforms … involve mortgages.”

“… allows banks to give automatic qualified mortgage status to customers they know if the banks are using their own money for loans.”

“‘Character and knowing people counts for something again,’ Field said.”

This is GREAT news … and although time will tell (after all, this is very recent) … we think it will open up capital flows into real estate.

Of course, as we’ve said before, we think more money will be finding its way into real estate lending.  It’s both inevitable and reassuring.

For individual investors and syndicators alike, this new playing field promises to open up new sources of lending … and terms.

Because even though lending has loosened since the depths of the recession …

… it’s remained tight for borrowers and projects that didn’t fit into the tightly-regulated box created by Dodd-Frank.

Not to get too far in the weeds, but the 2008 credit crisis had its roots in Wall Street’s casino mentality.

In its zeal to create more poker chips, Wall Street cast aside sound lending practices because they could bury the risk in complex securities and sell them to unsuspecting investors.

Wall Street didn’t really care if loans went bad … because they wouldn’t be holding them when it happened.

So Dodd-Frank created strict rules attempting to prevent the bad behavior of Wall Street and big banks.  (Good luck with that.)

We could go on … but the point is that Dodd-Frank took professional judgment out of lending … from EVERYONE … including community banks, credit unions, and other portfolio lenders (those who hold loans instead of flip them).

Even though the financial crisis had its roots in Wall Street, not Main Street … Dodd-Frank took many Main Street lenders off-line.

The Dodd-Frank rollback intends to take the shackles off local lenders.

There’s a HUGE difference dealing with a local lender on a PERSONAL basis … one who’s going to hold the loan … and can consider the many factors which don’t fit into some bureaucratic one-size-fits-all checklist.

And while we need to do more research, a side-benefit for syndicators may be that setting up lending funds might get easier too.

In any case, now that local lending laws are loosening, let’s take a look at moves you can make to take advantage of the changes …

Build relationships with community bankers.  If you’ve only been investing since 2008, this is a funding source you’ve probably ignored.  It’s time to fix that.

Open accounts with community banks in markets where you invest. Establish a personal relationship with the bankers.  It’s a VERY different experience than doing business with a too-big-to-jail bank.  You’ll like it.

Use professional selling skills to find out what the banker’s goals and objectives are.  What makes the relationship a win for the banker?

Present yourself as the IDEAL client for the banker.  Do some deals … even if you don’t really need the money.  SHOW the banker you’re a person of character and capability.  Build TRUST.

It’s even BETTER if you’re a syndicator because you can bring bigger deposits, bigger loans, more transaction volume, and maybe even more referrals.

In fact, one of the secrets of successful syndication is having your individual investors make deposits in the community bank you’re borrowing from.

Go with the flow …

When the rules change, so does the flow of money.  Sometimes it works against you.  Sometimes it works FOR you.

And while there are certainly some long term economic trends every investor … real estate or otherwise … should be concerned about …

… this is a development which should have real estate investors smiling.

We think these updates to Dodd-Frank will work FOR real estate investors … at least those careful to pay attention and take effective action.

Of course, you’ve read all the way to the bottom, so you’re already ahead of the game.

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 there’s smoke …

In one of his many excellent commentaries, our good friend and multi-time Investor Summit at Sea™ faculty member Simon Black points out the last time this happened the market crashed.

The market he’s referring to is the stock market … and the event is stock brokerage firm Charles Schwab opening new accounts at the highest pace in 17 years.

Simon opens up his piece by asking, “Anyone remember what happened 17 years ago?”

He then reminds us it was 17 years ago the dot-com driven stock market implosion rocked financial markets and investors.

For those too young to remember, the late 90s was the dawn of the internet age.

And by the turn of the century, investors had morphed into rabid speculators … pouring billions of dollars into tech companies … even though the numbers didn’t make sense.

They were betting the stock price would go up in spite of little or no cash flow.

If you’re a young investor, you’d be wise to study some economic history and talk with older, more experienced investors.

Simon’s a relatively young guy (in his 30s), but wise far beyond his years because he’s an avid student of history.  Whether you’re young or old, it’s smart to study history.

Mark Twain famously said, “History doesn’t repeat itself, but it often rhymes.”

So Simon’s comments triggered a quick check of housing headlines, and this came up:

Existing-home sales hit a 10-year high in March as homes fly off the market

Hmmmm… that’s interesting.

Channeling Simon Black, we asked, “Anyone remember what happened 10 years ago?”

Of course, 10 years ago was 2007.  And you probably know what happened to the housing market in 2008.

Now just because two things happened in succession doesn’t necessarily mean one caused the other … or even was a symptom of a cause.  But it COULD be.

As the old adage goes, “Where there’s smoke, there’s usually fire.”

When the possibility of disaster exists, it’s wise to have a plan.

When we get aboard the cruise ship for the Investor Summit at Sea™ each year, the FIRST thing we do is a mandatory “boat drill.”

We’re told where to find our life-jackets, how to put them on, and which “muster station” to go to so we can get into our assigned life-boat.

It’s no fun … not for us, not for the crew, and not for the cruise line.

They’d much rather tell us how to find the casino, shopping, and premium restaurants.  After all, that’s where all the fun and profit are.

The LAST thing they want to do is point out the possibility the ship could SINK.  That’s a depressing way to kick off a fun week on a cruise ship.

But responsible people prepare for the possibility of problems.  And when signs of trouble start to appear, denial, obfuscation, and normalcy bias are ill-advised.

The Titanic sunk precisely because no one thought it could.

When it comes to housing, most industry economists are more like industry cheerleaders.

It’s usually easy to confirm sunshine as far as the eye can see … if that’s what you WANT to see … because you can always find “an expert” to affirm your pre-existing bias.

So when we invited Fannie Mae economist Doug Duncan to speak at our recent Summit at Sea, we were ready for some lively debate between him and our pal Peter Schiff.

But what happened surprised us.

Doug Duncan, Fannie Mae economist, put up all kinds of charts and graphs, and gave a very entertaining yet sobering presentation.

Doug essentially said the weakest economic “recovery” in history is on the verge of becoming the LONGEST recovery in history … and the probability of an imminent recession is high.

Hardly happy hype from a government real estate economist.

This REALLY shocked Peter.  In fact, he mentioned it at the top of the first podcast he did after returning from the Summit.

Peter’s been accused of being a chicken-little perma-bear, always seeing what’s wrong and warning of impending doom.  And he’s used to arguing with people like Doug, who try to put a happy face on bad data.

Of course, when you get to know Peter (who accurately predicted the 2008 financial crisis both in his 2006 book Crash Proof and in heated debates on national television), you’ll find he actually sees a lot of opportunity in the world.

The same is true for Robert Kiyosaki, who ALSO accurately warned of the 2008 collapse.  You can see the video of one of his national news media appearances here.

So it’s not about the data being bad or the future being gloomy.  “Bad” and “gloomy” are our reactions to the data.

The data is what the data is.

The last time Schwab opened this many new accounts, it preceded the 2000 stock market collapse.

The last time housing sales were this strong, it preceded the 2008 housing market collapse.

Oh, and by the way, the Fed was raising rates heading into 2008 telling everyone the economy was strong.

The question is … how are YOU going to react?

Do YOU know where your life vest is?  Do you know how to put it on?  Do you know where your muster station and lifeboat are?

Those who are ready, are actually EXCITED about the possibility of a downturn.

Downturns flush the dumb money, bring prices back to bargain levels, and allow those who prepared to collect quality assets at fire sale prices.

The key is to be prepared.

Preparation means different things to different people.  There’s no magic formula.

Donald Trump told us, “Always have some cash.”

Summit at Sea™ faculty member Chris Martenson says, “Build social capital.”  That is, a network of friends you trust and can do business with.

Simon Black says, “Plant multiple flags.”  He thinks it’s smart to diversify where you live, work, bank, and invest.

We think it’s smart to listen to wise people, talk with qualified advisors, discuss with other active investors, and set aside time to focus on learning and planning.

We’re not suggesting investors should sit out.  You can’t make any money on properties you don’t own.

Just be smart about the markets, teams, and financing structures you use.  Favor investments which you can stay in through a rough patch.

If the market stays strong, you’re not really worse off.  And if the bottom falls out, you can ride it out.

Either way, you win.

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.

Next Page »