Don’t get lost in the lag …

Investors and economists often talk about cycles … business cycles, credit cycles, even news and legislative cycles.

Cycles are the ebb and flow of causes and effects sloshing around in the economic sea we all swim in.  They’re big picture stuff.

For nose-to-the-grindstone Main Street real estate investors, cycles are barely interesting, seemingly irrelevant, and mostly boring.

But a danger for Main Streeters is not seeing something dangerous developing on the horizon.  Another danger is getting lost in the lag.

The lag is the gap between when a “cause” happens and when the “effect” shows up.

For example, in a typical supply-and-demand cycle, a shortage of homes could cause prices to spike.    The effect of the supply-demand imbalance is higher prices, which in turn becomes a new cause.

Rising prices causes builders to increase production … and existing property owners to put their homes on the market … thereby increasing supply.

As supply grows, price escalation slows. If supply overshoots demand, prices might actually fall.  If you’re structured for only rising prices, you might have a problem.

Of course, there are other factors affecting pricing such as interest rates, wage growth, taxes, labor and material costs, availability of developable land, and on and on.

But our point is … an amateur investor often doesn’t see the cause for price escalation (or anything else) until the effect happens.

Once prices rise, they jump in to ride the wave … believing prices will go up tomorrow because they went up yesterday …  and their speculation only adds to the demand and fuels the fire.

At least for a while …

What’s often overlooked is the production pipeline … until the supply shows up and softens pricing.  Near-sighted investors often get lost in the lag.  They’re not sure where they are in the cycle.

It’s what happened to “GO Zone” investors after Katrina and Bakken investors during the shale boom.

Folks bought in during a boom, not considering the “production lag” … and didn’t structure for a slowdown.  When it happened, they didn’t have a Plan B.

It’s a simple example … and before 2008, that was about as deep as our analysis ran.

But the pain of 2008 opened our eyes … and 10 years later they’re still as wide open as we can keep them … because we know there are cycles as sure as the sun comes up.

That knowledge isn’t bad.  In fact, it’s good.  Because when you see the bigger picture, you also see more opportunity.

So we study history for lessons … current events for clues … and we talk with experts for different perspectives.

It sounds complicated … and maybe it is a little … but it’s like the old kids’ game, Mousetrap.

There’s a lot of fancy machinery hanging over our heads …and it’s just a series of causes and effects.  “A” triggers “B” triggers “C” and so on … until it’s in our faces.

But even at the street level with our nose on the cheese, if we watch the machinery, we can see events unfold and still have time to react appropriately.

So let’s go past a simple supply-and-demand example.

Back in 1999, Uncle Sam decided to “help” wannabe homebuyers get Fannie Mae loans … so the government lowered lending standards and pushed more funds into housing.  It seemed like a nice thing to do.

But at the time, observers cautioned it could lead to financial problems at Fannie Mae … even to the point of failure.  It took nine years (lag) … but that’s exactly what happened.  Fannie Mae eventually failed and needed a bailout.

But before things crashed, it BOOMED … and people made fortunes. We remember those days well.  It was AWESOME … until it wasn’t.

Folks were profitably playing in the housing jumphouse from the time the easy money air pump switched on until the circuit blew.  Lags can be a lot of fun.

Because few understood why the party started and why it might end … most thought the good times would roll forever.  So they were only structured for sunshine.

Oops.

People who urged caution at the height of fun … like Peter Schiff and Robert Kiyosaki … were derided as party-poopers.

Of course, they both did well through the crisis because even in the boom they were aware of the lag and the possibility of a downturn … and were structured accordingly.  Smart.

Now, let’s go beyond supply, demand, and mortgages … and look even further up the machinery …

In late 2000, Congress passed the Commodity Futures Modernization Act of 2000.

Doesn’t sound like it has anything to do with real estate … BUT …

This was the birthplace of unregulated derivatives … like those infamous credit default swaps no one in real estate ever heard of …

… until they destroyed Bear Stearns and Lehman Brothers in 2008, while bringing AIG to the brink of bankruptcy, and nearly crashing the financial system.

This mess got ALL over real estate investors in a big and painful way … even though there was an 8 year lag before it showed up.

Remember, for those 8 years a lot of the money created through derivatives made its way into mortgages and real estate … adding LOTS of air to the jumphouse.

Back then, real estate investors were riding high … just like today’s stock market investors.

And those who only measured the air pressure in the jumphouse … ignoring other gauges … didn’t see the circuits over-heating … until the system failed.

Then the air abruptly stopped, the inflated markets quickly deflated, and the equity-building party turned into a balance-sheet-destroying disaster.

And it happened FAST.

Which bring us to today …

The Atlanta Fed recently raised their GDP forecast for the booming U.S. economy.

Stock indexes are at all-time highs.  Unemployment is low.  The new Fed chair says, “The economy is strong.”

Some say these are the effects of tax cuts and a big spending bill.

Makes sense … because when you measure productivity by spending, when you spend, the numbers move.  Spending, or “fiscal stimulus” is an easy way to goose the economy.

But some are concerned this is a temporary flash fed by debt and deficits.

Others say it’s fiscal stimulus done right … kindling a permanent fire of economic growth and activity.

Could be.  After all, Trump’s a real estate guy, so he understands using debt to build or acquire long-term productive assets.

Real estate investors know better than most that not all debt and spending are the same.

Of course, government, geo-politics, and a national economy are a much different game than New York City real estate development.

And there are certainly some cracks showing in all these strong economic numbers …

A strong U.S. dollar is giving emerging markets fits.  Home buyingbuildingappreciation, and mortgages are all slowing.

We’re not here to prognosticate about what might happen.  Lots of smart people are already doing that, with a wide variety of opinions.

We just keep listening.

Our point today is … there’s a lag between cause and effect smart investors are wise to consider.

When lots of things are changing very fast, as they are right now, some are tempted to sit out and see what happens.  Probably not smart.

After all, the air in the jumphouse could last a while.  No one likes to miss out on all the fun.

But others put on sunglasses, toss the umbrella, and go out and dance in the sunshine … without watching the horizon.  Also not smart.

Dark clouds could be forming in the distance which might quickly turn sunshine into storm.

The best investors we’ve met take a balanced approach … staying alert and nimble while enjoying the sunshine, but not getting lost in the lag.

Changes in economic seasons aren’t the problem.  It’s not seeing them coming and being properly 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.

This is getting old … and that’s good

Even though there are many interesting economic developments to talk about, we’re going to focus on an oldie, but a goodie … senior housing.

National Real Estate Investor just released their latest Seniors Housing Market Study and the headline hints that opportunity in the niche might be … growing old …

“High construction levels are tempering some of the enthusiasm in the seniors housing sector.” 

Although cautionary, it’s hardly doom and gloom compared to this cheery report from Attom Data Solutions …

Foreclosure Starts Increase in 44 Percent of U.S. Markets in July 2018

Or this one …

One in 10 U.S. Properties Seriously Underwater in Q2 2018

Or this one …

U.S. Median Home Price Appreciation Decelerates in Q2 2018 to Slowest Pace in Two Years

BUT, as we’re fond of pointing out, the flip-side of problems are opportunities.

And because real estate is NOT an asset class any more than “Earth” is an asset class, there are lots of niches, sub-niches, and micro-trends to dig into to find deals.

Besides, every time some casual observer scans a scary headline and walks away, it leaves even more opportunity unclaimed for those willing to look a little closer.

So let’s see what we can glean from these articles …

First, the “underwater” report illustrates the point that real estate can’t be an asset class because even a sector as broad as “housing” behaves very differently in different places …

“… the gap between home equity haves and have-nots persists because home price appreciation is certainly not uniform across local markets or even within local markets.”

As long as this is true, there will always be “haves” and “have-nots.”  We’re not sure about you, but we’d prefer to be “haves.”  So that means picking the RIGHT markets.

Of course, “markets” aren’t just geographic.

A market can be a product type … single-family housing, multi-family, mobile homes, student housing, senior housing, medical, office, retail, resort, and on and on.

A market can also be a price-point.  “Low-income” is different than “work-force,” which is different than “executive,” which is different than “luxury.”

Consider this quote from the “appreciation” report …

“Price-per-square foot appreciation accelerates for homes selling above $1 million.

You get the idea.  As you continue to parse real estate into geographic, demographic, and economic niches, sub-niches and localities, you can uncover hidden opportunity.

This kind of analysis is the “work smarter, not harder” alternative to simply looking at hundreds of properties along with all the other deal-hunters.

So with that backdrop, let’s go back to our lead headline about what’s happening in seniors housing …

“Seniors housing has carved out a larger place in investors’ commercial real estate portfolios due to the compelling demographics and a track record as a steady performer in both up and down market cycles.”

BUT …

“… survey indicates a note of caution creeping in because of how much new supply is coming into the market.” 

First, “hint of caution” isn’t “OMG, the sky is falling” … so that’s good.

We’ll just hit one more quote, then look at how to go sub-niche as a way to mitigate the potential negative consequences of “too much supply.”

“…respondents in this year’s survey remain confident in seniors housing’s stable fundamentals.  A majority are optimistic that both occupancies and rents will continue to increase …”

So clearly, there’s a LOT to like about the senior housing space.

Of course, it’s this very bullishness which attracts new development and increased supply.

HOWEVER, there’s an angle to consider … and the hint is that this article is written to, and about, commercial … largely institutional … investors.

To them, senior housing means big buildings … like those featured in this report from the American Seniors Housing Association.

And remember, when big institutional money is looking for yield, they need big institutional properties to buy or build.

But as our good friend Gene Guarino tells us, there’s a sub-niche of the senior housing niche that’s too small for the big players, but plenty big for Main Street real estate investors …

Residential assisted living homes.

RALs are where you take an existing McMansion in a residential neighborhood, make some modifications, bring in a specialized manager,  and house a small group (8-16) of seniors who need assistance with their daily care.

But unlike a regular boarding house, these things cash-flow like CRAZY.

We won’t get into the mechanics of all that now.  You can learn more here.

Our point is this is RALs are a sub-niche where you can ride a demographic wave (boomers’ parents … and eventually boomers themselves), an economic niche (million-dollar plus homes), a hot niche (seniors housing, and especially assisted living) …

… and avoid the challenge of excessive inventory created by big institutional money.

Think about it …

There’s not yet a practical way for institutional money to come in and build large supplies of residential assisted living facilities.  They can only build “big box” facilities.

If and when they overbuild, it will mean the big box facilities will be forced to lower prices to attract residents from each other.

BUT, the big box operator has a BIG, all-or-nothing facility, meaning it can’t easily reduce room count to match demand. They either own and operate the entire big building or they don’t.  There’s no in between.

So over-supply means they’ll need to cut SERVICES in an attempt to preserve profitability.

Contrast this to a RESIDENTIAL operator …

Let’s say you have six of these houses in an area where the big boxes overbuild.

Will YOU feel the price pressure?  Sure.  At least a little bit.

BUT … remember, the senior resident who ends up living in a big box is often a different customer than the one in a residential assisted living home.

Many will pay a premium to live in a home rather than an institution.

So right out of the gate, your sub-niche of the senior demographic is arguably less price-sensitive, and your residential home is a very different value proposition.

But let’s say you do get squeezed and lose a few residents.  If you can’t replace them with profitable residents, you can always sell one of your six homes … into the single-family home market.

After all, it’s not like you’ve got a 125-bed single-purpose property.  In other words, you have a Plan B exit strategy that feeds into a different niche …. home-owners.

It’s MUCH easier for you to navigate the ramifications of an over-build … so you can ride the hot wave with less risk.

Even better, if the big box operators’ profit margins get squeezed, don’t be surprised if they take notice of your high profit margins and make you an offer.

We could go on, but you get the idea.  There are always niches and sub-niches when you’re willing to dig a little deeper.

So when you read headlines about macro-trends, keep in mind opportunity is often micro … and often requires more thought.

In this case, the cautionary headline about over-building serves as an example of how to ride a macro-trend, while avoiding dangers created when big money overcrowds a space.

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 dichotomy economy …

Have you noticed a bit of division in the news … over just about EVERYTHING?

As you may know, we obsess on all things economic and how they affect Main Street real estate investors … and try to steer clear of the more divisive topics.

But even the financial news is a polarized collection of confusing banter.

On the one hand, we see reports about low unemploymentGDP growth over 4 percentrising consumer confidence, and record high small business optimism.

That all sounds awesome.

On the other hand, we read about record levels of household debtstagnant real wages, and growing government deficits … at a time when interest rates are rising.

Then there’s the ballooning corporate debtgrossly underfunded pensions even as boomers are retiring at 10,000 plus per day … and the hard-to-understand impact of a strong dollar on pretty much everything.

All that sounds mostly scary.

Sure, you could say it all blends together into a balanced and comfortable investing climate …

But that’s like saying if you have one foot in a bucket of boiling water and the other in a bucket of ice water … on average you’re comfortable.  Probably not.

But before you pull the sheets over your head and hope it all blows over, consider this pearl of wisdom from Atlas Shrugged author, Ayn Rand …

“You can avoid reality, but you cannot avoid the consequences of avoiding reality.”

Of course, we’ll never unpack all this with today’s simple commentary …

… but we hope to encourage you to watch what’s happening, get in conversations with similarly engaged folks, and consider how all these things can and do affect YOU and YOUR investing.  Because they do.

For now, let’s just take a VERY simple investing principle and see if it helps us make sense of this schizophrenic financial world …

Would you borrow money at 2 percent if you could invest it at 4 percent?

 Most investors and businesspeople would.  So on its face, the borrowing isn’t the big problem.  It’s maintaining a positive spread.

This is the world real estate investors live in … borrowing and investing at a positive spread.

Of course, it gets a little trickier when rates are rising.   But the fundamentals of the game remain the same.  When rates rise, you MUST increase earnings, or you lose.

So it’s not just how much you borrow, but what you do with the proceeds.  If you borrow to consume or retire less expensive debt, you’re in trouble.

If you borrow to invest in growth, to acquire higher-yielding assets, to start profitable businesses … debt can be your most valuable tool.

Right now, Uncle Sam is borrowing and spending at a wicked pace.  The multi-trillion-dollar question is whether the borrowing will pay off.

The most recent 10-year Treasury auction saw a record amount of U.S. debt offered and scooped up by investors … at a yield under 3 percent.

(We watch the 10-year because it’s the most correlated to mortgage rates)

So it seems bond investors aren’t overly concerned about Uncle Sam’s debt-levels and capacity to repay with a comparably valued dollar.  For now.

And in spite of the highly touted tax cuts, federal income tax receipts actually GREW nearly 8 percent in the first 10 months of 2018.

BUT … while income is up, deficits and debt are up MORE.

As investors, we understand it sometimes takes time for investments to pay off, so it’s probably not time to judge … yet.

However, this is something we’ll continue to watch carefully.

If the investments pay off, especially in a way that resurrects rust belt markets… there could be some serious real estate investing opportunities on the horizon.

If they don’t, and this is all just a debt-driven faux boom, the end game could be a collapsed currency, ugly recession, and interest rates even the Fed can’t hold down.

Of course, if all the “bad” stuff happens, there’ll be lots of quality assets available at fire-sale prices … for those with enough foresight to liquefy some “boom” equity and keep it at the ready.

Of course, probably the BIGGEST opportunity in either scenario is to have a large network of aware and prepared investors on speed-dial … so you can put together investment funds to ride the wave or pick up the pieces after a crash.

The bottom-line is …

… it’s not external circumstances that primarily control individual success or failure, but rather the individual investor’s awareness, preparedness, and propensity to ACT as circumstances unfold.

How are YOU preparing?

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.

Home-building bust … good, bad, or ugly?

One reason we write is because very little mainstream financial commentary addresses the unique needs of real estate investors.

Most financial pundits think of real estate merely in terms of home prices, home builder stocks, and maybe real estate investment trusts (REITs).

Their preferred investment strategy is buy-low-sell-high … usually based on divining things wholly outside an investor’s control.

It’s more like gambling than investing.  They even call their positions “bets”.

Of course, the buy-low-sell-high trading mentality encourages the churning of holdings … which generates commissions and short-term capital gain taxes.

That’s nice for Wall Street firms and the government which protects them, but not so much for Main Street investors trying to build reliable retirement income.

And if you watch the financial news, you’ll notice any discussion of yields and earning is generally in the context of their impact on share prices.  So back again to the buy-low-sell-high mentality.

But long-term income-property real estate investors look at the world VERY differently than the players and pundits of Wall Street.

For real estate investors, it’s all about acquiring streams of cash flow …

… collecting contracts (leases) with people and businesses who work every day and send us a piece of their production.  It’s a beautiful thing.

And even though we LOVE equity … we know REAL equity growth is driven by cash flow.  More cash flow equals more equity.

Of course, the purpose of equity is to acquire more cash flow.  Managed properly, they feed each other.  It’s a virtuous cycle of compounding wealth.

Best of all, with real estate, many of the factors affecting cash flow are very much within the control of the investor.

With that said, we still watch mainstream financial news for clues about what’s happening with the financial system, geo-politics, and macro-economics …

… and we carefully consider how those higher-level factors can directly impact Main Street investors.

So when the June new housing stats came out, here are some of the headlines that popped up in our news feed …

Weak Housing Starts Hurt Homebuilder Stocks
– Barron’s, 7/18/18

Housing Permits Soften, Starts Plummet
– Mortgage News Daily, 7/18/18

Slump in London House-Building Weighs on UK Housing Starts – U.S. News & World Report, 7/25/18

There are lots more, but you get the idea.  Pretty gloomy.

But these stories are just clues in the news.  We still need to figure out why it’s happening, what it means, and how it affects Main Street real estate investors.

Big picture, there are those who think housing is a leading indicator of a healthy economy.  So when housing is doing well, it drives economic growth.

We’re not so sure.  It seems to us housing is a trailing indicator … a reflection of economic growth.

After all, who buys a house so they can get a job?  Buying a home is sign of economic success, not a creator of it … at least not for consumers.

So we think a weak housing market is a reflection of a weak home-buyer.

This begs the question … WHY is the home-buyer weak?

We tossed in the UK article to highlight this weak housing-start situation may not be reflective of issues at merely the local or even national level.

So even though real estate is LOCAL … certain factors affecting it are MACRO … perhaps even geo-political or systemic.

But because we’re news hawks at every level … local, macro, geo-political, and systemic … we’re aware of some of those potentially contributory factors.

But let’s start with the basic economic principle of supply and demand. 

And remember … we always break out “capacity to pay” from “demand” because it makes us focus on factors of affordability.

Think about it …

“Demand”  alone for housing is fairly universal.  Nearly everyone wants a home … a bigger home, a better home … so demand in terms of desirability is almost a given.

But just because someone WANTS a home doesn’t mean they can AFFORD one.  So much of housing demand pivots off of demand’s “capacity-to-pay”.

And then there’s inventory … of both houses (supply side) and people (demand side).

Generally speaking, the world is increasing in population, though not always in any given geographic area.  So it’s certainly possible for an area to lose population, and demand for housing along with it.  Think the fall of Detroit.

But because the slowdown in home-building appears to be occurring in diverse locations, we’ll toss out the notion it’s driven by a slump in the supply of people and a shrinking demand for homes.

We’ll assume there’s plenty of people who want housing.

Now on the housing supply side, we find another clue here …

U.S. home sales sag as prices race to record high
– Reuters, 7/23/18

“ … a persistent shortage of properties on the market drove house prices to a record high.”

Hmmmm … that’s weird.

Low inventory explains slow sales and higher prices.   But wouldn’t both of those things entice home-builders to build MORE … not less?

After all, if buyers are bidding prices UP, the opportunity to earn profits should entice builders to increase production to cash in.

Yet there’s a reportedly low supply of houses, and apparently strong demand reflected by rising prices … and for some reason home-builders are slowing down.

Again, the market’s natural reaction SHOULD be to increase supply … which then drives down prices … and makes housing more affordable to more people.

But that’s not happening.

We think it’s because it can’t.  After all, a home-builder can only drop prices so far before it’s no longer economical to build.

As we’ve discussed previously, one of the first casualties of tariffs was lumber costs.  Steel is another.  And of course, there’s the labor shortage driving up costs in residential construction.

To top it all off, there’s the well-publicized increases in interest and energy expenses … which add costs to almost everything.

So with nearly every component of cost on the rise, builders can only drop prices so far … then they either can’t build, or they need to charge more.

But charging more means buyers must be able to pay more …

Maybe when builders are looking at their market studies, they’re not seeing an increase in buyer’s capacity to pay.

When mortgage rates are going up faster than paychecks … and inflation, gas prices and tariffs squeeze consumers … it drags DOWN their capacity to pay more for housing.

So after digging deeper, it seems there’s some understandable logic to the slowdown in housing permits … in spite of low inventory and rising prices.

Is that bad?  It depends.

Remember .. when people can’t afford to buy, they need to rent … from YOU.

When housing crashed in 2008, it was a huge BOON to investors in affordable housing.  The demand for rentals went UP.  Many real estate investors made fortunes.

So the lesson remains … the flip-side of problems are opportunities when you’re aware and prepared.

Right now, in spite of reports of a booming economy and high consumer confidence, it may not translate quickly into a boom in home-buying or home-building.

That might make Wall Street worry, but for Main Street real estate investors focusing on affordable markets and product types …

… or specialized niches like residential-assisted living or resort property which cater to affluent people …

… there’s still a lot of opportunity to build reliable long term wealth through real estate. 

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.

Profitable Niches – Agricultural Investing

Throughout our Profitable Niches series, the message has been clear … there’s more than one way to invest in real estate. It’s so much more than single-family homes and apartment buildings. And, in today’s market, when some of the more traditional investments are stretched, it’s a good idea to think about something new and fresh.

Agricultural investing may not have been on your radar, but that’s about to change! And no, you don’t have to have a green thumb to participate. We’re talking with an expert guest who has blazed a trail into a market that’s energizing AND tasty.

As a sweet bonus, you can support a socially sustainable program as well. Check it out!

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

  • Your cultivating host, Robert Helms
  • His growing co-host, Russell Gray
  • Friend and farmer, David Sewell, Founder of International Coffee Farms

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From beans to mug or bar … picking a crop

Just like everyone needs a roof over their head, everyone has to eat. That means there’s a demand for agricultural products and an opportunity for investors to do well in agriculture.

All it takes is a little education on the language of agricultural investing. In housing, it’s all about markets and demands. Agriculture has the same learning curve. Once you understand the geography, the demand for products, and a little of the science behind growing, you’re on your way to getting a foothold in agriculture.

But, agriculture is a wide world, so we’ll narrow our focus.

Our guest, David Sewell, started in agricultural investing with one product: coffee. It has a long shelf life, doesn’t perish quickly, and there’s enormous demand for specialty coffee with limited supply.

Specialty, socially sustainable coffee has been David’s niche since 2014. He purchases farms that are managed poorly, spends time working on the soil, understanding the climate, planting trees, and building a system that delivers product at a great return.

“Specialty coffee is a unique product that’s managed by the tree,” David says. “Specialty coffee is hand-picked, one cherry at a time.”

One of the best things about specialty coffee is that the limited growing geography drives up demand. But it takes some time to get a farm turned around to producing. Just like any gardening project, it takes patience and skill.

Since David started his business in 2014, he has worked through plenty of challenges and developed an amazing model that is blazing a trail in agricultural investing.

And now, he’s moved into a second crop.

“A good way to start the day is with a good cup of coffee and, in the evening, end it with a couple pieces of chocolate,” David says.

The demand for specialty, fine-flavored cacao is rising, and the supply is even MORE limited than specialty coffee. David’s cacao choice is particularly a specialty in Belize.

David took what he learned from coffee in Panama and rehabbed a few farms in Belize with the same, successful model.

With a little science, ingenuity, and care, David has capitalized on the demand for specialty products. He has 154 farmers who sell their crop exclusively to him, in his centralized processing facility.

“It’s what they needed,” David says. “So, we can control the cacao.”

David has three farms as well as a trading company that buys and sells literal tons of beans every weekend.

They’ve all been trained on organic processes, and together, they use the centralized processing systems he has built to make an efficient product that is ready for market.

Socially Sustainable Investing

Conditions on a coffee farm aren’t known for being great. That is different on David’s farms. He takes care of his 35 farm hands, and it has paid off.

“We’re proud to say that with the compensation program we’re able to provide and with the love and attention we’ve paid them, we haven’t had one turnover in 3 years,” David says. “We take care of the people.”

David’s farms change the way workers live. They receive good rain gear, so they aren’t picking cherries or tending to trees in the rain wearing a trash bag. Kids aren’t allowed on the farm … they attend school.

Families live in provided housing with electricity, flushing toilets, and other amenities that we often take for granted.

And, while these benefits for employees are key to David’s business, it’s not all altruistic. Labor turnover is expensive, and taking care of workers keeps them from leaving.

Beyond just the living conditions, workers are sent to seminars and congresses to build up their skills so they become even more educated and grow with the company.

This dedication to his workers shows by the passion and dedication they bring to the field and to the job every day. His workforce is expert in cacao and coffee, and that drives the superior flavor … and price.

That makes investing in opportunities like David’s even more exciting and sweeter for investors. Not only can you make money, but you can also make a difference.

Small-scale agricultural investing

One of the drawbacks to agricultural investing is understanding the science and process to growing, processing, and distributing a product. It takes time and experience to know a good opportunity and to succeed.

For instance, David learned early on that the biggest hurdle was the deeding process for international property. He warns that it is difficult to do on an individual basis.

But, David has found an interesting way to let people play with agricultural investing.

“We’ve focused on the delivery part of the investment vehicle,” David says. “That’s the hard part and where failure happens in many cases.”

With David’s business, he wanted to use his knowledge of syndication to make agricultural investing more accessible for people, regardless of their knowledge level and even for those who couldn’t buy an entire farm.

David’s farms are broken out into ½ acre parcels that can be bought individually or in groups. The parcel is deeded an individual investor or entity’s name, and it’s essentially a turnkey investment. It’s managed and operated by David’s team and investors not only get the returns, but also the knowledge that they’re participating in a socially sustainable program.

For investors looking for a legacy investment to pass on to their kids, or to invest in a program that’s socially sustainable, this is worth a serious look.

To learn more about David’s coffee and cacao operation and how you can get involved, send an email to beans [at] realestateguysradio [dot] com, and we’ll get you his special report on both opportunities!

And, we’d love to see you in September with David at our Secrets of Successful Syndication seminar. Here’s where to sign up!


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