Ask The Guys – Market Indicators, Wholesaling, and Raising Money

 

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There’s always twists and turns in real estate, creating a labyrinth for investors. Who can you trust with your questions along the way?

When you find them, let us know. In the meantime, we’re happy to share our thoughts 😉

(Our lawyers make us add this friendly reminder: We’re not lawyers, accountants or financial planners. In fact, we’re not even all that bright. We just share ideas and information for you to consider when working with your own professional advisors.)

In this latest edition of Ask The Guys, we take a deep dive into our email bag and pick out some great questions, including…

  • Should I flip homes or rent them out?
  • What are some market indicators I should know about?
  • How do you recommend I raise money?

Tune in and see what we have to say in our latest edition of The Real Estate Guys™ radio show with:

  • Your on-a-quest-for-answers host, Robert Helms
  • His (trusty?) answer-finder co-host, Russell Gray

 


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Question: Should I flip a house or hold and rent it out?

Andrew from Portland, Oregon, reached out to us, “tired of getting a paycheck while someone else gets the profit.”

The Real Estate Guys don’t do a lot of flipping. In our mind, flipping is not real estate investing, but flipping IS a way to make good money.

The essence of business and investing is to build a machine that accumulates the efforts of others (time, money, etc.) as an organized “asset” with a cash flow.

Investing is putting your dollars out to work instead of your labor.

When renting to people, they pay you rent out of their earnings. That’s their effort, turned into a cash flow for you.

A lot of folks think in terms of: Cash > Asset > Cash. (Taking cash to build an asset that creates more cash.)

We encourage you to think in terms of: Asset > Cash > Asset (Using an asset that creates cash flow so you can invest in more assets.) Assets are our end goal.

So you could use your skills to rehab a home, tenant it, and keep the income.

We have a good friend Terry Kerr who has built a portfolio of properties in a thriving business in Memphis using that model.

Question: Should I buy a home before an investment property?

Sonya from Pembroke Pines, Florida, is a smart woman looking for the best way to use her $32,000 VA loan.

She’s renting right now, “because it’s tough to find a home in order to afford to buy an investment home. Which should I do first?”

We say where you live is a personal choice based on where you want to be and the type of home you want to live in.

Sonya isn’t sure she wants to stay in Florida long-term, which is part of her dilemma in choosing a property.

She’s got this VA loan eligibility for a primary residence. The nice thing about the VA is that once you buy a property is that even though it’s an owner-occupied loan, if you live in the home and move, the loan can stay in place after you move.

You could even buy another home as an owner-occupied loan. Keep in mind, you can generally only have one VA eligible property at a time.

If Sonya buys a home to live in, and there’s a possibility of moving, it’s probably best if she feels comfortable it would be a profitable rental, in case it’s not easy to sell.

(That’s the thing about home ownership: You will pick up some tax breaks but you’re also tethered to the property.)

There’s always the chance you may end out getting stuck in a property.

Sure, home prices have been going up, but it doesn’t mean it will keep going to the moon.

Based on the chance you may or may not be trapped in a property you may not want long-term to take that VA and use it somewhere else.

As far as renting goes …

We say there’s really no harm in renting today if you’re figuring out how to put your assets to work.

Question: David in Boise, Idaho, asked: “Are there limits, as a percentage, to invest my self-directed IRA? Can I invest it into one property?”

We definitely recommend you talk to a tax advisor. If your IRA is self-directed, then yes, you are legally allowed to invest as you please.

While you can, the bigger question is should you invest it all into one real estate project?

Generally speaking, it’s not a good idea to put all your eggs into one basket. It may be prudent to diversify.

We don’t have all the details on David’s portfolio, but the general principle is it’s never good to be greedy. Sometimes you swing hard and get the Grand Slam, and sometimes you strike out. If you’re not prepared to strike out, it might not be the best route.

Question: Looking to diversify in several markets, what do you think?

Rick in Michigan is looking to raise money through a syndication, and has a plan to acquire four or five properties in several markets, including one or two vacation properties in Belize.

We love his idea to syndicate, putting together a lot of people’s resources to do something bigger.

Rick wants to have all the properties managed except those in his own area, which he plans to manage himself.

At the high level, we love the idea.

It’s wise to diversify across markets and property types. We like that he’s throwing in some vacation properties. But here’s our hang-up: Why manage it yourself?

Rick, you’re going to be attentive to what’s going on in the other markets. You’re managing money and time.

Time is tricky. You can’t raise more time.

If there’s room in your business model to have a property manager, then get someone else’s help to manage the properties in your area.

Also consider this …

Since you’ll be having investors as part of your building this portfolio, you have to disclose every way that you may be compensated. Being a property manager could appear as a conflict of interest.

You need to build a team and build a relationship with the team. If you’re managing the properties purely to save money, raise more money.

As Simon Black says, “Add a zero to your thinking.”

If the only gating item is the amount of money, that’s largely a mental block.

Question: What are the market indicators?

Everett in Coral Gables, Florida, reached out to get more clarification on the market indicators.

We suggest looking at net migration, which will be either a net positive or negative. You always want to look for a POSITIVE net migration.

There are some markets where more people leave than come in. That’s bad news.

For example, look at Detroit, Michigan. It had a population of 2 million people. Now it’s somewhere between 600,000 – 800,000 in population.

In Detroit, they are literally tearing houses down – removing inventory – because it’s more of a liability to have squatters in them.

Detroit’s an exaggerated scenario.

The point is these markets shift slowly and if you’re not paying attention, then you get left holding the bag.

Another indicator of market health is how long it takes to sell a home.

Not just annually, but from a month-to-month basis. What are the average days on the market?

There’s a whole lot of other indicators … check out our podcasts for more!

Question: What’s the legality of wholesaling? Do I need to be a licensed realtor?

Shawn in Fort Meyers, Florida, reached out to us to learn more about wholesaling.

Wholesaling is the idea of getting into a contract for a property that you’re not going to buy, then finding another buyer.

Since you did the work of finding the property, other time-strapped investors may pay for your efforts in finding it for them. They’ll take it off for hands for a small fee.

The legality portion is tricky.

The smartest thing is to ask a real estate attorney the question. Tell them what you want and ask how to do it within the law.

We’re guessing wholesaling would be fine.

To have a license means you are brokering, or representing a third party.

When you make the contract as a wholesaler, you’re NOT representing anyone.

Make sure you understand HOW you should sign the contract …

This will be either as a “signee” or a “nominee,” depending on what your attorney tells you.

What you’re effectively being compensated for is tying up the property at a decent price and getting a buyer.

Again …

The smartest thing to do when you have a legal question is to spend a couple hundred dollars and GET COUNSEL from a qualified real estate attorney.

Question: With fixed-rate loans, backed by real estate, am I making a bet on inflation?

Patrick in Belgrade, Montana, reached out to us with a great question.

Looking at history and trajectory of U.S. dollar, it’s tempting to think it’s going down. Is it possible the U.S. could have a lost decade of inflation?

If you’re investing for the long-term, our opinion is the trend is your friend.

If you look around the world and the economic uncertainty globally, you’ll see the dollar is less flawed that in other countries.

If all the currencies are sinking, then long-term the dollar will be in the same ship.

We see you having a better chance of inflation than deflation.

In a lot of markets in the world, the U.S. dollar is the de facto for real estate purchases.

As a real estate investor, you need to be prepared for either side – whether the dollar loses or gains value in the global marketplace.

How?

  • Structure yourself conservatively, not razor thin on the cash flow.
  • Pick markets that are more in demand, and think more about where they are GOING then where they are now.
  • Go to cheaper places, where the cost of living is lower but quality of life is good.

These are big, strategic decisions.

If you are serious about understanding about macro economy, this is more than we can dedicate to an episode. That’s why we dedicate and entire, fabulous WEEK to it: Summit at Sea™.

We commit ourselves for a week of intense discussion with some of the greatest minds in banking, commodities, real estate, and investing. They give us a 360-degree look at all of these different topics and come out with actionable intelligence.

It’s a big investment of time and money. It’s also a blast!

Question: I’m just getting into investing, partnering with my dad. What should we be sure to include in our portfolio?

Andrew in Yucaipa, California, is 31, using his dad’s retirement to build a portfolio.

We’ve learned the hard way …

Structure your portfolio to weather a storm!

If you are betting on financing to take you out of tight spot, be cautious. If you’re being conservative and you’re picking a good demographic, have adequate reserves, and not letting yourself get to the point that you might have to sell.

You NEVER want to HAVE to sell.

Instead, you want to do determine your own timing.

We recommend recession-resistant product types. When times are bad, the wealthier are going down t middle class homes. When times are good, people are getting raises and upgrading their homes.

How to protect yourself?

Stay away of high-end stuff and choose more of the bread-and-butter middle ground.

Create your future

All of these were great questions. If you’ve read this far, you’re interested in investing BECAUSE you have goals. Good for you. That’s where it all starts.

You want to improve your life.

You want to create cash flow.

You want more freedom.

You can do it! Go out and make equity happen!


 

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.

Liberty, Free Markets, Gold, Agriculture and More from Freedom Fest

 

In this week’s episode, we lined up six fascinating thought leaders at the seventh annual Freedom Fest – including a candidate for President of the United States!

Everyone at Freedom Fest has one thing in common. We’re all in pursuit of whatever “liberty” means to us, whether that’s private property or private thoughts.

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

  • Your freedom-loving host, Robert Helms
  • His free-spirited co-host, Russell Gray
  • Economist and author, Peter Schiff
  • Investment expert, Adrian Day
  • Fund manager and bestselling author, Marin Katusa
  • LatAm Prime Farmland Investments manager, Louie O’Conner
  • Editor-in-Chief of Forbes business magazine, Steve Forbes
  • Libertarian U.S. Presidential Candidate, Gary Johnson

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We’re pretty agnostic when it comes to politics. Our guests at Freedom Fest shared their perspectives – you make your own decisions.

Below we’ve captured a brief synopsis of what they each shared on the show. Listen in for the whole story!

 

Peter SchiffEconomist, financial broker/dealer, author, and host of the Peter Schiff Show Podcast

Schiff shared insights into the dollar, gold, and stocks. He gives a BIG tip for real estate investors.

“The dollar has gone down consistently over time,” Schiff said. “The next decade we can see an even bigger loss of the dollar than the prior century.

Schiff points out that gold stocks have shot up in the last six months. “The environment for gold has never been this good,” he said, “people should not be upset they missed it – this party is just getting started.”

Schiff shares that the real estate market “is being artificially propped up,” with home ownership rates now at a 50-year low.

Here’s where the HOT speculative money is involved in real estate money.

When current investors decide they want to get out because they bit off more than they could chew, they will likely drop their properties quickly.

That’s where YOU can get great buys.

 

Adrian Day – Chairman and CEO of Adrian Day Asset Management, a registered Investment Advisory firm

When you want to know what’s new with gold, Adrian Day is one of the world’s experts.

“Now the gold’s starting to move,” said Day. “We’re seeing people jump on board. There’s a lot of money on the sidelines.”

Gold feeds on uncertainty, since its value is generally the inverse of the dollar. That makes NOW a good time to be invested in it.

“Everywhere you look, the macro fundamentals are very bullish for gold,” said Day.

This is due to several factors. One, interest rates are staying low. Two, there’s immense uncertainty in international affairs, especially post-Brexit.

 

Marin Katusa – Fund Manager, Author of New York Times Bestseller “The Colder War,” Director of Copper Mountain Mining Corp.

Once a high school math teacher, Marin Katusa began into investing in metals at age 23. First it was tungsten, then uranium.

Pretty quickly he started writing larger checks, and now is a major investor in Canada’s largest copper mine.

With his experience traveling to over 100 countries, Katusa learned the importance of investing in “the right people, at right time, and the best assets.”

What do you do in a time like this, when there are negative interest rates?

“There’s a lot of confusion and uncertainty,” Katusa said, “The Brexit really woke people up. People don’t know where to put their money for safety.”

He recommends being careful where you put your physical gold.

Katusa also advises AGAINST investing in coal.

“Coal not only has the environmental aspects working against it … but China started changing the rules on coal,” said Katusa. “I have zero coal investments.”

 

Louie O’Conner – General Manager, LatAm Prime Farmland Investments

O’Conner shared a unique, new way to invest in agriculture.

Through LatAm Prime Farmland Investments, you can make individual investments in a Colombian aloe vera farm.

Aloe has been known for medicinal properties, and it’s also becoming a popular flavor in drinks. For example, recently, Coca Cola invested in an equity share in a Los Angeles-based aloe company.

“We call it ‘farm-in-a-box. It’s hands-off. Turn-key. The investment includes management until the first harvest,” said O’Conner.

The aloe vera crop in Colombia is run by an established, well-educated family.

Entry level investment is $38,000 for one hector, or 2.47 acres of land. Investors pay annually, but the aloe is harvested three or four times a year.

We share more details on how to invest in this unique opportunity in our show.

 

Steve Forbes – Editor-in-Chief of Forbes business magazine

Steve Forbes, a publishing executive who was twice a candidate for the nomination of the Republican Party for President, has great passion for America.

His new book, “Reviving America,” advocates three reforms to improve the United States:

  1. Patient control of healthcare. He suggests more transparency to arm patients making care decisions, such as infection rates at hospitals.
  2. Tax code. He says the U.S. needs to remove the complexities, and simplify taxes.
  3. Stability of the dollar. He argues money should have a fixed value, as it did for 180 years.

Forbes’ news platform has grown substantially. “Our paid circulation is the highest it’s ever been,” said Forbes. “We’ve got 60 million unique visitors a month on our website, and over 1,000 contracted contributors … we’re producing a magazine every day.

 

Gary Johnson – Libertarian Candidate for U.S. President, Former Governor of New Mexico

We asked U.S. Presidential Candidate, Gary Johnson: What does America need?

“Most people support everyone making their own choices in their own lives,” said Johnson. “Given the polarity of the two major candidates, the opportunity is open.”

Johnson argues a need for less government, since big government costs money and takes away individual liberty.

“Count on me to sign any legislation that simplifies tax code,” Johnson said. “Democrats can’t balance a checkbook. Republicans force an agenda on other people.”

Whatever your political leaning, we at The Real Estate Guys™ encourage you to take a step back and look at the big picture.

As an investor … real estate or otherwise … it’s critical to stay informed of the forces and trends looming on the horizon which can and will affect your wealth.

So join us at the longest-running investment conference in the U.S. and take the reins on your future.


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.

Ask The Guys – Market Selection, Self-Directed IRAs and the Optimum Use of Leverage

 

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Have a burning real estate question? Shoot it our way.

Every couple of months we do an “Ask The Guys” show. In this week’s episode, we shared several real-life questions from our listeners and provided our ideas on how we would approach their situation. (Note: We do not give advice. We provide ideas and information. We recommend getting professional counsel.)

Below are summaries of four of the questions we covered this week ranging from market selection to self-directed IRAs to optimum use of leverage.

 

 


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Question: Nicole from Pennsylvania wrote, “My husband and I have saved up $30,000 cash to purchase an investment property. We’re prepared for a 20% down payment and are interested in the condo rental market in Florida. What do you know about that market?”

We like to say, “Live where you want to live, invest where the numbers make sense.”

First, visit with your mortgage professional and see what you qualify for. When you know what you can afford, it’s easier to tackle where to invest.

As a background on Florida, it’s been a great job creation market. A lot of baby boomers have moved there, as it’s known for being a popular state to retire. We are fond of the central Florida market. It might be a bit pricey for what you’ve saved at this point, since you’ll want to have a contingency cache.

As part of your budget, you’ll need to allocate resources to travel and your team. Don’t be skimpy on picking the right person. In fact, if you’re buying out of state, it’s often wise to let a local property management company help you find a property.

One caveat: When you’re looking at condos, consider the condition of the HOA. That’s something you’ll want to make sure you understand before making a purchase.

 

Question: Ryan in Georgetown, Massachusetts, age 23, is living at home with his parents and considering buying a home rather than renting. He asks, “What’s the ideal percentage to put down? Who should be on my team?”

To answer both questions, you need a great mortgage professional on your team. There might be mortgage programs available for first-time home buyers. To make sure you take advantage of them, your mortgage professional will be your best friend.

He or she will also pull up your credit score, the starting point to see what kind of credit you qualify to receive.

We recommend planning your credit approach to property ownership a year in advance or more. If you don’t want to wait, you might need a co-signer.

If your income is low enough, you may want to owner-occupy your first property. Live in it for a little while, then turn it into a rental property. If you can force some equity, making valuable updates to the property, you can use that on your next investment property.

We don’t recommend a condo. A single-family home is a good bet, as far as liquidity.

When you are young and willing to compromise on your lifestyle, feel free to be creative. For example, you can go bigger than you may be comfortable on your own, then rent rooms out to your friends.

If you’re interested in learning how to invest using other people’s money, we will share in-depth about how to do that in our upcoming Secrets of Syndication Success event.

Question: David in Boise, Idaho, asked: “Are there limits, as a percentage, to invest my self-directed IRA? Can I invest it into one property?”

We definitely recommend you talk to a tax advisor. If your IRA is self-directed, then yes, you are legally allowed to invest as you please.

While you can, the bigger question is should you invest it all into one real estate project?

Generally speaking, it’s not a good idea to put all your eggs into one basket. It may be prudent to diversify.

We don’t have all the details on David’s portfolio, but the general principle is it’s never good to be greedy. Sometimes you swing hard and get the Grand Slam, and sometimes you strike out. If you’re not prepared to strike out, it might not be the best route.

Question: Kevin in Bellingham, Washington, asked: “What do you think about paying for online real estate courses? If that’s not advisable, is studying for a realtor’s license a good idea?”

We are big proponents of paying for education. But make sure it’s a quality education with a reputable teacher. You should always know somebody’s agenda.

For example, our agenda is to teach you the market. At our events, we’re not looking to sell you property. We’re looking to teach you the market.

Once I spent $2,500 on a one-day course. I thought of it as an investment and have used the knowledge I gained that day to make a far greater return.

Don’t hold back on investing in your future. When you can gain actionable knowledge, expect that you will get a return. It’s up to you to put knowledge to practice.

As for a realtor’s license, most of the time when you’re getting a professional license, you are being trained on how to represent someone else. You’ll learn the legalities and structure of how to help. That’s good information to know, but it might not be necessary, depending on what you want to accomplish.

Spend time around other investors. Rely on your technical advisors. If you need a specific skill beyond that, invest in your education and then use that knowledge until it pays you back.


 

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.

ENCORE: Inspecting Property Before You Invest

Builder And Inspector Looking At New Property

Builder And Inspector Looking At New Property

Nobody wants to get stuck with a problem property. You know what I mean … buying a house that turns out to be uninhabitable or a commercial building that ends up exploding your rehab budget. How do you avoid these kinds of mistakes?

While there is no guarantee to preventing all surprises, when you’re in-the-know about property inspections and do them right, it’s much less likely you’ll have to pay a costly price later.

Get your inspections. Get them done right. We share how, why, and when you need inspections in our latest episode of The Real Estate Guys™ radio show, pulled out from the archives with your hosts:

  • Your inspect-it host, Robert Helms
  • His no-wreck-it co-host, Russell Gray

 


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Lead, asbestos, mold. Discover these nightmares in your new property and you’ll wish you’d done your due diligence.

Want to know how to avoid buying a “land mine” property? Due to popular demand, we pulled out a favorite from the archives (and added a new trivia question) about property inspections – when, why, and how to get them.

It’s not the sexy side of the business, but inspections are absolutely critical so you know what you’re buying.

 

Why bother getting an inspection?

I can’t emphasize this enough: inspections are a critically important step in your due diligence.

If you’re looking to have any people use the property, especially for residential purposes, you’re financially responsible to maintain the property at a certain level of habitability – that’s your responsibility under the law.

Again, if you’re buying to rent out to tenants, you better know what condition it is in.

Robert shares an example of a dilapidated house he bought without a property inspection. Why would he do this?

He was planning to tear it down and build a new development in the area. He didn’t care if the structure wasn’t sound, since he was only looking to secure the land it was on. That’s one scenario that makes sense to skip inspection.

 

Get a third-party property inspection

Depending on what you’re doing with the property dictates the type of inspection you need. Your first inspection is a personal inspection – you looking around yourself.

Then, your first line of defense is a third-party inspection.

Schedule a time, and show up yourself with the inspector. We recommend this because you can be taking notes and asking questions on the spot, rather than reading a report later that might not make sense.

Being there with the inspector gives you a gut-level understanding, and you can ask things like, “Are you really concerned about this?” or “What’s the age-life of this house?”

Many inspectors will point to other trades. For example, they may recommend you get a roof inspection. (We think of this like going to a general practitioner doctor who sends you to an ear, nose, and throat specialist.)

Keep all of your inspections and records of everything you did to make improvements. Then when you are getting ready to sell, you have validation of all the value you’ve added.

 

A note about “Subject to Inspection”

Sometimes, especially for larger properties with multiple tenants, you may have a “Subject to Inspection” clause.

This means you get an opportunity to inspect when you’re in contract and you have earnest money.

Why?

If you’re buying multiple units, the owner doesn’t want to disrupt the tenants just because you’re wanting to take a look.

For these kinds of deals, you want to get through the discovery process quickly. Cover the things that do matter. If it’s a competitive market, you don’t want to miss the deal.

If you’re looking at a big-deal property that will need some work, we recommend you bring your own general contractor or project manager. Then they can give you their bid and you’ll be better prepared to understand the numbers – especially if you have a tight rehab budget.

Aim to be more prepared than your competition (other bidders) and you’ll be better off to make smart decisions.

 

Lesson learned from a real estate broker

We’ve learned over the years that you have to pick your battles. One piece of advice: Don’t ever go back to the seller and attempt to negotiate something if you’re willing to walk away if they say no.

For example, we’ve seen buyers who would say “We’ve got to get the seller to cover that,” for something that cost $100. Sometimes it’s just not worth asking!

We recommend you always have an agent involved. They see a lot of properties and are a huge value add. Great agents will always have the inspections up front.

You want a great agent. You want to pay them a lot of money. Don’t go cheap on this.

Our friend, “Rich Dad Poor Dad” author, Robert Kiyosaki makes sure his agents get paid full commission, and usually more. He knows you get what you pay for.

You want to hire experienced agents in the niche you’re buying. Don’t be penny-wise and pound-foolish for the asset you will be responsible for.

 

What types of property inspections are there?

There are lots of inspection types, including the five below. Again, this is all dependent on the type of property you’re looking at.

There’s the physical inspection, meaning walking the grounds, with eyes on the property.

Then there’s an outside inspection – research done on the area around the property. For example, is the property in a place where it may flood?

Environmental inspections – involve maps reading the surrounding property. Robert needed this for a Las Vegas property located a quarter mile from an abandoned gas station. The least expensive is a Phase 1, and you may need to do a Phase 2, depending on the feedback.

For a seismic inspection – recommended in places with lots of earthquakes – you want to know if you’re in a seismic zone.

If you’re buying property for agricultural purposes, you can have an agricultural inspection, where third-party inspectors come out to do soil inspection to check on the type of nutrients in the soil.

Proper inspections are a BIG part of proper due diligence…and even more so when you’re making investments with other people’s money.


 

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.

Keeping Your Thumb on the Pulse of the Real Estate Market

Real Estate Market Blue Price Tags Above Properties. House Prices. 3D Abstract Illustration.

Before sharing highlights of this week’s episode, let me say we had a blast interacting with you folks in person at our Dallas field trip event.

It’s always fun for us to hear about the deals you’re doing and shake your hand. Thanks to those who attended and the great vendors who treated us well. We’ll be back!

As part of our discussion with locals in the Dallas area, we were reminded of the importance of paying attention to the market – especially when you buy property away from where you live. This week we dish details about how to keep your thumb on the pulse of the market.

 


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Gradual Market Change Happens – Pay Attention

If you’re old enough to have gone to a high school reunion (especially one with a couple of digits), you’ll understand this.

Think back to your last reunion. Remember seeing your friends from high school and thinking, “Oh, they look so much older and so different”?

Guess what? They are looking at you, thinking the same thing.

The principle here is that it’s tricky to observe slow changes. Since we see ourselves in the mirror every day, it’s hard for us to notice differences that occur over time.

The same is true for the real estate market.

You owe it to yourself to make sure you’re watching and paying attention.

When you’re looking from afar at a market via screen, in the comfort of your pajamas at home, you look at statistics and reports on the news.

Keep in mind, mainstream media is generally slanted from the viewpoint of homeowners. One simple example: “Bad news” for tenants that rent rates are increasing, can be “great news” for you as a landlord.

The market could shift and you won’t recognize the change unless something wakes you up. Often, it’s a problem.

Go Beyond Data: Make Sure You “Kick the Dirt”

Rather than wait for a red flag to arise, make sure you “kick the dirt” as we like to say, or visit your market in person.

There’s a vibrancy you can feel when you are in a place. A vibe that gives you a gut-feeling about the people, the context of the surrounding area, and clues to the direction the market is going.

You will never get it on the Internet, although that’s a good place to start. Feeling the market is as much a part of your decisions as doing the math.

This isn’t some hokey “feelings” stuff – think about the biggest partnership decision you make – marriage. While you can have some data on your romantic interest: the types of ideals they have, the types of activities they enjoy, etc., ultimately you have to feel something special about them to make the commitment.

Let’s apply this to real estate and being an investor.

Say you have a fancy chart representing the demographic in an area. That’s nice, but you can’t feel it. You have to see it.

You go into the local Starbucks, the Costco. You see the people, the way they interact, the types of cars they drive.

Another example: Michael Becker, one of our Dallas real estate friends, shared this great six-page case study. It had all the data – measurements, floor plans, cap rates, etc.

Yet, we only had a small snapshot with his fined-tuned PDF.

When we walked through it, met his tenants, saw the cars in the parking lot, and stood outside the building, THAT’S when we really got it!

Remember, You Are in the PEOPLE Business

When you’re visiting the area, every person you come into contact with can be a resource.

From the barista serving you coffee to the Uber driver taking you to your hotel, ask questions.

I like to start broad: “What’s going on in the real estate market?” You can add follow-ups, things like, “I heard about this legislation – what do you think about it?”

When you talk to people who live there, you’ll get honest answers.

Also, pay attention to the job market in the area, as that affects the people who affect your bottom line.

If a big employer moves out and takes a chunk of their workers, it will trickle into the tertiary services – the laundry services, the grocery stores, etc.

Without a main industry, your tenants – and your investment – may feel an impact.

At the end of the day, you’re not even interested in the property. You’re interested in the TENANT. The property is just the price of admission.

5 Off-Site Sources for Local Market Information

We know you have a life. Checking in on the real estate market doesn’t have to take a lot of time. But it’s better to dedicate some time regularly than regretting it later. Here are five ways we recommend you keep the pulse:

  1. Local Chamber of Commerce. Their job is to sell the market, and they often put together annual publications sharing latest updates.
  2. Google Alerts. I’ll often do specific alerts for things like “economy+Dallas” or “properties+Dallas” so I see the news stories about those topics. You can set up as many as you want.
  3. Trade Journals. Get subscriptions to the trade journals covering your market. This gives you the high-level view of what’s happening.
  4. Your local team. When you’ve got a property manager and other team members set up in the area, call them regularly to see if there are any big indicators of change.
  5. Price checks. Using any real estate website, plug in your product type (say, 3-bedroom, 2-bath) and compare over time. For example, in Dallas we saw a house that was $125,000 and rented for $1,150. This year, the same house is worth $145,000 and rents for $1,345. If the rent had stayed the same, it would mean investors were chasing yield. You want to understand WHY the price went up. 

Using both an in-person and online approach, you’ll know when it’s time to double down on buying properties or head for the exits.

If you haven’t attended one of our fabulous field trip events, where we experience the local market and bring together like-minded investors, we’d love to meet you.

In the future, we’ll be meeting up in Atlanta and Memphis – come join us! 


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.

Reality check: What does it take to develop real estate?

imageDevelop Yourself to be a Real Estate Developer

Ever thought about development or want to learn how to pick a great developer? In our latest episode we spoke with internationally acclaimed real estate developer, Beth Clifford. She gives insight into the attributes needed to successfully develop real estate.

But first, a bit of background on forcing equity.

For many recent years you could buy properties at “below replacement cost.” The basic idea of “buy low, sell high” drew a lot of interest, and many people jumped on the flipping train. Now there are not many properties like that. So that leaves us with another opportunity: real estate development.

Development is the same thing – it’s just a bigger project.

You can take an asset of land and add to it capital (via labor, building materials, equipment, etc.) and increase market value. This is what we at The Real Estate Guys call “forcing equity.”

To force equity, you don’t have to be a general contractor, developer or real estate agent. You have to be an organizer. Be able to pencil it out, get the right team together, and have a plan that makes sense.
 


 

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Bring the Skills You Already Have

Talented Beth Clifford, who’s led more than $3 billion in real estate development projects. She started out in IT and switched careers in her mid-thirties. How did she pull that off?

“I knew how to create a process and get the right people into the right chairs,” said Beth. “It’s all about the right people, right place, right time, and right resources.”

She used the same skill set she’d honed in her previous field – a sharpened ability to execute with a team – and learned the real estate vernacular and business process.

“If you understand at the highest level the business problem you need to solve, you break it into the pieces,” said Beth. “Break those pieces down.”

Say you have a piece of land. You know you need to build a building, coordinate utilities, etc. Talk to professionals and chunk it into individual pieces.

We see it like being an executive producer of a movie. You don’t need to know all the details. All of those key people with expertise can help – you be the strategic thinker and visionary to pull off a project.

 

Know Your Audience – Remove Your Risk

Whatever you’re going to produce, it has to be something people are willing to pay for.

We discussed this with Beth – your definition of “Minimum Viable Product” or MVP. Define it, and test the proof of concept. For example, can you attract a buyer with renderings, before the physical product is complete? Seek for validation from your potential buyer early on.

To lessen risk for the developer, Beth advises shortening time frames and maximize value. You want very little time (she recommends hours!) between getting your product finished and it being used.

In her firm, the team looks at what’s working and not working in a market, and then considers what could be different. That’s where they want to fit.

For example, Beth shares about her project redeveloping historic multi-million dollar homes, market class A, in the D.C. area.

They researched.

They clearly understood their buyer: working CEO with a stay-at-home spouse, generally a highly social person. These were formal, gracious people. Much of the existing products in that space were big-box homes, “blow up with air” that offered no greater utility. Beth’s team created a different class, with private entertainment quarters. Those turned out to be the winning buildings.

They could sell them at a premium and turn them in less than a month.

Want to learn more about how you can know your market from Beth? She’ll share more success stories and useful tips in person at our Summit at Sea.

 

Never Race to the Bottom

One more thing Beth advises … watch out for the trap of becoming the “lost-cost option.”

Rather, she says, “I’m never involved where you’re racing to the bottom. The big production guys can’t be beat. They will always be able to come in under your cost.”

Instead, look where the current players are. What are they doing that works? What can be done better? Beth takes the mid-level market and increases the price of her product, with a clear idea of what the buyer is looking for.

 

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.

Creating Wealth for Generations

 

Creating Wealth for Generations is more than smart estate planning. The real key to generational wealth is raising capitalists who can build wealth and make smart investments.

It’s tragic when one generation leaves a fortune to the next and they squander it. Or some unforeseen event wipes out a family’s business or portfolio…and the heirs have no idea how to rebuild.

It’s one thing to build a fortune and another to raise a fortune builder.

In this episode we talk about building generational wealth by raising capitalists.

In the studio and behind the microphones for this father and son edition of The Real Estate Guys™ radio show:

  • Your son-of-a-Bob host, Robert Helms
  • His Sean daddy co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms
  • Co-host in training and budding Seantrepreneur, Sean Gray

 

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Leave More Than Money…Pass on the Skills for Creating Wealth

 

We’ve all seen examples of someone rising from the dust to create enormous wealth. It’s a heroic feat. Tragically, sometimes when wealth is passed on, the next generation squanders it through greed, negligence or incompetence.

So we up the ante on the old adage, “Don’t give a man to fish, teach him to fish.”

Rather, we say, “It doesn’t stop with the second guy in the boat.” It’s a much bigger picture. The influence of one generation can impact hundreds, thousands of posterity.

Consider the wealthy, successful, brilliant people who founded the United States of America. They chose to stand up to the greatest armed forces in the world to create an environment of opportunity and prosperity for their families and the generations that would follow them.

Right now, at this time in history, it’s more important than ever to teach up-and-coming generations how to create prosperity through business and investing.

Want to do more just donate your wealth to you children? More than preserving money and protecting money, prepare your heirs to think and live like entrepreneurs.

In other words, show your children how to CREATE wealth.

This is a topic near and dear to our hearts.  We’re at that season in life where you start thinking beyond our own lifetime.  What’s our legacy going to be?

Probably like you, we care about our family’s future…even more than our own.   In this episode, “Creating Wealth for Generations” we bring in representatives and get perspectives from three generations to discuss ways to ensure the wealth-building mindset is passed on.

 

Seasoned Wisdom – Tips from the Godfather of Real Estate…

 

Robert’s dad, Bob Helms, our powerful mentor and the man we affectionately refer to as the “Godfather of Real Estate,” has been a real estate investor for six decades. Even in his 80’s, he’s still got contagious enthusiasm for investing.

“I’m still very excited about it. Being involved gives me access to people who are doing it today,” said Bob. “The reason I’m doing as well as I’m doing at my age is I’m involved.”

For those in your 60’s, 70’s, 80’s, looking back at your time as a parent and grandparent, Bob recommends learning lessons from the past…but not dwelling on them.  Move on from there.  Bob made his own mistakes, and advises failing fast and moving on sooner.

As for Bob’s parenting advice: You can’t push your kids where you want them to go. You can’t force them along.

Instead, create environments which let kids experience possibilities. As hard as it can be sometimes, don’t give them all the answers. Let them learn at their own pace.

Introduce them to people doing what they want to do. Get them in places where they’ll be exposed to ideas which excite them. This is how you process life.

 

To Find Great Answers Ask Great Questions

 

Like most kids fresh out of college, Russ’ son, Sean Gray, felt unsure about his future. Yet, with a little guidance and his own go-getter ambition, at 24, Sean is now an active entrepreneur and investor.

When he was “22 without a clue,” and his shiny new college degree in hand, Sean was tempted to ask the same question as his fellow grads… “What can I do to make money?”  It’s what nearly every student entering college is preparing for and the primary thing they focus on when they finally finish school.

And it SEEMS like a a good question.  After all, isn’t the whole point of working to make money?

Maybe.  But maybe not…

The “What can I do to make money?” question makes money the end goal…with the requirement to do something to get it.

With a little guidance from his mentors, Sean re-framed the question.

Instead, Sean asked himself, “What can I build that will afford me the lifestyle I want to have?”  In other words, don’t live to get paid…get paid to live.

As Sean had seen from his mentors, this mindset requires more work in the beginning.  But it yields a very different…and arguably better…answer.

So Sean went after a lifestyle and focuses on building businesses and investments that fit.

Now in his mid-twenties, he says he feels retired because he does what he wants, when he wants…and gets paid to live.  He has so much freedom because he asked a better question and went to work on finding a better answer.

Sean’s living the advice of Thoreau, who said, “Go confidently in the direction of your dreams! Life the life you’ve imagined.”

No one else can determine what your dream life is or what your path should be – we each have to create that for ourselves.

 

Tips for Millennials from a Millennial…

 

For our younger readers and listeners, Sean offers three tips he’s using to get a Real World Masters

1. Change the way you think. Rather than sticking to the comfortable route, like the rest of the products of the school system, educate yourself about money and how to build it.

2. Get a mentor. Find whoever’s best at what you want to do. Learn from them.

3. Change the people you’re around. Spend time with people who have similar goals and aspirations…people who encourage and inspire you to push yourself towards your goals.

 

Prepare Your Heirs… So They Won’t Have to Repair Errors

During our last Summit at Sea, we heard from internationally recognized estate planning attorney, Jeffrey Verdon, who’s helped affluent families and business owners solve comprehensive estate planning problems for more than 30 years.

He saw up close that when wealthy individuals passed on their wealth, the next generation would far too frequently squander it.  He thought it was his job to prepare the heirs, but realized he need to solve a bigger problem…repair the errors of entitlement.

As the authors of “The Millionaire Next Door,” put it, avoid providing children with “economic outpatient care.”

Instead, if you want the next generation to think like an owner, let them own it!  Even more important, let them BUILD it.  Whatever “it” is for them.  Sometimes…often…their passion, purpose, mission, vision and values will be different than yours.

That’s okay.  It isn’t a business or portfolio your building.  It’s an entrepreneur and investor.  So WHAT you build is far less important, then WHO you build.

The key is to put your kids in environments where they can discover their potential and opportunities…and then go to work on developing their potential into abilities, achievements and assets.

Your role is to be their mentor…or one of them…and then help them find others as needed.

Where to find these mentors? We’re asked this a lot.

One option is to create your own group.  If you happen to run around with high achievers, it might be a good idea to look for opportunities to get everyone together.  Kind of a multi-generational mastermind group.

You can also attend topic live events where the right people are already all coming together.  You can attend lectures, workshops, networking events, etc.   We’re huge advocates for live events…both ours and others’…because they provide deeper focus, getting your away from your daily distractions, so you bump into a great idea or relationship.

For a young person…and really for anyone…one of the BEST places to start is our annual goal setting retreat.  After all, if it’s about building a lifestyle that pays you to live it, the first thing you need to do is figure our what you really, REALLY want.

It sounds easy.  But so many people have been on a pre-scripted track for so long, they’ve lost touch with many of their hopes and dreams.  But it’s never too late.

So listen into this inspirational and practical episode and consider how you might creating wealth and wealth creators…so you can leave both an big estate and a powerful legacy when it’s your time to move on to the next thing.

 

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.