Robert Kiyosaki on the Financial System, Fake Teachers and Real Assets

This summer, we spent time at events like Freedom Fest and the Red Pill Expo … where we bumped into some of our mentors and friends … folks like Peter Schiff and Robert Kiyosaki.

It’s not by accident we keep running into the same people. These folks all have the same desire … to read between the lines and find the TRUTH about what’s really happening in the world. And they don’t jump to conclusions.

Robert Kiyosaki has helped us see both sides of the story for decades. This time around we chat with him about his views on the financial system, fake teachers, and the importance of real assets.

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

  • Your very real host, Robert Helms
  • His faking-it co-host, Russell Gray
  • Best-selling financial author Robert Kiyosaki

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Get a REAL education

We spoke with Robert Kiyosaki at Freedom Fest. “I come to learn,” he says.

Freedom Fest and similar events … like the New Orleans Investment Conference are like a mental gym. “They challenge the way I think,” says Robert.

That’s one reason educational events are so important (like our Future of Money and Wealth webinar series, which features talks by Robert and many more financial gurus).

REAL education is more than just listening to the salespeople. It’s getting outside your cocoon and seeking out new information.

Invest in your PASSION

One idea Robert thinks is really essential in the investing business is to invest in what you love and enjoy. “I do think real estate is the best,” says Robert … that’s why it has been his bread and butter for years.

But maybe avocadoes are your passion … in that case, perhaps you should consider investing in an avocado farm.

You should always do your due diligence and work with a good financial planner … but investing in your PASSION will always be more successful than investing in something you’re “meh” about.

REAL assets, REAL money, and REAL teachers

“We don’t have a prayer as long as we’re working for money,” says Robert. He believes investors should steer away from money … in favor of REAL assets.

Investors should also surround themselves with REAL professionals … those who’ve done their research and know what they’re talking about.

A lot of people are in trouble because they’re learning from FAKE teachers, says Robert … people who don’t have a real conception of cash flow.

Two other things investors should be aware of … FAKE money and FAKE assets.

Be wary of a monetary system that isn’t backed up (by gold, for example), and don’t rely on traditional assets, Robert advises.

If you’re doing everything “right” … working a 9-to-5 job, putting money in your 401k, investing in stocks … you’re being screwed by the system, says Robert.

SMART investors have to learn to work WITH the system.

For more on FAKE versus REAL, check out Robert’s upcoming book FAKE, which will be released as an entirely digital series.

REAL talk about our financial system

Central banks control paper money … and that’s dangerous, says Robert. He cites people like Jim Rogers, who believes we’re headed for the worst crash yet because we have an abundance of printed money and debt.

“Tragedy follows printing money,” says Robert.

But it doesn’t matter how bad the system is … what matters is the actions YOU take. We like to say BE the Fed … don’t BEAT the Fed.

That means figuring out how to make the most of our financial system … knowing the tax laws and figuring out how to make them work for you.

“The next collapse will look like something we’ve never seen before,” says Robert.

But investors don’t have to be scared … if they prepare for the inevitable BEFORE it happens.

We talked with Robert about digital currencies, like Bitcoin. “Gold and silver were here before us and will be here forever,” says Robert.

But investors need to look at real assets (like property and gold), cybercurrency, AND paper money when they’re investing … because they’re the three big components of our current monetary system.

Smart investors work to figure out what is real and lasting.

For more from Robert Kiyosaki, read the classic book Rich Dad Poor Dad … if you haven’t already. And check out the Rich Dad Radio Show.

A REAL financial expert

Robert has been studying the financial system forever. He remembers the history of money and has watched the financial system change.

As we often say, “Those who fail to remember history are doomed to repeat it.”

You HAVE to understand financial fundamentals and the structure of our financial system before you can read the news and really SEE between the lines.

Like Robert says, a crash is highly likely … we can’t predict WHEN it will happen, but we CAN hedge against the eventuality of it.

Get educated … so you can stay on top of the wave when the tsunami comes.


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Growing Profits Naturally with Farmland Investing

A diverse portfolio offers you a cushion … if one investment suffers, you won’t feel the impact across your entire portfolio. One method for portfolio diversification is to step outside home or apartment investing … and into farmland investing.

Investing in a commodity like produce or cattle allows you to lose your focus on an individual market and start focusing on the GLOBAL market for your product.

Like any real estate investment, there is a learning curve to figuring out agriculture … especially when you’re growing and exporting produce outside your home country.

But agricultural investments are worth the effort … they offer the best of all worlds, combining agricultural income with land banking and offshore strategy.

In this episode, global investor Carsten Pfau discusses his journey into the world of agricultural investing … and offers ideas on how YOU can get started as a passive investor in this low-risk option.

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

  • Your orange-loving host, Robert Helms
  • His like-a-lemon co-host, Russell Gray
  • Carsten Pfau, manager of a thriving international real estate business

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How Carsten Pfau got planted in Paraguay

Trees don’t understand what’s happening at the Fed. They just grow. And the fruit, vegetables, and nuts they produce fulfill a fundamental, permanent human need for food.

Bread-and-butter commodities like agriculture will be valuable forever … that’s one reason we were so excited to chat with agricultural investor Carsten Pfau.

Carsten’s family is established as real estate developers and investors in his native Germany and in South America.

He decided to shift from traditional real estate to agricultural investing for one big reason … “You can sell agricultural products word wide.”

That’s one reason agriculture is so great. It’s less about getting the MARKET right, and more about getting the PRODUCT TYPE right.

For Carsten, the primary product is oranges. He also grows vegetables and grazes cattle.

When he stepped into the Paraguayan market with his brother Michael Pfau, Carsten quickly realized oranges were a great choice. Eighty-five percent of the oranges sold in Paraguay are imported, so there’s a huge market for locally grown produce … and potential for favorable margins.

Why Paraguay? One reason is its competitive cost structure. Because it is a developing country, costs are low, but there’s tremendous opportunity to innovate and bring in new technology … resulting in excellent profits.

Paraguay is great, but in order to do business there, Carsten says he had to learn the language … and the mentality. Every nation has different cultural mores, and identifying and learning them is essential to business success.

Growing from the ground up

Carsten says growing his business was an “amazing process.” When he opened up his orange plantation to investors, he expected 10-15 people to join in.

Instead, he ended up with 500 investors.

Agriculture requires a scale approach … the larger you are, the more efficient you can be, and the higher your profits. That’s why Carsten started syndicating.

He also says demand for oranges is growing so quickly that the biggest challenge is growing more. It’s the opposite of traditional real estate … instead of recruiting buyers and renters, he can sit back and CHOOSE from all the buyers who are coming to HIM.

We asked Carsten how he figured out the science of agriculture.

Carsten told us every plant he buys for his home dies … so his oranges aren’t thriving because of his green thumb!

They are thriving because he has compiled a team of the best experts in the business. His advice for investors is to “never think you know it all.” Instead, admit your strengths and weaknesses and join forces with talented people.

Plant your feet in a plot of your own

Agriculture can be daunting because it requires a lot of specific knowledge. One option for investors who want to get involved but don’t have the time or interest to get their hands dirty is passive investing.

“People are interested in two things,” says Carsten, “owning land and getting a cut of the action.”

Carsten combined these two things in his own business by offering investors the opportunity to buy the rights to their own parcel of land … and then sign a farming agreement with his management company, which plants, cares for, and harvests the trees.

This type of investment offers the best of two worlds … a land investment that appreciates over a long period of time, PLUS regular income from the produce.

Investors do have to wait about four years after their initial investment to start seeing proceeds. That’s how long it takes orange trees to mature and start bearing fruit.

Parcels start at 1.2 acres. For an initial $35,000 investment, clients get payroll for the Pfau’s workers, pest control, watering, and the trees themselves … and they never have to pay anything again.

Profits range from $5,000 to $12,000 per plot per year … and continue for 25 years, the span of the trees’ life. That’s a pretty good ROI!

Why agriculture?

“I like traditional real estate and still do it,” says Carsten. But the approach is very different. Marketing, financing, and selling are all different challenges.

The upside? “Here we can sell nation- and world-wide.”

“I like that I can lean back and choose when to stop,” says Carsten.

And he’s confident in the longevity of demand for his product. The middle class across the world is growing … and they’re hungry for high-quality food and water.

Whether you’re in Latin America or on the other side of the world, food is a fundamental human need. Succeeding in the food production business lies in getting the right scale.

The right way to do it is to find a pipeline of deal flow that will allow you to leverage your due diligence into MORE deals.

In many international markets, new technology and techniques allow forward-thinking investors to create massive economies of scale … allowing both syndicators and investors to get decent returns.


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Cover Your Assets Part 2 – International Structures for Extreme Protection

We live in a big world … one that offers benefits to those willing to step outside of their comfort zones.

In Part 1 of Cover Your Assets, we discussed domestic structures that can isolate and protect your assets in the case of legal trouble.

In Part 2, we’ll look at the bigger picture of asset protection.

We’ll discuss international asset protection structures and long-term wealth protection strategies … and we’ll also talk about what investors can do to protect their privacy and take advantage of tax laws.

It might sound complicated … but luckily, our guest Kevin Day is an expert in offshore asset protection and came on the show to simplify the topic for us.

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

  • Your world-traveling host, Robert Helms
  • His channel-surfing co-host, Russell Gray
  • Best-selling author and lawyer Kevin Day

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Trusts 101

Kevin sat down to chat with us in breezy Belize.

He points out that U.S.-based investors have to be on their A game … because in this country of extreme litigation, “A lawsuit is equivalent to a lottery ticket” … for the person suing YOU.

One way to protect your wealth from lawsuits? Trusts.

Kevin took us through a brief history of trusts in the U.S.

Trusts were formerly designed solely to transfer wealth from one person to another. Revocable trusts were invented in the 1930s to allow people to set up a way to transfer their estates … and make tweaks to the structure along the way.

It wasn’t until the 1980s that the U.S. allowed people to name themselves as the beneficiary of a trust for the first time.

These trusts allow you to segregate your assets … so you still have a decent lifestyle and you can reduce your liability.

“It’s a way to firewall the various parts of your life,” says Kevin.

Trusts are unique because they don’t have an owner … they exist independently from you. That’s why their lawsuit proof, says Kevin.

If you set up legal structures, including trusts, while the seas are calm, you’ll be able to handle the lightning when it comes.

And once you go through the process, you can pay more attention to MAKING money than PROTECTING your money.

Getting started

Although setting up trusts can seem tricky, it isn’t that overwhelming if you take it step by step. Investors should get started early.

Most lawyers don’t teach clients about inter-entity planning … but when Kevin gets new clients, he takes them through a step-by-step process to help them protect their assets.

Kevin starts by completing a liability assessment to see how much liability the investor holds.

He looks at what protections that investor already has in place. This includes projecting the investor’s future plans to develop a streamlined structure. Assets are divided into three categories:

  1. Zero-liability assets, like your cash portfolio.
  2. High-liability assets; for example, a company that has employees or uses third-party providers
  3. Assets that are in between, like real estate … high-value, high-liability assets are included here.

He uses these three categories to see how exposed clients are. He then checks to see whether investors are holding the proper insurance … usually a moderate amount.

After that, he works with the client to set up the appropriate structures that will provide the most protection in the simplest way.

Are you an investor wanting to get started with a trust? Kevin suggests building up to an offshore trust by setting up a domestic trust with decanting provisions that will allow it to move offshore gracefully.

The WHEN and WHY of international trusts

We asked Kevin when it was appropriate for investors to consider offshore trust options.

He told us that investors with a net estate of over more than 4 million … and that includes their home, business, and rentals … should absolutely set up offshore options.

That’s the point where all your creature comforts are taken care of and any extra money you’re taking in goes toward growing your real estate business.

Under 2 million, an offshore trust is not appropriate, simply because of the cost-to-benefit ratio.

Between that 2 and 4 million mark is where there’s some leeway. If you have a high-liability business, you probably shouldn’t go international. But if you’ve just hit a home run and you’re growing exponentially, then you should consider an offshore account.

Offshore options allow investors to lower their profile in case of a lawsuit, says Kevin. Lawsuits feel like blackmail … and what you look like from a public view will change the lawyer’s perspective.

Trusts can help you manage privacy concerns about how much of your wealth shows up on the public record.

Why is this so important? If you’re sued, there’s a discovery period where the other attorney can look at your assets.

Eighty percent of the time, says Kevin, those attorneys don’t look into how your assets are structured … and the other 20 percent of the time, they see international structures and think getting that money is more trouble than it’s worth.

Worry less with offshore trusts

Kevin says investors have three things to worry about:

  1. Taxation
  2. Privacy
  3. Asset protection

According to him, the great thing is that trusts help in all three areas.

Lawsuit protection trusts are tax neutral … and don’t rely on keeping secrets from the IRS. They also offer complete bars to anyone who wants access to your money.

What if you own property offshore? Americans who own foreign companies don’t have to pay tax until their income is repatriated. Setting up your income to be non-subpart F can be very easy, says Kevin … with the right professional help.

There’s no point in building up your assets without also protecting them so you don’t lose everything when disaster strikes.

Exploring your opportunities for asset protection means looking at offshore options.

So much real estate education is fun and aspirational. Asset protection is a down-and-dirty topic … but it’s SO important.

Being a real estate investor means dealing with real threats and the possibility of bad deals and mistakes. It’s essential to discuss what could go wrong … while everything is still going right.

That’s why we’re so glad to have an expert in offshore protection in our fold! We want YOU to know your options for asset protection so that if the lightning hits, you can have one piece of your business fail without everything else falling apart.


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.

Cover Your Assets Part 1 – Protecting Your Wealth Today and Tomorrow

An essential element of real estate investing is protecting the assets you’ve worked so hard to acquire.

When you’re just starting out, your investment business is pretty low liability. But as you acquire properties, the liabilities build up … and a legal problem with one property could cascade and affect your other assets if you don’t have the proper protections in place.

In this show, we’ll talk with a Rich Dad advisor on how to sort your assets into buckets so you NEVER lose everything at once.

Part one of this two-part series is for beginners and experienced investors alike. As John F. Kennedy said, “The time to repair a roof is when the sun is shining.” NOW is the time to put in place protections to keep you safe if troubles arise.

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

  • Your host, asset Robert Helms
  • His liability of a co-host, Russell Gray
  • Garrett Sutton, best-selling author and legal advisor to Robert Kiyosaki

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Firewall your assets

The society we live in is very litigious … and that’s not going to change any time soon. So what can investors do?

We talked to Garrett Sutton about precautions YOU can take to protect your assets as they grow.

Your best option, Garrett says, is probably an LLC, simply because they provide the best asset protection. An LLC allows you to firewall your assets so one lawsuit doesn’t set off a chain reaction that leaves you asset-less.

Why is an LLC better than a corporation? Besides better asset protection, LLCs offer more tax flexibility and charging order protection.

Charging orders are legal judgments that allow creditors to access the money you make through your business. But some states offer charging order protection to LLCs.

And, Garrett says, most lawyers prefer to go through insurance so they can collect right away. So ideally investors have two firewall protections … an LLC or corporation AND insurance to back them up.

Some states, like Utah, California, and New York, don’t provide great asset protection for LLCs. Creditors can blow through the LLC and force the sale of assets … not ideal.

What can you do if you live in a state that doesn’t have the best rules for entities? Garrett reminds us you DON’T have to form an entity in the same state as your property or your residence.

How to set up your own LLC

While setting up an LLC may sound onerous and difficult, Garret says it’s really not that hard. There are two main steps:

  1. Set up an LLC in the state you want.
    1. Pick a name and make sure the name is available
    2. File your articles of organization, operating agreement, and certificates.
  2. Transfer the title of your property into the name of your LLC. This is NOT a sale … simply a transfer.

While there are plenty of websites advertising do-it-yourself LLC help, it’s much better to talk to an attorney, says Garrett.

A certified legal professional can walk you through all the steps and help you understand which business decisions are right for you.

And, an attorney will help you stay aware of formalities … the easy-to-follow rules that will keep your LLC safe from legal troubles.

Fine-tune your asset protection strategy

Garrett is a best-selling author. His books on starting your own corporation or LLC cover the strategies and techniques YOU can use to increase wealth and reduce risk.

A technique SOME people use is changing their LLC from partnership taxation to C or S corporation taxation.

That’s fine, says Garrett … as long as you don’t forget to amend your operating agreement.

Business decisions as simple as tax changes have many permutations we don’t even think about … another reason an asset protection attorney is essential.

Other investors are looking into offshore asset protection trusts. Something some investors don’t realize is that more than 10 states have created onshore trusts. But while these trusts make your money bulletproof, recent cases have demonstrated that it’s only bulletproof in the state where you’ve set up the trust.

Although there are many tricks for upping your protection level … and your wealth … investors don’t need 17 layers of LLCs.

They also don’t need to spend a ridiculous amount of money to form an LLC. For example, a Wyoming LLC provides great protection levels, for only $50 a year (plus any legal fees).

And LLCs don’t mean you’re locked into operating decisions. You have the latitude to make changes. LLCs are flexible!

Interested in delving deeper into the legal realm of asset protection? Delve into what Garrett has to offer on his website.

And while Garrett provides affordable asset protection and legal services, that doesn’t mean you shouldn’t seek out your own legal help … just make sure the people you work with are serious about helping small investors stay on top of corporate formalities.

In part two of our asset protection series, we’ll delve deeper into the legal world with a discussion of offshore asset protection strategies. Listen in for info on taking your profits outside of the States!


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

The Market Detective – Uncovering Clues for Finding Great Markets

Across the country, real estate markets are hot … and getting hotter. That means compressed cap rates … which in turn mean a lower rate of return for investors.

So how can investors find a market that will offer great returns in good times and bad? In today’s show, we’ll discuss the market fundamentals that can make or break your next real estate investment deal.

Luckily, markets leave clues. If you’re an excellent market detective, you’ll be able to spot subtle indicators that will help you make an educated guess about the market’s future.

For this episode of The Real Estate Guys™ show, we recruited the best private eye we know to guide us through his analytical approach to investigating and choosing new investment markets.

You’ll hear from:

  • Your sleuthing host, Robert Helms
  • His clueless co-host, Russell Gray
  • Real estate developer and author Victor Menasce

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Stepping into new markets with Victor Menasce

Victor Menasce is the author of Magnetic Capital and a successful U.S.-based real estate developer. He’s a strong believer in the principle that the best markets aren’t necessarily the ones you live in … or near.

Instead of automatically going for nearby markets, Victor undergoes a thorough evaluation process for potential markets, whether they’re near or far.

One of the things we look for when we’re analyzing a new market is net in-migration … essentially, we want to know whether there are more people entering the market than exiting.

Metrics like these can help you predict whether a market will serve your investment goals.

For Victor, market evaluation begins with the most basic metric of all … supply and demand. That means choosing a market where demand outpaces supply.

He says investors should focus on three things when entering a new investment deal, in the order listed:

  1. The market.
  2. The team who has boots on the ground in that market.
  3. The specific investment opportunity.

If you perform due diligence on the market and the team and something doesn’t line up, then you need to step back and reassess … before you even look at specific investment opportunities.

Philadelphia market analysis

To model his process for market choice, Victor guided us through an analysis of one of his current investment markets … Philadelphia.

“You have to look on the macro level,” Victor says.

Like many large American cities, Philadelphia has a large low-income population. This is a benefit, says Victor, because it creates areas where high-priced real estate and low-priced real estate brush up against each other.

The key is to find the arbitrary line between high and low properties … and then move that line by creating value.

Another reason Philadelphia is so successful is because of its proximity to an overpriced, overcrowded market … New York City. Victor says he sees a lot of renters moving from the New York market to Philadelphia because of its relative affordability and proximity to the Big Apple.

Two other big factors Victor looks at are population influx and job creation and availability.

He also evaluates cap-rate compression. That’s how he discovered that he can build new for 25 to 30 percent less than he can buy used. “That’s a competitive advantage,” Victor points out. “We’re creating opportunity out of thin air.”

Another point of consideration is rental rate per square foot. In Philadelphia, Victor can charge between $1.50 and $1.75 per square foot … $1,200 to $1,400 per month for an 800-square foot B-class apartment.

Victor compares that to Raleigh, North Carolina, where the average rents average $1.15 per square foot, even for class A properties. That’s about $920 for the same 800-square-foot apartment, for context.

Although rents differ, the cost of building in Raleigh and Philadelphia is comparable. That’s why Philadelphia makes far more financial sense for Victor.

Victor also walked us through the process of finding a team in the Philadelphia market. “I only go to Philadelphia one to two times a year,” he says. He started by making friends with an active group of investors already in Philadelphia who had good connections to local contractors and businesses.

Then, he amassed property by buying land and derelict structures for “pennies on the dollar.”  

Lake Charles, Louisiana market analysis

Although big markets like Philadelphia generally make more sense for real estate investors and developers than smaller markets with fewer resources and infrastructure, Victor is currently investing in properties in a small town in Louisiana.

Why? The town, Lake Charles, has several compelling factors that make it a great place for long-term investing.

He walked us through his process of discovery and analysis.

Through personal relationships with people in the Louisiana real estate market, Victor came across Lake Charles, a town on the I-10 corridor.

The town is poised to produce 118 BILLION dollars of natural gas over the next decade … now that’s a staggering number.

Because of its increasingly important status as an exporter of natural gas, jobs and ancillary services are expected to increase over the next decade … and with that, the population is expected to keep rising.

With 48-50 billion dollars of construction in the works or anticipated, the population growth isn’t solely temporary workers, but also new permanent residents.

This is a town where skilled labor prevails, so the average household income is north of 90k a year … not the typical tenant profile. That means rents in Lake Charles average around $1.50 per square feet, even though it’s not a major city.

Because Lake Charles is growing so rapidly, it needs construction of all kinds. So Victor has dipped his feet into several markets, including workforce, family, and senior housing as well as medical offices.

It’s a lesson to investors … start with the market, then discover the needs and assemble a team to address those needs. Investors who go into markets operating only in a small niche may miss the best opportunities.

Why is Victor so confident in Lake Charles? “This is a town that has embraced heavy industry,” he says. He expects few obstacles to pop up as the town continues to grow. And he’s confident in his assessment because he has relied on folks who have their boots on the ground.

Treat real estate investing like a business

Victor has a pragmatic approach to market analysis. He’s logical and thorough and treats every investment decision like it’s a business decision.

We like to say that most people know a little about a lot, but Victor knows a lot about a lot. But he also knows his limits.

It’s really hard to be involved in more than a handful of markets at once … careful investors can’t do the kind of analysis Victor has done for Lake Charles for 30 markets simultaneously.

And Victor has spent the time to cultivate relationships with his teams in Lake Charles and Philadelphia. That’s important too.

We think Victor is a great resource for investors looking to take a careful approach to market choice and more. Looking for more real estate wisdom? Listen in to his Real Estate Espresso podcast, a 5-minute, interview-style briefing he puts out 7 days a week.


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.

Appraisals – Find, Negotiate and Fund Better Deals

Beauty is in the eye of the beholder … and in real estate, an appraisal is what gives you the unbiased, third party opinion on a property.

Appraisals happen whenever a lender is involved in a transaction, but that’s not the only time you’ll need or want an appraisal.

We’ll examine the three ways appraisers can evaluate a property, why you shouldn’t accept an appraisal as gospel truth, and how you can use an appraisal to SAVE money on your next deal

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

  • Your valuable host, Robert Helms
  • His admiring co-host, Russell Gray

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Understand what an appraisal is

Nearly everyone who has purchased a property has dealt with an appraiser. In most all cases involving a lender, an appraiser is involved.

A lender is one of several parties interested in the value of a property. The seller, buyer, and lender all have an interest in knowing about value for different reasons.

But, an appraiser has no vested interest in a property’s value, making them the neutral third party. However, even though they are neutral, it’s good to keep in mind that their appraisal is an opinion of value.

While lenders are often interested in an appraisal to check out the value of the home versus the loan, it’s a FANTASTIC tool for investors, too.

Appraisers can determine the value of a property based on future use. Depending on what improvements or changes an investor plans to make, the value of a property changes.

So, why would you need to understand valuation?

  • To secure a loan
  • To evaluate a deal
  • To understand your portfolio’s value

An appraisal doesn’t only happen when evaluating or completing a real estate deal. It’s a way to understand your portfolio and properties at any point along the way.

Decode the jargon

An appraisal has a very specific purpose. Its job is to solve a problem: what is the highest and best use for this? That’s the challenge.

Appraisers in many countries use the same methods and standards to solve this problem. The Appraisal Standards Board (ASB) develops, interprets, and amends the Uniform Standards of Professional Appraisal Practice (USPAP).

The appraisal report is created using a combination of three methods:

  1. Sales comparison method. Look at similar properties and what they’ve sold for recently.
  2. Capitalization approach (income approach). This is the value the property based on the income it generates. What are people renting for right now? Where else could they go locally? In some cases, there aren’t many comps to look at, so the income a property is currently generating might be more appropriate.
  3. Summation approach (Cost segregation approach). Look at the income from the property and ask: What would it cost today for the land, construction, and development? This is a way to appraise a large, one-off or unique building.

The appraisers job is to look at the value based on these approaches and to weigh them properly.

How to use an appraisal report

Since appraisal reports are a third-party opinion of value, they aren’t set in stone, and shouldn’t be taken as the gospel truth.

Once you know what goes into an appraisal report, you can think critically about them and extract the parts that are useful.

And, it can be a valuable tool for negotiation.

In some cases, if an appraisal comes back LOWER than the offered price, it’s appropriate to go to the seller and start with that valuation in the negotiations.

Or, if you’re planning to go in on a deal with someone else and need to split the property value later, an appraisal is that neutral party that provides the numbers.

As with any expert, appraisers have a WEALTH of knowledge, and it’s worth learning a little about their craft. Some appraisers have some impressive niches, including airports, commercial buildings, and even haunted properties!

If possible, try to be on-site for an appraisal and learn what the appraiser is looking for. All of this information feeds into your education and foundation on how to improve properties to get the best bang for your buck … especially in a refinance or a sale.

Appraisals are a valuable tool for an investor. Whenever possible, be sure to spend the money on an experienced, well-respected appraiser. Then, when you get your report, understand the value AND the limitations of a report as you make your important investment decisions!


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.

Save a Million Dollars in Taxes with Apartments

Death and taxes are the two things you can count on in life. But, there is no need to pay a penny more than you owe. And, while we talk a lot about ways you can grow wealth and do bigger deals faster, today we’re talking about how to reduce one of your biggest expenses … taxes.

With tax reform and other favorable policies for real estate investors, now is the time to look at your strategy and make some changes to reduce your liability.

This week’s guest did just that … he took a piece of advice from our Summit at Sea and turned it into a BIG win. After making a big apartment deal, he saved over $1 million in taxes across ALL his earnings.

Remember, we aren’t tax or legal professionals. We think you’ll get some great insight from this story. But, when it comes to your OWN personal tax situation, be sure to find a pro to guide you.

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

  • Your tax-wise host, Robert Helms
  • His tax-free co-host, Russell Gray
  • Guest, Brad Sumrok, apartment investor and coach

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Real estate investment returns are more than just cash

When we buy investment property, we most often look at the cash return. But, there are so many other benefits and things to consider when looking at a deal:

  • Cash flow. This is the big one. You want more income than expenses.
  • Long-term capital appreciation. The equity in the property gets bigger as the loan gets smaller.
  • Amortization. Every month you’re paying principal and interest, and your principal is decreasing.
  • Tax benefit. The government wants to incentivize real estate investment, and there’s a HUGE opportunity to reduce your liability.

Why look at your taxes now? For the first time since the ’80s, Congress has made significant changes to the tax code.

We definitely don’t suggest letting the tax tail wag the investment dog, but this year is the perfect time to dive deeper.

But, definitely don’t go at this alone. The best thing you can do is seek out an expert to guide you through these tax changes and give you the best advice for your specific situation.

Saving a million in taxes … it’s possible

Brad Sumrok is a long-time friend and a well-known player in the apartment investing space. He has thousands of doors and teaches students how to syndicate and buy into big apartment deals.

He also has an AMAZING story to tell about how he recently  saved big on his taxes.

“I had a goal in the past that I wanted to pay $1 million in taxes,” Brad said.

But, he recently realized that just because he was earning more, it didn’t mean he had to PAY more in taxes. And he learned how to look at real estate as more than just appreciation and cash flow but also as a way to reduce his liability.

But first, let’s talk more about the deal.

Brad was evaluating a deal for a 124-unit apartment building. The returns were on the lower end of what his threshold is, and he almost walked away.

But, after taking into consideration the tax savings earned from depreciation, Tom realized that a marginal deal was actually a fantastic deal.

One of the reasons this deal worked out so well was because of bonus depreciation. While apartment buildings have a depreciation period of 27.5 years, for certain improvements and components, you can take 100 percent of the depreciation in the first year you own a property.

Since the bonus depreciation wasn’t subject to passive loss limitations, Brad was able to use the depreciation loss to offset their total income … which meant he saved $1.2 million!

“It took a marginal deal and turned it pretty much into a home run,” Brad said.

Taking hold of a good idea

After you read Brad’s story, remember not to get too caught up in the numbers. Every deal and tax situation is different.

But, what Brad did was remarkable. He took a conversation he had with an expert at one of our events and put it into action.

What is the value of one great idea or one good relationship? You never know what you don’t know. Put yourself in a position to find that great idea and explore it.

Sitting in a seminar room, attending a webinar, or listening on a phone call will never be enough. Putting an idea into practice is what saved Brad thousands of dollars, earning the cost of his attendance at an event several times over!

If you want more exposure to new people and new ways of doing things, we invite you to attend Brad’s Apartment Investor Mastery National Conference on August 18.

The Guys will be there talking about apartment investing and it’s sure to be a valuable, exciting event. Register by going to the events section on our website or sending an email to bradconference [at] realestateguysradio [dot]com.

We hope to see you there!


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 Economy is Great Except for One Problem

As real estate investors, we’re always looking toward tomorrow. We’ve had a long, sustained recovery since the market crash in 2008. Many indicators show the economy is on the right track … the stock market is up, unemployment is down, and the dollar is strong.

So, what could be the problem?

We’ll talk about what we’ve learned since 2008 and how we’ve changed the way we look at the economy AND the financial system.

Learn how you can repair your financial roof now while the sun is still shining so when the next downturn comes, you’ll be in better shape to protect and grow your wealth.

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

  • Your weather-any-storm host, Robert Helms
  • His fair-weather co-host, Russell Gray

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Inspecting the financial foundations

From the outside, the economy looks like it’s in good shape. But, just like when you’re evaluating a house, it takes an expert to understand what shape the foundation is in.

While it’s easy to look at the structure and assume everything is going well, a failure to inspect the foundation could cost you dearly.

One of the most important things we learned from the 2008 market crash is the difference between the economy and the financial systems it’s built on.

In order to do that, we knew we needed top-notch inspectors. We changed who we hung out with and started to learn from economic experts outside of real estate.

They taught us about the cracks in the foundation and how we could better prepare for economic downturns. Because while we didn’t see the scope of the crash, there were experts who did!

Through serious study, we’ve learned that this is something that anyone can learn.

So, how did the investors who weathered the storm in 2008 do it? And how can we all be better prepared for next time?

Digging into debt

Our financial system is built on debt. The amount of debt on corporate and government balance sheets is staggering.

When consumer and business confidence is high, everyone borrows to consume more. Eventually, this leads to too much leveraging and over-allocated capital. And the higher the boom, the bigger the bust.

The Federal Reserve has tools in place to help smooth some of the dramatic rises and falls. When the economy slows, they lower interest rates to free up lending. As recovery builds, they raise rates to tighten and restrict lending.

For individual investors, one of the biggest problems was that our portfolios were built for perpetual sunshine. And while the next crash won’t necessarily look the same, there are plenty of similarities.

Shoring up your investments

Learning from the past means you’ll be in a better position to profit from the next downturn. Don’t let the good economic numbers lull you into doing nothing. Use the good times as a wake-up call!

  • Don’t spread your equity too thin. Make sure your deals make sense on paper and that you aren’t lowering your standards. The bigger your portfolio, the more careful you need to be and the fewer mistakes you can make before a market downturn tumbles all your holdings.
  • Keep cash on hand. Don’t over-rely on your credit lines for liquidity.
  • Have your foot near the brake. Keep an eye on your assets, credit, and future deals. There’s no need to panic, but be cautious and thorough.
  • Consider having some properties paid for in cash. If you have a property without a loan, it won’t be a target of or subject to the swings of the market.
  • Acquire recession-resistant real estate. Look for properties in the middle of the market where there’s nearly always demand. Also consider niche investments like long-term storage, luxury properties, or assisted living opportunities.

If you’re looking for a fantastic primer on the financial system, how it is the foundation for the economy, how to recognize the warning signs of a downturn and how prepare for it, check out our video series The Future of Money and Wealth.

We captured some of the best and most relevant information from expert financial minds in 20 sessions you won’t want to miss. The information in this series is a head start into understanding the underpinnings of the system and how to build and protect your wealth in a changing economy.

To learn more, send an email to future [at] realestateguysradio [dot] com.


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 – Cash Offers, Crappy Properties, and More

We’re back again to tackle the questions we missed in our last Ask The Guys episode. We love these episodes and the opportunity we get to talk through some of YOUR real-world investing opportunities and challenges.

We hear from listeners dealing with tenant damage and security deposits, 1031 tax-deferred exchanges, nontraditional lending ideas and TONS more.

First, the ground rules.

We talk about ideas and information. When you’re dealing with real money in the real world, you want to consult a professional. We don’t offer legal, investment, or tax advice.

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

  • Your problem-solving host, Robert Helms
  • His trouble-making co-host, Russell Gray

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Question: How soon can I move in after a cash offer, and how low can I go under the asking price?

Joseph in Tacoma, Washington, asked this question. The important concept to understand here is price versus terms.

Whether or not you offer cash or take out a loan, the outcome is essentially the same for the seller. What cash offers is a quicker payout with certainty.

But, this isn’t attractive to every seller. In some cases, a quick closing isn’t what a buyer wants at all, so the promise of quick cash won’t be an incentive.

When you’re negotiating with cash, make sure what you’re offering lines up with the seller’s priorities. A cash offer doesn’t automatically mean a 20 percent discount.

Question: I rehabbed a rental property in Detroit, and now I’m ready to sell. My tenant wants to purchase the property, but she has limited cash on hand. How can I find a lender to do the deal?

Wilbert in South Field, Michigan, brings us this question. He wants to sell the home for $38,000, but the appraisal came back at $20,000. That price gap, as well as the location has made it difficult to find a traditional lender.

The first problem is that many banks won’t do a loan for less than $50,000. If the lender is going to go to all the trouble to do the paperwork for a percentage of the loan amount, then the loan amount needs to be enough to get their attention.

Here are a couple alternatives for Wilbert to consider:

  • Find a private lender. This might mean a higher interest rate for the buyer. But, that higher interest rate will be more likely to attract a lender.
  • Be the private lender. Rather than finding an outside investor, work a deal with the tenant to have them pay the loan to you instead. If they pay off the mortgage, you’ve still had that steady stream of income. If not, you’ll get the property back to rent or sell to someone else.
  • Find a different buyer. If finding a private lender isn’t possible, consider finding a different buyer who is able to get financing or purchase the home for the price you want to sell.

Question: When a tenant in our out-of-state rental moved out, they caused a lot of damage. Why don’t tenants take care of their rentals better, and why are they surprised when they don’t get their deposit back?

Renters view their home differently than an owner. How else do you explain that it feels like no renter owns a vacuum cleaner?

Damage to property is part of doing business as a landlord. But, Lauren in Charleston, South Carolina, did a lot of things right. They documented all the damage with photos before the tenant moved out, had a third-party realtor do a final walkthrough with the tenant, and got estimates from contractors to repair the damage.

Here are a few other things you can do to deal with damage:

  • A picture is worth a thousand words. Take photos of the property BEFORE the new tenant moves in and get their initials on the photos. Then, when they’re ready to move out, you can use those photos to justify the cost of any damage.
  • Open up a pet policy. Many landlords are hesitant to allow pets in a rental. But, with a hefty pet deposit and even a little higher rent, you can come out on top.
  • Get a read on your renters. As you screen applicants, be perceptive. We’ve also known people who will meet with potential renters at their current residence to see how they treat their current space. This may not be possible for everyone, but get creative and thoughtful about how you screen new renters.

At the end of the day, renters are more likely to treat a rental home with less care than you do. Damage and repairs are a cost of doing business, so make sure you build that into your budget.

Question: I want to sell my rental home in California, and I’m interested in the 1031 tax-deferred exchange to buy a new property in Texas. I’m confused by the IRS form and want to know if this will eliminate my taxes in California?

Cindy in Fort Worth, Texas, is definitely an A student!

First of all, we want to be clear that with this kind of complicated tax question, you need expert opinion and advice. A 1031 tax exchange intermediary will be well worth the cost and can answer all your questions.

The intent of the 1031 tax-deferred exchange is that if you sell a property and then purchase another property, you can defer the tax. As you buy and sell properties, you can continue to defer the tax, but there isn’t a way to eliminate the tax completely.

Finally, try not to let the tax tail wag the investment dog.

Real estate offers many great tax benefits, which is one of the reasons we love it! But, when you’re dealing with real money and the IRS, you need a team of experts to guide you.

Life is short, and you don’t want to spend your valuable time reading an IRS form.

Question: How can I learn more and get coaching on real estate syndication?

Addie in Seattle, Washington, brings us a question that is near and dear to our hearts!

We recommend our Secrets of Successful Syndication seminar as your first step. Whether you want to be a syndicator and learn how to leverage money with a group of investors or invest passively in real estate, this is an event you’ll learn a lot from.

In this seminar, we’re teaching the strategies that have been a part of our investments for years.

We do have a coaching program, but you can only learn about it at the seminar during an OPTIONAL session after the two days are done.

If you want to register for the event and see if syndication is right for you, we’d love to have you!

Question: My wife and I have a real estate investment company with 23 doors under rent. We’ve found traditional lenders to be slow and cumbersome and want to simplify our lending process. How can we do this?

John and Karen in Troy, Ohio, are having trouble scaling their business because of lenders. They write that they’d be willing to pay a higher interest rate to make the process easier and more streamlined.

For traditional banks, the process is often necessarily slow. They need to do due diligence to make sure the investment is a good one.

Private capital is easier and faster, but it comes at a higher price. This can be done through syndication or networking to find interested investors. Make sure you’re well advised and working with big deals, and you’re well on your way.

We’d also suggest that with the rollback of some of the Dodd-Frank provisions, some of the restrictions on community lending have eased. If you haven’t checked in with your community lender recently, it’s worth getting to know them. They’ll get to know you and your entire portfolio of properties and could be a valuable resource.

Question: I wasn’t able to attend your events for the Future of Money and Wealth in Florida. But I’d sure love to get access to that information. How do I do that?

A listener in Hawaii wants to learn from the incredibly faculty we brought in to talk about how to keep up with the changing times in the economy.

This was a one-off event, and it was an incredible gathering of some of the best minds in a variety of subjects all focused on how to protect your wealth.

We recorded the event with a professional video crew and now have 20 different panel discussions and presentations available to watch.

You can visit the Future of Money and Wealth website to learn more or send us an email to future [at] realestateguysradio [dot] com. We’ll get you all the details on how to access these videos.

Question: My schedule seems to be always booked up by the time I hear about the Belize discover trips. Do you know the future trip dates for later in the year?

Tim in Silverton, Oregon, like many of us, has a busy schedule and needs to plan ahead!

To find out events as soon as possible and to get them on your calendar, get on our advanced notice list. Head to the events tab on our website. If you find an event there, and the date doesn’t work out, get on the advanced notice list and you’ll get an email letting you know about future dates.

Our next Belize discovery trip will be August 24-27, and registration is open now! We hope to see you there.

Question: What is the definition of a performing asset?

Matthew in Nacomin, Florida, asks us the shortest question in our inbox!

Simply put, a performing asset is something that puts money in your pocket. The more cash flow, the more equity. If you have something on your balance sheet that doesn’t put money in your pocket, it’s not a performing asset.

When you consider an asset you can go for a fat cow, a performing asset that will come at a premium but continue to deliver, or a skinny cow, a non-performing asset that needs some work to get it performing again.


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 – Single Family Rentals

In our final episode of our Profitable Niches series, we’re ending where many folks probably thought we would start … with single family rentals.

It’s no mystery why this is the most popular way for new investors to enter into real estate investing. Home ownership and single family homes are something that everyone knows well, and it makes sense to start with what you know.

When it comes to investing in single-family rentals, our guest this week knows her market inside and out and has some tips for picking the best deals that you’ll definitely want to hear.

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

  • Your singular host, Robert Helms
  • His family-friendly co-host, Russell Gray
  • Guest, Jean Gillen, real estate agent in Central Florida

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Why single family rentals make sense

It’s impossible to not interact with the real estate economy in some way. Whether you own your own home, rent, or have investment properties already, you’re participating in the real estate economy.

Single family rentals are a great way to enter into the market and interact as a beneficiary. So, rather than just paying rent or a mortgage, you can collect money from tenants. You’ll get cash flow AND build equity over time.

In the US economy especially, the single family market is given high priority by the government. There are incredible tax benefits and incentives given to people who own housing, even if they are renting it out.

After all, having affordable, accessible housing is an essential need and a key part of the nation’s economy.

But, single family rentals are also accessible to small-time investors or folks just starting out. They aren’t very efficient, so larger investors don’t have the ability to cherry pick individual listings. That’s how smaller investors can do the research to find great deals and still enter the market.

One of the first things we talk about with any kind of investment is understanding your investing philosophy. Then, build a top-notch team … a realtor, lender, and other experts. Finally, find the right property to buy.

Our guest this week is a realtor who specializes in investment properties. She knows all about the importance of building a team and finding investments that make sense.

The secrets of successful single-family rentals

Jean Gillen is a realtor in the Central Florida market. She helps investors get good deals. And, when you’re looking to build an all-star team to help with your investments, you want a realtor like Jean who knows what investors are looking for in a rental.

“The wonderful thing about selling to investors is that it’s all on a piece of paper,” Jean says. “If it doesn’t work out on a piece of paper, don’t buy it.”

One of the pitfalls some new investors and certainly new homeowners make is getting too emotionally attached to a kitchen or other part of a house. It can lead to decisions that don’t make sense on paper.

That’s why Jean works with the types of clients that she does.

“I like working with investors because I don’t have to please the woman or the man,” she says. “It’s more fun to find that great investment for people.”

In fact, Jean says she has clients she has never met, and they’ve purchased properties they’ve never seen in person. While this may be a paradigm shift, it goes to show that taking the emotion out of purchasing a property and seeing it as the investment vehicle it is can be a good philosophy.

One of the other things Jean sees as key to a successful investment is a good property manager. Jean has several management companies she works within her market and suggests her clients interview all of them.

“If you feel you can get along with the manager, then it’s going to make your life much easier,” Jean says. In many cases, your property manager will pay the taxes and HOA fees for you.

And, of course, finding a realtor who understands investment property is worth their weight in gold. They’ll be a valuable resource to find additional properties and even to manage current ones and solve problems with property managers.

Single family rentals in Central Florida

Single family rentals are all about the market. Find a strong market and the right realtor to guide you through, and you can capitalize on what single family rentals have to offer.

Jean specializes in the Central Florida market. She knows the streets and neighborhoods where clients can find the best deals. AND she knows the tenant demographics.

Even though Florida is known as being the place for retirees, she says, the average age of residents in Central Florida is 37. Many tenants today were homeowners before the economic downturn in 2008 and have decided they’d rather rent.

“These are just normal people. They could be school teachers or work in hospitals,” Jean says. “I rented a house to a doctor because he worked at a new hospital and didn’t want to buy for the first two years.”

Jean also prefers Central Florida because it’s landlord friendly. Thanks to Florida’s governor, more businesses are coming to the state and drawing in a larger workforce. It’s a hotbed of activity for aerospace, university students, and many other industries.

In fact, Jean says that home values in Florida are expected to rise 35 percent by 2021, meaning now is a good time to consider looking at the market. With new homes coming into the market by the end of summer, Jean is excited about the new opportunities available.

At the end of the day, Jean believes that the deals worth doing are the ones that make sense on paper. She’s put together a presentation on the Central Florida market including who is renting and how to find properties that will cash flow well. We’d love to send it to you!

Send an email to centralflorida [at] realestateguysradio [dot] com and you’ll receive it right away along with Jean’s contact information to learn more.


More From The Real Estate Guys™…

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

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