8/25/13: Build to Rent Investing – Healing America with New Homes

Are you looking for a win-win-win-win investing scenario?  Sure!  Why wouldn’t you?

But does such a thing exist in today’s U.S. real estate market?

That’s what we try to find out in this episode of The Real Estate Guys™ Radio Show!

In the studio for this holistic discussion:

  • Your host and Doctor of Discussion, Robert Helms
  • Regular contributor, the Godfather of Real Estate, Bob Helms
  • Returning guest, Texas investor and broker, Ron Black

What is one thing a tenant, landlord and property manager all have in common?

They all love a BRAND NEW PROPERTY!

Think about.  Obviously, the tenant would rather be the first person to walk on the carpet, cook in the kitchen and sit on the toilet.  (Okay, that was a little much, but you get the idea).

And once the tenant is in, as long as the rent makes sense, don’t you think she’d rather stay in their nice, new home longer?  Sure!

Of course, the property manager would rather not be hassled with a bunch of fix-it calls.  And obviously, a brand new property – especially one with a builder’s home warranty – is likely to have less maintenance than a much older home, right?  Duh.

Do low maintenance expenses make the landlord happy?  To quote Sarah Palin, “You betcha!”.  (We know some of you might not like Sarah Palin, but can you think of a more famous person who says “You betcha”?  We couldn’t either.)

We could go on and on, but you get the idea.  If the numbers make sense, new is better than used.

BUT…and yes, it’s a big one…when you can buy a used home for below replacement cost in so many markets, can the numbers make sense to build new?

Yes it can.  But not in every market.

So, as we often preach, the property isn’t the big deal.  It’s the market.  And though there are lots of great markets in the U.S. right now, there’s one that is at the TOP of the list when it comes to creating jobs.  Do you know which one? (Drum roll, please)  It’s….

Houston, Texas!

So when we saw Houston at the top of the jobs creation list (we already knew that 4 of the top 10 fastest growing cities in the U.S. were in Texas, including Houston), we got out our list finder (if you’re under 50, you have NO idea what a list finder is) and looked up our buddy from Texas Investor Homes, Ron Black.

Ron was kind enough to drop by the studio and share the latest and greatest on the Houston market and why the Build to Rent program he’s been developing is working so well.

It isn’t rocket science, but it’s easy to overlook if you’re not paying attention.  But that’s why you have us.  Our full time job (and a little bit more) is to pay attention, then bring nifty (another throwback word) ideas to your attention.

And we think this Build to Rent concept is one of the niftiness ideas.  We think you’ll agree.

So listen in to this discussion with Ron Black and if you dig it (yet another throw back phrase), at the end you’ll be rewarded with the secret key to accessing a special webinar Ron prepared for inquiring minds who want to know more.  Sound groovy?  (Oh, be-have. baby…)

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6/26/11: Cash Flow with Confidence Using Guaranteed Leases

Why do people put up with jobs they hate?  Or limit their upside opportunity and use only a fraction of their potential in their careers?  They want security – the certainty of someone else being responsible for making sure that paycheck shows up.

But there aren’t any guaranteed paychecks in real estate investing… or are there?

One of the many wonderful things about a crappy economy is that sellers become motivated to make concessions that would otherwise be off the table.  Just like an employer will take the risk of promising a paycheck to get you to work for less than you produce (think about it…employers don’t hire you to lose money), would a builder guarantee your rent to get you to buy so he can make a profit on the sale?

To find out, we invited a real estate broker friend of ours back into the studio to tell us about just such a program.

Camped out around the microphones, somewhere deep in the heart of Texas:

  • Your host and primary promise maker, Robert Helms
  • Co-host and chief promise keeper, Russell Gray
  • Special guest and purveyor of cash flow promises sure to delight every investor, Ron Black

If you’re a long time listener of the show, you know Ron Black has a knack for finding creative ways to help real estate developers and investors get together for everyone’s benefit.  Back when houses were selling like hotcakes, builders needed to get model homes up and open.  But that tied up a lot of cash in houses that couldn’t be sold until the very end.

So Ron set up a program where a builder would sell, then lease back, the model home to an investor at a very attractive price, which freed up cash to go build and sell more houses.  It’s the same reason a business would rather rent than buy the building they occupy.  They want more money in the business and less in the real estate.  They make more money in the business.  See?

Of course, those heady days of a happy housing market are but a dim memory.  Today, developers aren’t building houses “on spec” (build it and they will come), but instead they wait until it’s sold, then build it.  Except that even as safe as that sounds, the banks are still too afraid to provide construction funding.   Sounds like a problem.

Well it is a problem for the builder, but the builder’s problem is Ron Black’s (and his investors’) opportunity.

Ron’s creative solution is to organize private money to provide high-yield interim construction loans.  Builders can afford to pay a nice return because they only have the money for a short period of time.  Investors can get high yields without transaction costs and be in and out in six months or less.  They can even do it in their self-directed IRA and rollover 401k’s.  We did an entire episode on this topic, which turned out to be one of our most popular.  If you missed it, click here for immediate transport into The Real Estate Guys™ archives.

So what’s Ron’s latest creative solution?  Well, we don’t want to steal his thunder from the show, so you’ll have to listen in to find out.

Let’s just say if you like the idea of buying a brand new property (no deferred maintenance!) and having your rental income guaranteed for the early years, you’re going to LOVE this episode.  And if you’re a really good student and listen all the way through, you’ll find out how to access a free follow up webinar Ron created which provides even more information.  Enjoy!

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.

10/24/10: Big Profits without Wall Street or Tenants – How Private Investors are Making Money from the Financial Crisis

When an economy burns down, the landscape is charred and the financial food chain is disrupted.  Viable businesses starve for funding, while investors hunger for return.  The normal eco-system has broken down and sources of capital and investment opportunities aren’t where they’re supposed to be.  Everything is in disarray and the ensuing uncertainty breeds fear.

But it also brings opportunity.

Sadly, after an economic forest fire, most people focus on what’s burned.  They hang around the old Wall Street and banking feeding grounds, waiting for things to grow back and settling for low returns or grubbing for hard to find funding.

But others are able to find new pastures simply by looking past the beaten path and seeing where the new opportunities are growing green in more fertile soil.

We found a guy who’s doing something so brilliant that we decided to dedicate this episode to cultivating our understanding of his model.

Plowing through the conversation in the studio for this adventure in broadcast excellence:

  • Your show host and real estate Yogi, Robert Helms
  • Co-host and Boo-Boo bear, Russell Gray
  • The man with the Smokey voice, the Godfather of Real Estate, Bob Helms
  • Special guest, investor and real estate entrepreneur, Ron Black

A few episodes back, Ron Black called in and seeded our minds with the awareness that in today’s charred economy, conventional banking is failing to feed the needs of both savers and borrowers.  Interest rates paid to savers are too low.  Access to loans for consumers and business is too tight.  Even well qualified borrowers are having a hard time finding the funding needed to grow the economy.

For investors in the past, long term appreciation has proven to provide plenty of financial timber for building a strong retirement.  Just buy stocks and real estate, water them faithfully, and in time they grow into mighty oaks of equity.  But today, the economic forest has burned down – and while those who plant now will likely have some big trees in 20 or 30 years, what if you don’t have that much time?

For baby boomers, the last 10 years of buy and hold stock investing has been disappointing at best. The Dow hasn’t grown.  It’s even worse for retired folks trying to live on interest income when yields are low single digits.  When you’re living on interest, if rates go from 4% to 2%, you just suffered a 50% pruning.  Ouch.

When it comes to personal finance, conventional financial planning models are struggling to adapt. The whole system is designed to sell stocks and bonds through the Wall Street machinery and to park money in the banking system.  Then these “experts” take your money and (as we’ve all now sadly discovered) they do all kinds of risky things, most of which the average person doesn’t understand, can’t control and probably wouldn’t approve of.

Conservative individual investors have been gravitating more towards dividend paying stocks. These stocks are typically issued by big companies with solid profits (or at least as solid as they can be in a fragile economy).  With yields of 6-8% and the opportunity for long term capital gains, we understand that this looks “good” compared to whatever green shoots are peeking out of the charred landscape of traditional Wall Street offerings.

Of course, if times get tough for the dividend paying company, they may choose to reduce or eliminate the dividends.  Or, perhaps they’ll incur debt or distribute vital reserves to continue to pay dividends when they really can’t afford it.  If this happens, you can bet the stock price will drop, which makes an exit in favor of a better offering potentially expensive.  Buy high and sell low is not a winning formula.

What about high yield bonds? Money for top quality corporate borrowers is pretty cheap right now.  The best companies are sitting on piles of cash waiting for the economy to stabilize.  They hardly need to borrow and wouldn’t pay much to do so.  So high yield bonds are likely to carry substantial risk.  Plus, are you ready to trust the Wall Street credit rating agencies again?  You know, the ones that gave sub-prime mortgage backed securities a trip A rating?  We’d rather go for things that we can see and understand.

Then there’s high interest savings accounts and high yield CD’s.  But remember, today’s definition of “high interest” is maybe 3-4%. Whoopee.  Plus, the better rates mean locking the money up for years.

So the conventional investing trees are pretty bare right now.

The problem with the Wall Street model is that investors are too far removed from the actual investment and have so little security if something goes bad (does that really happen?), that even in the good times, it’s still risky.  The only reason it doesn’t feel risky is because Wall Street insulates you.  Plus, all the slick marketing is intended to make you feel like giving your money Wall Street and the banks is not only normal, but your only choice.

With so much retirement planning marketing built on the Wall Street model, most people don’t have any idea where to find another option – or even what it would look like.  And when they do, those Wall Street paradigms pop up and prevent people from seeing that low risk, high yield, short term, cash flow investments are possible in today’s market – specifically because the Wall Street systems have broken down.

In this episode of The Real Estate Guys™ Radio Show, our special guest Ron Black describes how he identified a void left by the breakdown of the traditional mechanisms for matching investors with yields.  Best of all, his model cuts out Wall Street and the banks (after all, they’re really just high priced middlemen) and gets the investor very close to their actual investment.

The bottom line is that double-digit high yields are currently available on short term, secured investments which are easy to access and understand. It’s something anyone can do in today’s market to supercharge their portfolios, whether seeking current income or long term growth of principal.  Think of it as Miracle Gro for your portfolio.

You’re gonna like this show!

The Real Estate Guys™ Radio Show podcast provides education, information and training to help investors make money with their real estate investments.

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