Flipping Properties for Fast Cash and Big Profits

Having a short path to cash is an essential survival strategy during economic challenges. For real estate investors, flipping a property is often a reliable way to create cash quickly.

But we also know … understanding a concept and being able to execute it well in the real world are sometimes two very different things.  

In this episode, we visit with a seasoned 7-figure flipper who opens up and shares the good, the bad, and the ugly of how to flip profitably in the real world.

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

  • Your flipping great host, Robert Helms
  • His flipped-out co-host, Russell Gray
  • Real estate flipping entrepreneur, Mike Simmons

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Flipping is a great path to short-term cash 

We often talk about the long-term ways to make money in real estate, but there are also opportunities to make money short-term. 

Today we’re going to tackle a topic that we don’t talk about often … the huge and amazing world of flipping real estate.

When someone goes through any form of crisis in business or investing, they should always know their shortest path to cash. In real estate, that means flipping a property, buying a property, and maybe wholesaling it … but essentially, short-term ownership to generate cash. 

When we see markets change … there are certain opportunities that are no longer on the table. With many not being able to make their rent or their mortgage payment … it might not be the best time to buy and hold a long-term rental house.

The great thing about flipping is that you’re in and out pretty quickly, and you can make money no matter what the market does!

We have some experience flipping houses … but we found that managing teams and trying to be strategic was a lot of work. 

So that’s why today we’re talking to Mike Simmons who is an expert in flipping real estate. 

How Mike Simmons became a flipper

Mike Simmons grew up in a blue-collar family in Michigan that was employed by the automotive industry. Mike believed growing up that his goals should be to get into a union … work for 35 to 40 years … work overtime … and hopefully have a little bit of time left for retirement. 

Mike says nobody taught him about the possibility of being an entrepreneur. 

Over time, Mike tried different jobs and career paths, but even when he was moving up the corporate ladder at a white-collar job … he realized that nobody was happy in those positions. He wanted to figure out how to get out of the rat race and find a better path to retirement. 

Mike eventually discovered real estate and knew it was the path for him. His first real estate deal made him $15,000, which was small but a great start. 

He also discovered rental real estate and wholesaling … he says 60 to 70% of his company now is wholesaling. 

Mike says, “What if I get sick or if I am in the hospital or something happens to me … how do I create a business that is run independent of me, but still is able to produce income? That’s what I’ve really gotten good at over the last handful of years.”

Mike says you can excel at the type of work you do … but he didn’t want to always be doing all the work himself.

It’s a totally different skill set running a company and leading and managing and inspiring and hiring and training people. He said he needed to learn to also be a good leader. 

There are lessons to be learned at every step. 

Mike says that on the first house he flipped, he picked all the things off the punch list he thought he could do himself and save time and money on.

But that can be detrimental if you want to really grow your business and flip more than one house a year. He says that takes more time and will result in greater “holding costs” like taxes, garbage, etc. 

Mike says: “What I know and what I’ve become great at is, I know what things should cost, and I know how long they should take. Those are the two things you have to know that will make you a successful house flipper that has the ability to scale.”

In Mike’s experience … what he has found as a house flipper is that when he brings contractors in to quote a job, they will forever try to give him more things that he should be doing … and it takes experience to know the difference between just trying to add to the cost of the renovation and what’s a legitimate suggestion. 

Mike says it’s so important as a flipper to educate yourself and understand what the contractors are doing on a functional level and then dial in the cost of it. 

Flipping lessons Mike has learned

Mike says when he was first flipping … on every house, he started from scratch, personally picking out paint, tile, fixtures, flooring … and he says this lack of process really kept him from growing. 

This is okay for someone doing one or two … but to really grow, Mike learned he had to have a solid system. 

Next, he learned from his mistake of not tracking numbers and watching what marketing worked and what didn’t with different houses. 

In the early stage of the pandemic in Michigan, his direct mail method stopped working because people didn’t want to touch their mail. So Mike had to adapt to other marketing strategies. 

Google pay per click … text blasting … ringless voicemail are some other options. 

Mike also suggests learning what a “release of lien” is. He learned an important lesson from paying a general contractor who did not pay subcontractors. It’s important to have everything in writing. 

With all the lessons learned and the team he has built … Mike now averages flipping 100 properties a year. 

What is level jumping? 

Imagine if you can use someone’s 20/20 hindsight as your foresight to know what you should be doing, and maybe just importantly, what you shouldn’t do? 

Mike learned to take his business to the next level, or maybe even “jump” a level … it’s all about surrounding yourself with people you can learn from. 

That’s how he has been able to grow so much after joining 7 Figure Flipping. He found good, quality people who give great advice that just helps others grow and realize their own goals. For all the great insights Mike has to share, listen to the full episode. For a free copy of Mike’s new book, email [email protected]


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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Ask The Guys – Choosing Markets, Tracking Trends and Calculating Cash-Flow

It’s a fan favorite … another edition of Ask The Guy for this episode of  The Real Estate Guys radio show! 

We take on lots of great questions from our fabulous audience, including how to choose a good real estate market … which important trends to track and how … one of the most important jobs of any real estate investor: calculating cash flow … and MANY more! 

Just remember, The Real Estate Guys don’t give advice… what we do is give you ideas and information and you then will sit down with professionals so you can get specific advice for your market. 

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

  • Your Know-It-All Host, Robert Helms
  • His Know-Nothing Co-Host, Russell Gray

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What Counts As Positive Cash Flow? 

Our first question comes from Frank in Winkler, Manitoba, Canada … Frank wants to know, if someone takes a mortgage out on an investment property using current home equity and the investment property just barely covers the expenses, is this positive cash flow? 

One of the basic understandings of investing in real estate is the basic income formula … where does the cash flow come from? You have income, which is pretty easy to calculate if you have a single-family home … and then you have expenses.

We say there are two sides: the math of being the owner and the math of the lender. In the United States … you can have a little negative cash flow on paper, and if you’re short, you can bring some of your own personal income to bear if you choose. 

The main point is … you need to make sure you have a comprehensive budget and go in with your eyes wide open. Owners should be careful when working with a negative cash flow … you might want to build that into your capitalization budget to have reserves to carry you until you can get it to where it needs to be.

Buying a Property in a Different State

The next question is from Mike in East Grand Fork, Minnesota. Mike says he owns three single-family homes free and clear and wants to buy a property in Arizona for a warm weather escape. He says he pulls in $2,000 a month in profit after expenses and is looking for any strategies.

First thing is … why would anyone ever sell a property that was putting $2,000 a month in their pocket? 

And the answer is, because you can re-allocate that to property or properties that might pull $2,500 or $3,000 or $5,000 a month in profit or you can move to a market you like better!

Assuming the owner is keeping the first three properties and likes the market… the obvious thing is to put a loan on them… take advantage of today’s low-interest rates… and redirect some of that $2,000 a month cash flow into what would be a down payment for the Arizona property.

The bottom line is … get together with your mortgage professional, find out exactly what loan programs are available to you based on your credit score, your balance sheet, the amount of equity you have in the properties where they’re located, and make sure this is somebody that can help you in both Minnesota and in Arizona.

Investing in Property in Another Country

Sean in Lima, Peru, says he and his wife are living there as teachers and plan to buy a home there, live it for several years, then rent it out as a long-term investment when they return home to New York or another destination. They secured a loan from a local bank in Peru, however, the interest rates are much higher than in the U.S. 

The short answer is … there’s nowhere on earth where we have found financing as favorable as in the United States of America.

Many people who buy in another country often turn to the ability to borrow on property in the U.S. and use those proceeds to buy a property in other places. That’s method #1. 

Method #2 … borrow locally. One of the reasons is that that loan and that creditor have nothing to do with U.S. credit or your tax returns and so often those loans are made locally by local banks who invest in the property … so it’s a lot less cumbersome.

There’s a whole other side to investing internationally … there’s the basis of law in the country, what property rights look like… what their expenses are … whether countries share a tax treaty. Just consider all those factors. 

Know Market Trends 

These next two questions are related. 

Victor in Ocala, Florida, wants to know how to pick a real estate market to invest in, and Al, from Richmond, British Columbia, Canada, wants to know … what drives real estate trends and what resources can help us follow the real estate trends globally? 

The trend is your friend. You need to understand what trends are in real estate.

Markets vary all across the world … so the big picture on finding market trends and discovering a great real estate market has to do with the suitability of the property, the viability of the income stream, and the age-old supply and demand question.

All things being equal … rents are strong where there is demand for people to live in places, and so as investors, we’re looking for places that have strong economies … favorable tenant landlord law … and good market metrics. 

Demand is based on people wanting to live there and their businesses wanting to live there. Supply is building … the ability to build … the ability of the marketplace to expand supply. 

Places like Manhattan and San Francisco can’t increase supply … so prices only have one way to go. 

For 23 years on the show we’ve said … live where you want to live and invest where the numbers make sense. 

If you’re going to invest somewhere other than where you live … then you do need to study the market and understand the direction.

A market could be really great and have a lot of jobs, but if the jobs are all tied to one or two employers or industries, that could be a risk. 

Our premise is that you can’t really pay attention to more than about a half a dozen real estate markets … maybe 8 or 10 if you’re a full-time investor.

You need to know your markets on a granular level as real estate investors. 

Ratio of precious metals in the portfolio

These two questions from different listeners are on the same topic. 

Jason asks, what should be the ratio between how much silver, gold, and income property one has? And Gary from Idaho Falls, Idaho, wants to know about what percentage of an investment portfolio should be in precious metals? 

We believe that before you’re a real estate investor, you’re an investor, and you better understand that “compared to what” factor. 

If you approach the idea that you invest in real estate to make money …  and you assume that those are dollars … then you need to know something about dollars and currency. 

If you really understand what money is, you’ll recognize that for thousands of years, gold and silver have been money … and it’s only been since 1971 that gold and silver have not been money. 

Gold and silver don’t make you money as much as they preserve your purchasing power, so that’s how they all fit together. 

It depends on what you’re trying to do … there is no magic formula. It’s more important that you understand what the role of these different things are in your portfolio.

More Ask The Guys

Listen to the full episode for more questions and answers. 

Have a real estate investing question? Let us know! Your question could be featured in our next Ask The Guys episode. 


More From The Real Estate Guys™…

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


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

Podcast: Flipping Properties for Fast Cash and Big Profits

Having a short path to cash is an essential survival strategy in any economic jungle. For real estate investors, flipping a property is often a reliable way to create cash quickly.

Of course, understanding a concept and being able to execute it well in the real world are sometimes two very different things.

In this episode, we visit with a seasoned 7-figure flipper who opens up and shares the good, the bad and the ugly of learning how to flip profitably in the real world.


More From The Real Estate Guys™…

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


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

Boots-on-the-Ground Market Insights: Atlanta, GA

Boots-on-the-Ground Market Insights: Atlanta, GA

September 2020

 

There’s no denying it … Distribution hubs are booming.

 

The real estate ecosystem is evolving and it might be in our best interest to evolve with it. We’ve had our eye on Atlanta for a while and in this interview, we hear why now might be the best time to act. The region has proven to be a strong distribution hub and COVID-19 has only accelerated the profits within the market.

In this Boots-on-the-Ground interview, Russell Gray, co-host of The Real Estate Guys™ Radio Show, talks with Chris Funk to get an update on how Atlanta is faring now that it’s home to a number of Fortune 500 companies. We gain insight on Build-to-Rent properties, and how they might prove to be among the best long term holdings. 

Topics discussed include …

  • Metropolitan Distance
  • Celebrities Flocking to Atlanta
  • Occupancy and Turnover Rate
  • COVID-19 Accelerated Distribution Growth
  • Inventory Issues and Solutions
  • Long Term Holdings and Profits

And SO MUCH MORE!
 

Simply fill out the form below to access this edition of Boots-on-the-Ground Market Insights: Atlanta, GA

 


High Return Turnkey Rentals in Affordable Indianapolis

In tough times like 2020 has brought, demand for affordable essentials goes UP. When it comes to real estate, it doesn’t get any more essential than residential.

Indianapolis is a hidden gem of a market … it is very affordable while still offering tremendous quality of life.

You will learn why Indianapolis is attracting nearby Midwesterners trying to escape high-price, high-tax states nearby! 

In this episode, we visit with our boots-on-the-ground guy Jeff “Shecky” Schechter and learn why he thinks Indianapolis is THE market to be in. 

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

  • Your high-return host, Robert Helms
  • His affordable co-host, Russell Gray
  • Our Indianapolis boots-on-the-ground correspondent, Jeff “Shecky” Schechter

Listen

 

 


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What Makes an Affordable Market

As a real estate investor, price is important. As you become more seasoned, it’s not the most important thing … but let’s face it, getting started is tough! 

One financial strategy in acquiring real estate has to do with finding markets that make sense …. the big picture is that income has to be enough to cover expenses and then some!

So you look at these markets that have appreciated over time like Northern California, the Bay Area, Seattle … places where the prices have gone up and up, and yet the rent doesn’t always keep pace.

Appreciation is one way we make money in real estate … but cash flow is how we hang on to the property, and so especially if you’re starting out, you want to find a good market where prices are affordable and the rents are strong.

As we’re sitting here in the latter part of 2020, we are on probably the front end or in the middle of the beginning of a pretty severe economic setback. Inflation is starting to show up. 

Your typical tenant is living paycheck to paycheck … and as people try to find a way to maintain a quality of life, to put a decent roof over their head to be in a decent community, they’re going to have to move around. 

So we look for places where the conditions are good or that are near a large, major population center … that is probably going to track people from those large centers into the more affordable marketplaces.

Many years ago for real estate trivia, we asked what the most affordable market was in America. It actually is the same answer today, and that is Indianapolis, Indiana! 

Affordability means that somebody can purchase a home and have the same utility and quality for the lowest price compared to what the average wage is. 

But then is there room for renters? Well, what we’ve discovered is in that market … people at lower incomes typically don’t have the ability to save up the 20% or more down payment it takes. 

So it’s a market where we see a lot of renters, and that’s great for landlords! 

Indianapolis also happens to be the neighbor of large markets that react differently than it does. 

We think if you’re looking for a place to buy an inexpensive property where the returns are going to be solid, this is certainly a good place to start. 

Get to Know Indianapolis 

When we were visiting Indianapolis last year, we loved that this place is clean, nice, has affordable houses, has a major sports team, and is the home of the largest sporting event in the world. 

We went on a quest, and that led us to our guest today … Jeff Schechter of High Return Real Estate from Indianapolis, Indiana. 

Jeff says things are going well in Indianapolis. While they are seeing a little bit of upward price pressure during COVID-19, investors are doing well and people are making money. 

First, we want to discuss the rental situation …. We asked Jeff how COVID has impacted people paying their rent in the Indianapolis market. 

He says that while there are some who have taken advantage of courts being closed, for the most part, his tenants have been great with paying, and he’s been able to work with those who could not. 

For those who don’t know the Indianapolis area, Jeff explains that it’s actually one of the biggest MSAs in the nation. 

He says, “We do see quite a bit of change in Indianapolis over the last few years; it has been going through quite a renaissance, so we’re seeing a lot of really great old commercial buildings being changed over to different use. We’re seeing new apartments going up or seeing a lot of those old beat-up homes being redone; I’m in one myself.” 

Having local market knowledge is huge … Jeff explains that over the four years he’s been working in Indianapolis, he’s seen a lot of improvement in many areas of the city. 

What about appreciation in the Indianapolis market? 

Jeff says, ”The last couple of years, especially in certain areas, we’ve seen some pretty significant appreciation.” 

But while that is exciting … he says it’s also a double-edged sword because the more that the price pressure happens, the harder it is to make the price to rent ratios work.

Indianapolis is Affordable for Everyone 

The premise of the show today is about an affordable market … so we ask Jeff to give the listeners an idea of what a typical house might cost.

Jeff says, “I’ve got one property right now that is under $50,000that’s for the whole house. Most of the sweet spot of what we do would be probably in the 60s to high 70s.”

Wow … now that’s AFFORDABLE! 

When it comes to rehabbing these properties, how does Jeff decide what needs to be done? 

Jeff says that’s actually one of the easiest parts of his job. 

Every week he meets with his acquisition crew, and they decide what properties they should go for. 

The key is in the relationship with the crew chief who gives them an initial assessment … and they have a great checklist and system for deciding what materials to put in the house. 

Next, we ask Jeff what tenant/landlord law is like in Indianapolis … and you’ll be happy to learn that he says laws are in fact very favorable for the landlords in Indiana. 

Compared to other states, it’s a great situation for investors and landlords. 

What about property management for those who live far away from their investment properties? 

Jeff admits that’s been one of the most difficult parts of the business for him … and we agree that it’s hard to find reliable and trustworthy people in property management. 

But Jeff found the right solution in a new property management company that wrote their own software and proved themselves. 

He says he’s happy with how they work. He doesn’t want to have to be the best at everything! 

Bottom line …  if you haven’t yet really taken a look at the Indianapolis market, there is a lot to learn. Jeff has put together a great report available to you AT NO COST! You will be able to learn why it’s a great investment market. 

For all the great insights Jeff has to share on the Indianapolis market … be sure to listen to the whole podcast. 


More From The Real Estate Guys™…

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


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

Podcast: Ask The Guys – Choosing Markets, Tracking Trends and Calculating Cash-Flow

We take on lots of great questions from our fabulous audience, including how to choose a good real estate market … which important trends to track and how … and one of the most important jobs of any real estate investor, calculating cash-flow … and MANY more!

So tune in for another exhilarating edition of Ask The Guys!


More From The Real Estate Guys™…

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


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

Podcast: High Return Turnkey Rentals in Affordable Indianapolis

In tough times, demand for affordable essentials goes UP. When it comes to real estate, it doesn’t get any more essential than residential.

Indianapolis is a rare major metro which is very affordable while still offering tremendous quality of life.

It’s no wonder Indianapolis is attracting nearby mid-westerners trying to escape high-price, high-tax states.

In this episode, we visit with our Boots-on-the-Ground guy and talk high return turnkey rentals in Indianapolis.


More From The Real Estate Guys™…

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


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

Principles for Building a Successful Brand and Database

To profit in real estate you must attract the right opportunities and do the right things. 

Too many investors put all their focus on how to do deals … but they neglect the HOW of attracting people and opportunities. 

Business has proven principles for building a brand people like and trust … and for building a database full of the active and prospective sources of deals, capital, and services you need to succeed. 

Today, we’re visiting with a world-class marketing genius to discuss how to build a profitable brand and network. 

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

  • Your successful host, Robert Helms
  • His unprincipled co-host, Russell Gray
  • Marketing legend, Kyle Wilson

Listen

 

 


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Building your brand and your network

Why is it that some real estate investors are so much more successful than others? It boils down to habits of success. 

The good news is that these are learnable skills … and we’ve got a great guest who is going to share some awesome ideas about how YOU can connect the dots to get your message out there. 

How do you market? How do you brand? How do you build a reputation? How do you work through other people?

Where a lot of real estate investors fail is they think success is about the transaction. They think it’s about the numbers. They think it’s about due diligence. 

Those things are important, but in any business, none of that matters if you aren’t building your brand and building your network. 

How people know you … how they think about you … how they feel about you … determines whether or not they move closer to your circle and bring you opportunities. 

Those relationships are the key to having a great business … which we know is just as true for real estate investing as it is for any other venture. 

Tactics vs. principles

Our guest today has an amazing background. He’s probably the best-known guy in the personal development world that you’ve never heard of. 

Kyle Wilson has more than 10 number one Amazon bestseller books and has been business partners with the legendary Jim Rohn for … but before that he owned a service station in Vernon, Texas. 

“I grew up in a small town, never went to college, and eventually owned this service station, but at age 26 I moved to Dallas looking for a new opportunity,” Kyle says. 

Kyle went to a seminar and ended up working for the speaker selling tickets to events. He then struck out on his own hosting events, which is how he met Jim Rohn. In 1993, they went into business together. 

The key is that Kyle was marketing before there were modern marketing tools … like the internet. 

Today, people think that marketing means they have to be online … but marketing principles have been constant for decades. 

For example, what’s easier … a referral or a cold call? Obviously, a referral is better. 

Kyle says he thinks of marketing as a wheel … you’re the hub, and each spoke is one of your different products or services. You want to get people on the wheel and take them around. 

It’s the mentality of hunting versus farming. You can try to hunt people down for a one-time opportunity, or you can try to grow and nurture lasting relationships for many opportunities in the future. 

The first big principle is having a great product. Second is having great service. Third, is being consistent and relational over a period of time. 

“People confuse tactics with principles, and so they put all their money and effort into tactics and ignore the principle side. But if you have a great product and great service and connect with people over and over, you’re going to watch your business compound,” Kyle says. 

In real estate, people who churn through clients aren’t really interested in taking care of people long term … but if you are watching masterful agents, they keep in touch and do so much better. 

Strategies for success

One strategy anyone can use is to create platforms where you can make connections … things like podcasts, seminars, email lists, and more. 

“I think the way you take responsibility for your own business is that once you get a customer, you want to keep them, and you want to communicate with them,” Kyle says. 

Remember, it takes people time to engage. 

We have people show up at our own events who just found our podcast two weeks ago … and we have people who have been listening for eight years and just decided to take the plunge. 

You want to get those people on your platform. Get them on your list so you can talk with them and interact with them. What you communicate to them is the biggest thing in your control. 

“My ultimate goal is to get someone’s contact information so I can follow up. If you lose track of people, that’s throwing money away,” Kyle says. 

There are certain things on your “marketing wheel” that are designed to bring people to you. 

That could be a newsletter. It could be that you send out cool articles from other people. It could be a podcast like ours, or it could be that you’re doing a YouTube video once a week. 

Whatever it is, you’re sharing something. 

You don’t have to share with the mind to sell a specific product. Instead, simply think about creating value for these people. 

Once you have built an audience and are sharing with that audience, then you can periodically give them the opportunity to say yes to something … but you’re not having to constantly sell. 

If you build an audience, then you can attract talented thought leaders. They need an audience to talk to … and they might want to do business with you. 

For more on principles that build a successful brand and database … listen to the full episode!


More From The Real Estate Guys™…

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


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Delaware Statutory Trusts — A Powerful Tool for 1031 Tax Savings

Real estate investors LOVE the 1031 tax-deferred exchange. 

But when you want to exchange your equity into a partnership so you can get into bigger, better deals in new markets with professional management … a 1031 comes up a little short. 

A great solution? Delaware Statutory Trusts. 

Even though they have been around for years, many investors don’t know about this powerful investment tool. That’s why we are talking with a syndicator who knows how to use this strategy to keep your equity compounding. 

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

  • Your powerful and trustworthy host, Robert Helms
  • His tool of a co-host, Russell Gray
  • Delaware Statutory Trust organizer, Paul Moore

Listen

 

 


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Building on the 1031 exchange

One of the things we have to manage as real estate investors is our tax liability. We want to pay as little tax as possible, but we also want every tax advantage we can get today. 

Today, we’re going to talk about a relatively unknown technique that’ll help you preserve tax and make more money. 

There is a strategy behind how and when you change assets. If you sell a rental house after five years, you’re going to do something with the proceeds. 

In this episode, we’re talking about a structure that doesn’t get talked about enough, because it allows people some really great benefits. 

As always, we are not tax professionals. We don’t give advice … but we will share some ideas and information. 

One of the great tools we have to repurpose and reposition wealth is a 1031 tax deferred exchange. 

People talk about this strategy as a way for an individual investor to avoid tax … but it has been more difficult for syndicators. 

How do you implement this strategy in a group investment? 

Solving that problem has been really difficult … but there have been some new innovations in terms of the way people are using some of the structures available. 

What is a Delaware Statutory Trust?

Paul Moore from Wellings Capital is a syndicator who specializes in some great asset classes … but he has also helped unlock the key to a new chapter of 1031 investing. 

“The 1031 exchange is great. When the 2017 tax law came out, we were all concerned that maybe they were going to take it away, and they did for almost everybody except real estate investors,” Paul says. 

As real estate investors, we are really fortunate that we were able to keep the 1031 exchange. It gives us great leverage and the ability to compound tax deferred. 

And … you could even swap till you drop and never pay capital gains or recapture tax. 

But even with all the advantages of a 1031 exchange … it’s really hard if you want to go from an active manager to a passive manager. 

Paul says over the last three or four years he has had many people call him with 1031 exchange money that his funds couldn’t help. 

They were frustrated and his team was too. 

The last thing any investors want is to see other investors give up and pay taxes or invest in something that they might not have otherwise just to avoid taxes. 

So, Paul started looking into the Delaware Statutory Trust … an ownership model in which a legal entity allows people to buy fractional interest in a property and even diversify among several DSTs. 

This takes away the time pressure, the negotiation, and the management hassle of the 1031 exchange. 

It also gives direct ownership … which means that the replacement property is going to flow the tax deferrals to the individual investor. 

Now let’s be clear … it’s a Delaware trust … but the property doesn’t have to be in Delaware, and the person doesn’t have to be in Delaware. 

The beneficiaries are actually the people who buy the fractional interest, but the professional manager who runs it takes on all the hassle. 

A DST also allows the 1031 exchange investor to get a stabilized, predictable return. 

Another benefit is the ability to slowly transition your portfolio over time into bigger and bigger projects under the watchful eye of professional management. 

In a nutshell, the Delaware Statutory Trust allows people the same benefits of a 1031 exchange … but rather than investing in a specific property, you’re investing alongside other folks. 

One big downside to the 1031 that does carry over to the DST is the debt rule. 

If you’re investing $100K and you have 40% debt and 60% equity, you have to have that same percentage in the new investment. 

If you don’t, you just pay tax on the part that’s out of whack. But you still have to pay some tax. 

Types of properties for a DST

The return and the income model for the investor will depend on the property itself. 

What are the range of types of properties that make sense for Delaware Statutory Trust operators to consider?

For a long time, the most popular properties for DSTs have been things like triple net leases … a long-term lease that delivers predictable income. 

But now, DST providers have also gone into multifamily. There are self-storage DSTs. There are even mobile home park DSTs. 

The important thing is to have a stable, predictable, passive income. If the property isn’t generating something that’s predictable and stable, it will throw off the DSTs. 

But, that’s why investors can expect a set return. 

For more on 1031 exchange and Delaware Statutory Trusts … listen in to the full episode!


More From The Real Estate Guys™…

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


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Podcast: Principles for Building a Successful Brand and Database

Profiting from real estate investing is the result of attracting the right opportunities and doing the right things. Many investors focus on how to do deals but neglect the how of attracting people and opportunities.

In any business, real estate investing or otherwise, there are proven principles for building a brand people like and trust … and a database full of active and prospective sources of deals, capital, and services necessary to succeed at a high level.

In this episode, we visit with world-class marketing genius Kyle Wilson to discuss how to build a profitable brand and network.


More From The Real Estate Guys™…

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


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

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