Goldman Sachs says it’s time for cash flow …

If you follow the financial news, you’ve probably noticed some talk about “the everything bubble”. Basically, it’s rising asset value prices for … everything.

We know that sounds great. At least as long as YOU own the assets BEFORE they inflate. When you do, equity happens to you and it’s awesome.

But until you sell, it’s only paper wealth. To get usable cash, you must relinquish the asset.

If you’re playing the buy low / sell high game … a bubble is a great time to sell.

Of course, selling means you pay taxes and fees.

Worse, you’ll need to buy low and sell high all over again … or eventually you and inflation will consume all your wealth. That’s not sustainable.

And if you’re trying to buy into a bubble, it gets dangerous. It’s easy to get fooled into chasing the market.

So how do you know the difference between a good buy and good-bye?

Two words … cash flow.

Wait! Before you ASSUME you know where we’re headed and wander back to the tyranny of all your urgent busyness …

there’s a BIG opportunity on the backside of this friendly public service announcement about the safety and stability of cash-flowing real estate.

Consider this headline, which appeared on the front page of two major news aggregators …

High-Dividend Stocks on Historic Discount as Yields Plunge, says Goldman Investopedia, 8/20/19

Goldman Sachs says some dividend paying stocks are super-cheap right now … even in the midst of an “everything bubble.”

What does that tell you about how paper investors have been thinking about income up to this point?

Seems like they’d rather buy unicorns like Uber or WeWork on hype … over proven companies with real earnings. Buy and hope a greater fool comes along to cash you out.

It’s been working.

But Goldman’s comments imply Wall Street is realizing the winds are changing. And in bubbles, when it’s time to sell, it’s a stampede.

So where’s the opportunity for real estate investors?

Goldman sees opportunity in yields between 4.3 and 6.8 percent … with the potential for equity growth.

Remember, Goldman is talking to stock investors who’ve been whip-sawed on the share price roller-coaster. They’ve been holding on for dear life.

But fleeing stocks for the “safety” of bonds has been a problem because bonds are bubbly too. That’s why rates are so low.

As of this writing, the 10-year Treasury is only yielding about 1.6 percent.

That means someone retiring with $1 million invested for income is trying to live off $16,000 a year. A year ago, it was twice that … which still wasn’t great.

Someone can be a millionaire yet have income below the poverty line.

Are they rich? Or are they poor?

Unless you think eating the seed corn is sustainable farming, they’re poor.

This is the problem facing thousands of people transitioning into retirement every day.

You may be thinking, “I could create over $100,000 a year of passive income with $1 million of equity in real estate.”

Yes, YOU could. But Goldman and their clients aren’t real estate investors.

So Goldman says it’s time to look for real income through dividends instead of share price hype.

They point out that dividend stocks are offering a much higher yield than bonds … plus some price appreciation potential.

Sound familiar?

That’s exactly what income producing real estate does.

Of course, real estate also provides arguably the best tax breaks of any investment, which dramatically improves after-tax yield.

Plus, real estate allows generous and affordable leverage, which can drive long term total returns to well over 20 percent annually … even based on conservative assumptions.

But there’s even more to the story …

The Wall Street casinos are fun when there’s a lot of air being pumped into the jump house. Asset prices inflate. Balance sheet wealth increases.

People FEEL richer. And on paper, they are.

But the jump house machinery is complicated. Sometimes it malfunctions.

And when asset price investors get spooked, they seek shelter in good old-fashioned income. For stock investors, that’s dividends.

The point is REAL wealth is INCOME, whether it’s dividend yield on stocks, or positive cash flow from rental properties.

We discuss this in detail in The Case for Real Estate Investing … and it’s an important concept to understand if you’re going to put together a resilient portfolio.

The fact that income producing stocks are relatively cheap at a time when unicorn companies are successfully going public while losing money …

… shows asset price investing can be intoxicating.

Goldman’s recommendation indicates investors may be sobering up as the punch bowl runs dry.

We think stock investors are likely to be interested in sound real estate deals.

And when Wall Street’s primary answer to asset price volatility is to simply hold on, they actually strengthen the case for real estate.

After all, if you’re going to buy and hold, the relative illiquidity of real estate isn’t much of an objection. It’s a small price to pay for stabilizing your portfolio.

And when it comes to building long-term income and equity growth higher than inflation, it really doesn’t get any better than income producing real estate.

The only real advantage Wall Street can claim is convenience. It’s pretty easy to open up a brokerage account and buy stocks.

Of course, the growing popularity of real estate private placements provides an option for busy people to partner with active real estate investors.

And when you consider the privacy and asset protection features of private placement investing, it’s probably well worth a little more work on the front end to get involved.

That’s why we think syndicating real estate is one of the best business opportunities of our time.

Millions of Main Street investors have trillions of dollars at risk in the Wall Street casinos … and they’ve been holding on for the long term.

But now, even the venerable Goldman Sachs is touting the benefits of buying equity for yield … something real estate does better than anything Wall Street offers.

But whether you decide to invest in real estate on your own, through a syndication, or as a syndicator

… headlines say the timing is right to focus on income producing assets to build long-term sustainable wealth.

Until next time … good investing!


More From The Real Estate Guys™…

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


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

Ask the Guys – Long-Distance Landlording, Property Management and More

Welcome back to an all-new edition of Ask The Guys!

Today, we’ll be answering listener questions. So listen in for our best real estate tips and tricks!

A disclaimer … we are not tax advisors or legal professionals. In our Ask The Guys series, we give ideas and information … NOT advice.

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

  • Your tipster host, Robert Helms
  • His tricky co-host, Russell Gray

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


How do I find a property management company?

This question comes from Lee, in Bay City, Michigan. He wants to know whether we have any advice for finding—and vetting—management companies.

He says he’s investing in his area, but the only management companies he can find are run by real estate agents on the side. He has a day job, and doesn’t have time to manage on his own … so he wants to find a reputable company that’s up for the task.

He also asks whether he should move out of his local area, since there aren’t many management companies.

We always say you should invest where the numbers make sense … but you also need to invest in places where you can find a great team.

In the long term, your property manager is the most important person on your team. So if there aren’t any great property management solutions where you live … perhaps it’s time to expand your geographic investing boundaries.

Start by refining your personal investment philosophy, then look for a market that both matches your goals and has the management companies to fill your needs.

You don’t want single-point failure. Make sure the company you choose aligns with your philosophy. Ask them, “Who supports you, and how?”

You want to make sure their compensation model is aligned with your best interests. In other words, when you earn money, they do too.

And choose your property management company BEFORE you buy your properties. They can be an excellent resource for finding properties and asset class types that will work well for both of you.

Remember, you can’t scale up without putting the right team in place. Getting a great property manager on your team helps you find the professional distance you need to run your business properly.

How do Section 8 rentals work?

Laura, from Naples, Florida, wants to know how Section 8 rentals work and how she can acquire affordable housing in her investment market.

First, a few things about Section 8. Section 8 is housing subsidized by the Department of Housing and Urban Development (HUD). But it’s administered by local public housing agencies, so it’s not always available and differs across the country.

Section 8 can be great because a portion of the rent is paid by the government. You basically have a guarantee you’ll get most of your rent on time, regularly.

But tenants in this housing can be a tough crowd … sometimes they don’t blend well with other, non-Section 8 tenants. For that reason, we like a property to be all Section 8 or none.

A great resource for learning about Section 8 is Mike McLean, who has published a book called the Section 8 Bible and has some great online resources, too.

Affordable housing can be a good place to be because of stagnant purchasing power … but make sure you’re playing close attention to the program from which funding comes.

And keep in mind … the devil is in the details. If you’re not managing the property yourself, make sure your property manager is well acquainted with Section 8.

Should I invest now, or later?

Casey, in Lehi, Utah, has been listening to the podcast, and now he has a pressing question.

Casey has saved up $100,000 to invest, but he wants to know whether he should invest now or wait until the market takes a dive. He mentions worries such as rising interest rates, an unstable dollar, and inflation.

Let’s start with a premise … markets will either do well or poorly in the future. We know that. We also know that when the market hits the bottom, you can only go up.

Real estate is a long-term, buy-and-hold business. But it is interest-rate sensitive, so you want to make sure you lock in long-term financing if you invest now.

It’s also good to keep some liquidity for if and when the market does go downhill.

Something we like to say is, “Opportunities are like busses. Another one will always come along … but you have to get on the bus at some point.”

The way we see it, Casey has a few options …

  1. Invest in things that are likely to do well, even when the market is bad, particularly mid-level rentals and below. There will always be demand for housing, especially mid-range housing.
  2. Invest in a forced equity situation … a neighborhood or property that has room for improvement, which you can force upward in value. This will help you mitigate downward pressure to the dollar.
  3. Invest in a bigger market … this provides stability, as these markets have more ballast during tough times.
  4. Step in on the debt side of the market by lending money to other investors.
  5. Work with an experienced syndicator who is more likely to get investments right, even when times are more precarious.

Remember, when you’re in property for the long haul, most of the time you’ll be fine. The key is to structure deals so you can weather the ups and downs.

Another thing to consider … the price only matters when you buy and when you sell. In between, it’s all about cashflow.

Real estate is one of the best inflation hedges if you structure the financing properly relative to cashflow … but you can’t fledge against inflation if you don’t do anything at all!

How do I create residual income with little savings?

Jeff, in Fountain Hills, Arizona, says he is in an interesting situation.

He doesn’t have any income, but he has enough cash to live on for 24 months. In the meantime, he wants to figure out how to create residual income that will pay for his living expenses going forward.

Jeff is looking at building a balance sheet of passive income sources.

But right now, he has time, labor, and energy he can put to work. And since he’s not holding on to a chunk of cash, the active investor route is a good one.

Some options …

  1. Force equity by fixing and flipping.
  2. Earn cashflow by fixing, holding, and renting.
  3. Become a syndicator and use other people’s money to make great investments. It’s our favorite way to go full-time, fast.
  4. Try wholesaling.

Basically, what Jeff needs to do right now is to build up his investment capital so he can start getting some cashflow.

But before he does that, we suggest he invest in education and build relationships. Get the right tools in your toolbox and the right advisors at your back before you go big.

Can you recommend turnkey management companies?

Keith hails from East Sandwich, Massachusetts. He recently bought a home through Mid South Homebuyers and is ready to buy another.

The problem? He’s on the waitlist at Mid South. In the meantime, he’s looking for another turnkey company that manages the houses it sells.

One disclaimer … we don’t know anybody quite like Terry Kerr at Mid South.

But we do know lots of other great folks.

The idea of a turnkey provider is that they do the whole thing … find the properties, get them in great shape, put tenants in, and manage the rentals.

But before you look for a provider, think about the type of property, market, and team you want.

Then go ahead and search our provider network for someone who can help fill your needs. We don’t guarantee anyone on the list, but we do promise we’ve spent a lot of time with them on the ground and have seen enough to trust them.

Should I attend Secrets of Successful Syndication now, or later?

Gene, in Boston, Massachusetts, is an investor who owns two duplexes. He wonders whether he should attend our signature Secrets of Successful Syndication conference now, or later in the year when he has more experience.

We’ve gotta say, we really think the key is for investors to come early and often.

This conference is designed for investors who already have a portfolio and are ready to take the next step.

But even if you’re just starting out, it’s a great way to get around what we call “evidence of success” and learn the power of networking.

Experience is something you can accumulate through other people. And syndication is all about having the experience to make good investment decisions.

So, for those who want to move forward, we recommend you start as soon as you can.


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!

Opportunity Zones – Reduce Taxes by Investing in Main Street

It’s easy to figure out where tax incentives lie in wait. Just study the tax code.

The latest version of the tax code introduces a new tax shelter … opportunity zones. But … what are opportunity zones?

In this episode of The Real Estate Guys™ show, we dive into what we know about opportunity zones … including three MAJOR benefits.

You’ll hear from:

  • Your opportunistic host, Robert Helms
  • His inopportune co-host, Russell Gray

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Opportunity zones: The basics

There’s a way to pay no tax on certain investments AND heal struggling communities. We’re talking about opportunity zones.

These new geographic tax shelters are encoded in the version of the tax code passed in 2017 … but they’re not totally finalized yet.

That doesn’t mean they’re not important … savvy investors will be absorbing all the info they can BEFORE opportunity zones go into action.

The idea of opportunity zones is to offer a tax-favored investment vehicle for people who already have capital gains in other investments.

Opportunity zones will be located in low-income communities ripe for revitalization … and will be located in every state in the U.S.

The fundamental purpose of opportunity zones is to encourage long-term investments in struggling communities.

Congress has established an incentive framework that is flexible and unique. This is essentially a new class of investment.

These opportunity zones complement existing community development plans. In essence, the project is treating the U.S. like a giant rehab project.

You’ll basically be moving yourself into a pre-identified path of progress. There hasn’t been a ton of incentive for investors to come into these run-down, lower income areas. But NOW there is.

The benefits of opportunity zones

Like we said earlier, the idea of opportunity zones is set, but the legislation is not in action yet. The appropriate documentation and legislation will be in place by the end of 2018.

So NOW is your time to prepare for the future.

There are definite differences between this opportunity and other investments. Generally, you’re required to pay tax when you liquidate capital gains.

But investing in opportunity zones provides three unique tax benefits. Before we get into those, we do want to clarify … this investment is only available for investors who already have capital gains from previous investors.

But not to worry … if you’re a newer investor who doesn’t have any capital gains yet, there are ways to get in on the action. We’ll get into those in the next section.

Now, the three tax benefits …

  1. You can defer your original capital gains tax for up to 10 years. As you probably know, it’s always better to defer taxes than to pay now.
  2. You also get a 10 to 15 percent discount on your original capital gains tax.
  3. AND …when appreciated capital gains are put into an opportunity zone investment, the gains you make from that investment are completely tax free.

There is a timeline. You have to sell the appreciated assets and invest the capital gains into one or more opportunity zone investments within 180 days.

But we want to emphasize … your capital gains from properties in opportunity zone areas will be completely TAX FREE.

No capital gains? How to invest in opportunity zones

The government has a goal here … they want to bring a ton of investment capital to certain areas and swing them around.

In that vein, there is a certain requirement you have to follow to invest in opportunity zones … there is NO tax incentive if you own property in an opportunity zone under your own name.

You have to invest in opportunity zones through opportunity funds.

If you don’t have appreciated assets, you may be wondering how you can start an opportunity fund and get in on this great opportunity.

There are a few options …

  1. Invest in an area near an opportunity zone. You’ll be boosted up by the wave of capital increasing asset values all around you.
  2. Invest as a syndicator. Set up an opportunity fund … and get other investors to contribute their capital gains.

This last point is something to seriously consider … especially when you start thinking about the stock market.

The stock market is hot, but it’s showing signs of faltering. People want to take their capital gains out … but they don’t want to pay taxes.

A fantastic solution? Opportunity funds.

All about opportunity funds

What does it take to put together an opportunity fund?

Opportunity funds do not have investment limitations.

They must be organized as a corporation or a partnership.

They do not require official IRS approval … the fund manager can self-certify the fund simply by submitting a form to the IRS.

The process is designed for speed. It cuts out bureaucracy … and brings locally driven change to areas that need it.

But it also requires investors to make REAL change … for example, one requirement we expect to see is that investors put as much into rehab and construction as they spent to acquire the property.

Opportunity zones mean sending money to the bottom of the market … and making the subsequent changes LAST for the long term.

For a map of tagged and categorized opportunity zones, plus more information, simply send us an email at opportunityzones [at] realestateguysradio [dot] com.

And don’t think this is the last you’ll hear about opportunity zones … we expect this to be a BIG wave in the real estate investing sea, and we’ll be providing more information to our listeners as this new opportunity develops.


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!

Halloween Horror Stories – 2018 Edition

Welcome to our annual edition of Halloween Horror Stories … real world accounts of real estate deals gone horribly wrong.

We’re honored our guests chose to share their horror stories with us. They also discuss what they discovered in the process … so YOU can learn what NOT to do.

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

  • Your spooky host, Robert Helms
  • His spooked co-host, Russell Gray
  • Investors Sep Bekam
  • Todd Sulzinger
  • Michael Manthei
  • Brad and Emily Niebuhr
  • Silvana Shull
  • Lane Kawaoka
  • David Kafka
  • and Ryan Gibson

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


The shot heard ‘round the neighborhood

Our first story comes from investor Sep Bekam. Sep bought a 36-house parcel and started making repairs and raising rents to market price.

But this made one particular tenant less than happy.

You see, the existing tenant was occupying two houses … one for personal use and one for their daycare business … and the rent raises meant they had to downsize.

But that’s life. Sep put a Section 8 tenant into the newly unoccupied property and thought that was that.

Six months later, he found out there had been a drive-by shooting. Turns out the Section 8 tenant had a teen involved in gang and drug activities … not the kind of thing you can find out on a background check.

The Section 8 tenant moved out shortly afterward, and Sep started the process of putting a third tenant in the house. But the old tenant … the daycare owner … still wasn’t happy. They started interfering with the leasing agents, trying to scare off prospective renters.

Still, Sep found a new tenant and everything seemed okay again … until about a month later, when the tenant heard loud shots.

Turns out the disgruntled neighbor had fired a paintball gun at the new tenant’s house … then told them about the previous drive-by shooting.

The solution … Sep made an agreement with the new tenants to put in a state-of-the-art security system so they would feel safe.

The takeaways … Crime sometimes happens, no matter how many safeguards you have in place. Sep says it’s important to mitigate the problem WHEN it happens so it’s not associated with the neighborhood.

And keep in mind, Sep has a portfolio of over 100 houses. He reminds investors to not get discouraged … these kinds of horror stories are the exception, not the rule.

The bankrupt builder

Todd Sulzinger started investing his self-directed IRA funds in 2011.

He found a developer building fourplexes who was looking for hard-money loans and decided to sign on.

A few months later, one of the developer’s major suppliers went bankrupt. And then … the developer went bankrupt too.

Because Todd was only in on a portion of the fourplex, he couldn’t foreclose.

The solution … Todd did his best to fight for the money held in the construction management company. Unfortunately, he never recovered all of his money, and what he did get back didn’t return until years later.

The takeaways … “Don’t do a hard-money loan on a fourplex,” Todd says. Know exactly where your money is going BEFORE you make a loan, and understand what will happen in a worst-case scenario.

Also, make sure you can foreclose on a property. And evaluate the risks of any loan or investments. If you’re unsure … ask questions. The vetting process should take time if you’re doing it right.

The mysterious doorman

Michael Manthei’s troubles didn’t start when he bought a 10-unit building in a rougher neighborhood … they started when he replaced one tenant with an older gentleman who seemed like a nice guy.

Soon after the tenant moved in, water started leaking from the apartment into the commercial space downstairs.

Then, there was a death in the apartment.

Turns out, the new tenant had been charging homeless people $10 to shower at his place. He let one woman stay overnight … and she overdosed and died. The man was even running a prostitution operation from the apartment.

The solution … “We kindly asked him to leave, and he complied,” Michael says. That wasn’t the end … the apartment was in bad shape and had to be gutted and cleaned.

The takeaways … Don’t trust your intuition more than the process.

Michael now makes sure new tenants complete an application, do a full criminal and eviction background check, and supply references and employment history before he will even consider them.

He considers that process an investment … on getting quality, long-term tenants.

The curious sucking sound

Brad and Emily Niebuhr do a lot of mixed-use deals. But in one property they bought a few years ago, things went terribly wrong.

First, there was the love triangle. One tenant had her boyfriend added to the lease … but a few months later, the boyfriend moved into the apartment of a DIFFERENT tenant.

But that’s not the horror story.

People started to hear lots of noise and banging … including odd sucking sounds … coming from the second tenant’s apartment. Then, water started to leak from the apartment into the commercial space below.

Turns out, the tenant and her new boyfriend had jaunted off to Alaska, but not before illegally subletting the apartment.

The subletter had an issue with the bathtub drain … but since he didn’t want anyone to know he was there, he was using a Shop Vac to drain water from the bathtub, sometimes as many as 13 times a day.

Even worse … the new subletter was allegedly a drug dealer who brought an unverified service dog onto the property.

The solution … Emily and Brad did a property inspection and gave the subletter notice, and he quickly moved out. They also fixed the drain issue.

The takeaways … If you couldn’t tell, Brad and Emily were managing the property without the help of a property management team. They told us that now, they wouldn’t go without one.

They also realized that investments are about more than the numbers. Even though the mixed-used property had amazing cap rates and returns, it was in a rural area, and they couldn’t find a property manager.

Although they finally have property management now, it took a lot of searching. “There’s a learning curve to the due diligence process,” the couple says.

When disaster strikes

In 2008, Silvana Shull had a successful business in Japan … a large retail furniture and interior design operation. She bought and designed a custom showroom because the numbers made sense.

But right after, the economy started to shift.

She was able to manage for about three years … until 2011 and 2012, when Japan was struck by a series of natural disasters, including tsunamis and earthquakes.

The operation was destroyed.

Silvana had to make a decision … cut her losses and try to rebuild, or close her business entirely and try to recover what she could.

The solution … Silvana sold the building she bought for less than 10 percent of what she originally paid. She shipped all her remaining inventory to Hawaii, where she eventually was able to sell everything … but the entire process took seven years of daily, dedicated effort. And she did it all while taking care of her two small children.

The takeaways … Running an international operation isn’t easy and requires a team. “I didn’t listen to advice and thought I could do anything,” Silvana says.

If she were to do it again, she would listen more and move slower. Although it’s impossible to control natural disasters, Silvana says it probably didn’t make sense to expand in Japan, considering she was living in Hawaii at the time.

The incredible shrinking IRA

Lane Kawaoka is a podcaster, like us. His show is called Simple Passive Cashflow.

He is also an investor who has made a few mistakes.

When he was starting out, Lane wanted to use his self-directed IRA to invest in a passive deal, but he didn’t know many people.

So, when he got a referral, he didn’t do much investigating. Lane invested $43,000 … almost his entire IRA fund … in a deal that looked pretty good on paper.

But then he started networking with other limited partners and heard the operator wasn’t the most scrupulous person. A year later, Lane got a letter that said his deal had gone south.

Lane was left with a property that needed $20,000 worth of repairs in a tertiary market with long selling times.

The solution … Lane wrote off the loss and eventually fire-sold the property. He was left with only $7,000 in his IRA fund.

The takeaways … “Don’t work with someone you don’t know, like, or trust. And don’t lose focus on building relationships with other peer investors,” Lane says.

Trouble in paradise

This story comes from an investor outside of the U.S. … David Kafka. David is located in Belize.

One day, David got a call from an employee. The police needed him to identify a body. Turns out, it was a client of David’s … he had just listed and sold her house.

There were some questions floating around about whether the client had actually wanted to sell, and David had the keys to her house. He was worried he might be a suspect. But he was even more worried about finding the actual killer.

The solution … Eventually, David ended up closing the deal. And he realized he wasn’t a detective and couldn’t solve the murder. He had to extricate himself.

The takeaways … Dot your I’s and cross your T’s, says David. When the unexpected happens, you want to put yourself in the best possible position.

Also, remember that sometimes bad things happen to good people … and that many things are simply out of our control. So, be compassionate and have fortitude, but keep your nose out of things that aren’t in your jurisdiction.

A red-hot deal

Our last horror story comes from investor Ryan Gibson.

Ryan invested in a condo-conversion development opportunity, converting an existing single-family home into condos.

He had great insurance … probably a little too much, he says. But that insurance came in handy when someone broke in and started a fire two months before the condos were set to be finished.

Ryan was on vacation in Hawaii when he got the call, but he had a local contractor on the ground who could help manage the situation.

The solution … Ryan immediately sent an email out to his investors. He also informed his lender, a bank, right away. And he submitted an insurance claim, which luckily covered the damage to the dollar.

The fire extended the entire process by about three months, but in the end, Ryan was able to offer his investors a return over 50 percent.

The takeaways … “If it can go wrong, it probably will,” says Ryan. So always be over-insured. And remember, “Bad news doesn’t get better with age.”

Be transparent and handle problems as quickly as possible … and make sure you have eyes and ears on the ground to help you out when times get tough.

How to handle a horror story

In stressful times, attitude plays a big role. But what really matters is asking the right questions:

  • What happened?
  • Why did it happen?
  • How can I resolve it?
  • What can I learn?

That way, you can turn your horror story into a learning experience that will help you be an even smarter investor.


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!

The Future of Interest Rates and More with David Stockman

We love talking about real estate. But, real estate is only a part of the sea of our economic landscape. Rising interest rates have a HUGE impact on real estate and the economy in general.

That’s why we are talking to one of our favorite former Wall Street and Washington insiders.

He tells us his take on the future of interest rates and the economy … and shares how YOU can capitalize on changing interest rates to make smart real estate decisions.

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

  • Your swimming host, Robert Helms
  • His sinking co-host, Russell Gray
  • David Stockman, former U.S. Congressman and best-selling author

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


The U.S. economy is a fantasyland

David Stockman is an expert not only in economic policy, but also in articulating and explaining complex topics in a way anyone can understand.

David’s political path began in college when he worked for a congressman and learned what it took to be a policymaker. He won an election to congress after the incumbent in his district retired.

Later, he was drafted to be a part of Ronald Reagan’s economic team. President Reagan appointed David as budget director, where he helped launch economic policies.

When it comes to economic policy, there are generally two schools of thought … Keynesian and Austrian.

“Keynesianism says basically that you can’t rely on capitalism to grow; you need the helping hand of the government,” David says. “We say get out of the way! The less government the better.”

And of course, limit borrowing and spending.

The other major factor in economics is interest rates … which directly affect home buyers and investors.

“Rising interest rates have historically told Congress to get its fiscal house in order,” David says. “It elicits a reaction in the country that says, ‘You’re crowding out investment that we need in the private sector.’”

But money printing and distortion of the capital market can cause major crashes like the one we endured in 2008. The subprime disaster SHOULD have been a wake-up call to the country.

In the 94 days after the crash, the Fed increased the balance sheet by 150 percent more than in the previous 94 years.

David says that put us on the path of crazy money printing and low interest rates … and has fueled more speculation.

Now, the Fed is trying to stabilize interest rates and has put the economy in a precarious position.

And there’s an important concept for today’s investors to keep in mind as they evaluate the economy … the recency bias.

“If you’re looking just at what happened yesterday or last year, you might lose track of the fact that we’re in fantasyland, and fantasyland is a dangerous place to be,” David says.

Essentially, the Fed realizes that they went way too far for way too long, and that they won’t be ready for the next big crisis. And the deficit continues to grow out of control.

Which means the next crash could be even bigger.

David says that for investors who are borrowing large sums of money to finance their investments, there’s no more dangerous time than right now.

He calls for prudent underwriting today, and keeping an eye toward the future.

Higher interest rates and lower property values are the types of problems that can erase yields.

“Debt can produce wonderful returns,” David says. “But, if you get caught blindsided, it can be a very dangerous thing to wrestle with.”

Shore up investments before the crash

While many pundits are talking about how robust the economy is, it’s important to listen to the people who are sounding the alarm. So, what can happen?

“If we have another crisis, innocent people will be hurt,” David says. People who lost in the dotcom bust and the housing crisis will have similar and possibly even bigger losses.

This time, the fed will not be in the position to bail out the system. And David says that perhaps in the next crash, the Federal Reserve will emerge as the real culprits of economic instability.

One of the big lessons is to stay educated and understand the fundamentals. You can turn a crisis into an opportunity.

What should a prudent investor be doing now to prepare for the next downturn?

“I think that the idea of cash-flow oriented investment is a sound one,” David says, “but the underwriting going forward will have to be more discriminating and careful than ever before.”

This is especially true for commercial investing. It’s important to ensure that tenants can continue to pay their leases.

Above all, David says that being a careful and prudent investor is a more secure place to be.

For investors who didn’t live through 2008 … or even if you did … you can learn from David’s expertise.

Want to learn more from David and keep up with his advice and takes on the economy? Send an email to Stockman [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.


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

Building Your Network and Credibility by Attracting the Right People

Real estate investing is a social endeavor. The more people you know … and the better those people are … the more likely you are to succeed.

But how do you turn your business relationship dreams into reality?

The secret to building relationships is alignment.

In other words, YOU have to bring value to the table to build strong relationships … and you want to seek out people who can bring value to you, too.

In this episode of The Real Estate Guys™ show, we’ll talk with a powerful connector who is an expert at helping folks nurture and build relationships.

You’ll hear from:

  • Your connected host, Robert Helms
  • His cantankerous co-host, Russell Gray
  • Kyle Wilson, promoter and brand builder

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


The three ingredients of strong relationships

Kyle Wilson has had the chance to work with a lot of great people throughout his career. Recently, he wrote a book about the lessons he has learned from them.

One of Kyle’s mentors and partners was entrepreneur Jim Rohn, who died in 2009. Jim said, “Success takes time, and the twin killers of success are impatience and greed.”

Today’s society wants instant success, says Kyle … but it takes time to do anything worthwhile, including building your network.

That doesn’t mean every relationship you spend time on will be great. A second lesson Kyle learned comes from Zig Ziglar, who said, “Never do a good deal with a bad guy.” It’ll never work out for the best.

We’ve got the first two ingredients … time and good people. The third ingredient of a successful relationship is value.

You need to BE a good partner before you can HAVE a good partner … and that means bringing value to the table. Solid relationships aren’t usually based on people just being nice to each other … they’re about value.

A good relationship or partnership should be win-win on both sides.

Dream big … and put in the time

Kyle shared another lesson from his book, 52 Lessons, with us. (Pssst … to read the book, simply click here for free instant access. Kyle is publishing the book entirely online, one chapter a week.)

He learned this lesson from Mark Victor Hansen, founder of the well-known Chicken Soup for the Soul book series.

Mark told Kyle, “We’re going to sell 100 million books.” Kyle didn’t believe him.

Today, the Chicken Soup for the Soul franchise has sold more than 600 million books.

Kyle calls the lesson he learned “stretching the rubber band” … Mark forced Kyle to think beyond what he thought was possible.

It’s essential to build relationships with people who can get you outside of your comfort zone and help you dream big.

To turn your dreams to reality, however, requires dedication, a lesson Kyle learned early in his career from success expert Bryan Tracy.

Bryan said, “Success is like getting a plane off the ground.” It takes a ton of fuel and energy to get that plane from the runway to the air … but once you’re at 300,000 feet, you can coast a little.

Kyle applied that wisdom to the beginning of his career. He spent the first two or three years putting in the hours … so he could reap the results later.

Most people spend their whole lives going 80 miles per hour down the runway and never breaking free from gravity. “That’s not efficient,” Kyle says.

Great relationships will propel you upwards

52 Lessons is a compilation of stories from individuals who’ve been through a defining experience and made the changes necessary to bounce them to success.

Kyle can share a similar story … he sold 7 million books as a publisher, then sold all his companies and retired in 2007 to become Mr. Mom. He even signed a non-compete.

Several years later, he wanted to get back in the game … so he used the knowledge he’d amassed to start a new publishing business. His first book was Passionistas, a book about millennial women hustling to make their businesses succeed.

Kyle says he’s able to leverage his experiences and relationships to create more success for himself and others around him. That’s one reason he loves attending our annual Summit at Sea™.

The Summit isn’t just about information, Kyle says … it’s about the people you meet and the relationships you build.

At some point, most investors will want to move from solo investments to syndication with other people. That’s where our Secrets of Successful Syndication seminar comes into play.

Most people attending that event already have half a dozen properties … and almost everyone has something they can offer to other investors.

It’s a way to put yourself in a target-rich environment.

Leverage social media

Kyle says that for the modern entrepreneur, online relationships are important too. “Whatever business you’re in, it’s all about building an audience.”

Whether that’s through a podcast, social media, an email list, events, or a combination, online networking might be your secret sauce to building a network.

Kyle says that for him, “It’s counterproductive to pay someone to do social media … it’s about the pulse.”

But whatever strategy you alight on, you have to be authentic about it. You can delegate the minutiae … but you should be the architect of your connection strategies.

And EVERY strategy you make should begin with the philosophy of bringing value to others.

Align yourself with others

As The Guys, we’ve built a successful brand and a network full of investing rockstars because we work to find common values.

If you’re looking to make connections, DON’T jump into a partnership right away.

Instead, do a deep dive to determine your own personal mission, vision, and values. Then you can determine whether others will help you advance your goals … and whether YOU can help THEM.

Not everyone you meet will offer that kind of win-win relationship.

If you’re looking for help figuring out your mission, vision, and values, come to our Create Your Future goal-setting retreat.

Discover the big picture of who you are as a person … and learn what you want, how (and how not) you can get it, and how to evaluate potential relationships.

Convert your passion … into action. And attract the right people into your life by removing uncertainty about what YOU want.


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!

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

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


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 – Agricultural Investing

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

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

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

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

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

Listen



Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


From beans to mug or bar … picking a crop

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Socially Sustainable Investing

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

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

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

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

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

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

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

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

Small-scale agricultural investing

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

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

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

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

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

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

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

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

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


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 – Real Estate Development

In this episode of our Profitable Niches series, we’re starting from the ground up. Inventory of homes is tight in many US markets, and returns are diminishing. Enter real estate development.

Our guest, Jay Hartley, saw an exciting opportunity to expand his business into the real estate development space, and he’s got a wealth of knowledge to share.

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

  • Your stately host, Robert Helms
  • His developing co-host, Russell Gray
  • Returning guest, Jay Hartley, real estate developer and property manager in Dallas-Fort Worth

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Beginning with the basics

One of the questions we ask in our seminars is which is more risky: buying an existing building and renovating or building from the ground up? The truth is, there isn’t a right answer to that question.

From inheriting problems in an existing property to building too much or building something the market doesn’t want, there’s a lot to consider when deciding whether to build or buy. The key is knowing the market, the demand, and the supply.

One of the most exciting things about real estate development is the number of entry points. Throughout the lifecycle of a property, there is value being added. Taking raw land from a zoned area to a lot with utilities and a finished building are all steps in the process.

For those who find themselves in a market with a lot of demand but a squeeze on supply, real estate development can be a FANTASTIC way to add more houses into the market, whether or not you hold on to that inventory long term.

Shifting your investment mindset

Jay Hartley is known as one of the best property managers in the Dallas-Fort Worth real estate market. He began like many investors with buying and renting fixer uppers.

Eventually, inventory started getting tight, prices escalated, and returns diminished. That’s when Jay took his first steps into development.

“We had to look at the marketplace and see where the opportunity would be to add inventory,” Jay says. “We started looking at acquiring vacant lots that were already in subdivisions and doing what they call infill.”

Infill meant building one or two homes on lots in subdivisions and then either renting or selling those homes to investors as turnkey properties.

It wasn’t long before Jay’s successful turnkey model got plenty of competitors and Jay took it to the next level. He utilized the economies of scale by getting into bigger developments and subdividing tracts of land. That’s also when he started building his network and expanding his education.

“I had some clients in the building business,” Jay says. “I took them to lunch and started picking their brains.”

Jay soon learned it was a smart idea to partner with a few builders early on. But then the key to sustaining his business was to keep his contractors busy with his projects so he didn’t lose them to other projects.

Real estate development doesn’t necessarily mean you’re the one swinging the hammer. In many ways, it’s orchestrating OTHER contractors and moving parts to complete a job. That also means managing labor.

“One of the biggest issues we’re dealing with right now is having labor ready and available,” Jay says. “If we don’t keep them busy, we lose that framer, we lose that concrete guy, we lose that roofer. We try to set them up to go to one job site to the next to keep them busy and on my job.”

As the deals got larger, Jay had to deal with the growth spurt in his business. He was always known as the property management guy, but had to shift his mindset as he shifted into real estate development. One of those moves was toward selling properties rather than buying and holding.

“I’m not afraid to sell them anymore,” Jay says. “I was a collector before, and it was tough for me to wrap my head around selling them.”

But, with some help and guidance, he was able to work through those mental roadblocks and scale up his business!

Get rich in a niche with a network

Rolling with changing markets is what makes an investor successful long term. Even though Jay was doing really well in property management, he saw a need for more inventory in the market. So, he became one of the people to create it! That has also set him up to know about lots of different types of real estate, and it’s another tool in his toolkit.

“It’s not about what I’ve done. It’s about who I’ve met,” Jay says.

Building a network of people with all kinds of unique backgrounds is a way to tap into their experience. Jay says you can take classes and watch videos, but watching flipper shows on television doesn’t mean you know how to flip a house. Partnering with people on a build job, however, is worth its weight in gold.

And that’s the essence of most development. It’s done through syndication and joint ventures. You can partner up with people who have the land, capital, or expertise you need, and you can put together a great deal.

Jay started out financing his own projects, but it wasn’t until he started tapping into syndication that his business really took off. He attended a few of our programs on syndication and sales, and they catapulted him into success.

“I’ve been in real estate all my life,” Jay says. “The training there, I didn’t think I really needed it. It was enlightening … it gave me the tools and the ability and the confidence to talk to clients and investors and pitch!”

Jay’s journey has been propelled by his ability to be ambitious and coachable. The ability to shift and adapt to new markets is how he keeps his skills sharp and his business growing.

If you’d like to learn more about real estate development and property management in the Dallas-Fort Worth market, get on the inside track with Jay. Send an email to dallasdeals (at) realestateguysradio (dot) com, and we’ll connect you with Jay and his expertise!

And, we hope to see you at some upcoming events. Secrets of Successful Syndication and How to Win Funds and Influence People are packed full of information that you won’t want to miss. Register now!


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 – Unraveling the Mysteries of Real Estate

It’s one of our favorite segments … answering YOUR real-world questions about real estate investing.

In this batch of mail, we run through where to start with syndication and investing to how to think about self-directed retirement funds and everything in between.

As a reminder, our show is about offering ideas and information, but we are not legal or tax professionals and do not give advice. Always see a pro for advice on your specific situation.

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

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

Listen



Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Question: I’m a real estate agent and would like to start investing for myself. How do I get started?

Kristen in Seattle, Washington, brought us this wonderful question. First of all, hats off to you for wanting to be your own best client!

Starting with the right education is so important and so is developing your network. You might consider joining an investment club, but you could also think even bigger and start your own!

Starting a syndication or investment club can be very successful if you surround yourself with the right people and experts. Here’s a few people you’ll probably want to include:

✓  A CPA to help with understanding tax benefits

✓  A mortgage broker to extract excess equity

✓  Other real estate agents … especially those with investment knowledge

You can convert your pursuit of education into a profitable business. Start by going to events with meetups and investment clubs. Remember, it’s not just the presenters who have a great story. It’s also the people in the seats. Make lasting connections with other attendees, and bring them into your network.

Question: Which materials … books and blogs should I read for getting educated in investing?

Our best advice to Luca in Croatia, who submitted this question, is to not just read a book … STUDY a book. Prepare your mindset to start thinking like an entrepreneur.

What does this mean? Find a group of people who are interested in investing, and get together and discuss a book.

You’ll learn by listening to what others have to say AND teaching different concepts. Repeat the process of learn, study, teach, and use these discussion groups to build your network.

Recruit people who are further along in the investment process than you to learn from them. You want to discover not only the technical aspects of what they do, but also how they think. Explore their mindset and examine how it makes them successful.

Question: I want to self-direct my retirement funds after I leave my job. How can I use this money to invest in real estate?

This question comes from Jason in Stokesdale, North Carolina. Some aspects of this type of investing can get a little tricky, so remember to always seek advice from a tax and legal professional.

For money that’s in a 401k from an employer, you might have access to what’s called an in-service withdrawal. You might also consider taking out a loan on your 401k.

As with any investment, make sure that the numbers add up, especially since there are important tax considerations to make when you’re investing borrowed money. This is also where a CPA will come in handy.

The vast majority of custodians do not allow for traditional investing and don’t charge a lot in fees and maintenance charges because they make a piece of what you’re investing in. Non-traditional custodians may charge more fees upfront because they do not make a piece of anything you invest in, but they can offer more flexibility in what you invest in.

If you want to know more on this topic, we have a couple reports that might be helpful on Qualified Retirement Plans (QRP) and Individual Retirement Accounts (IRA). You can get both of those by emailing QRP (at) realestateguysradio (dot) com AND IRA (at) realestateguysradio (dot) com.

Question: For those who don’t like all the work of real estate investing, how do you find a trusted syndicator?

Roy in Bridgewater, New Jersey, and Patrick in San Diego, California had similar questions about passive investing through a syndicator. They both want to break into the bigger real estate deals, but are worried about putting their money into the wrong hands. Syndication is a powerful tool that we’re big fans of here on the podcast, but vetting your syndicator is key!

First, look up all the info you can on your sponsor and know who you’re dealing with. Ask them upfront if there’s anything important you should know about them or their business, and then, go searching.

Referrals are a good way to get to know your sponsor. Careful Google searching (watch out for false information on the internet!) and looking up professional licenses and potential trouble with regulators are also essential before doing a deal.

Also, make sure their attorneys and legal documentation all checks out.

As we’ve said many times before … develop a relationship with the sponsor. Take the time to get to know them and the types of deals they do to make sure it’s a good match.

We’d love to talk to you more about syndication at our Secrets of Successful Syndication event on September 13-14. Register now!

Question: I have a commercial property near the end of its lease. Should I sell it or keep the passive income?

Colleen in Savannah, Georgia, has had a triple-net (commercial) property for 13 years, but the lease will be up in 4 years. She enjoys the passive income from the property, but wants to know if it might be time to let it go.

We discussed the advantages of commercial property in detail with Tom Wilson in our Profitable Niches series, and the longer leases and steady income are definitely big pluses!

Lease negotiation can happen before a lease is up, so that’s an option to make the deal sweeter for a potential buyer. But, here are a couple questions we would ask to determine if selling is the right choice:

✓  Knowing what you know now, would you buy it?

✓  If you did sell it, what would you do with the money?

Ultimately, the decision to sell or keep the property is up to you, but evaluating the lease with fresh eyes is a good way to keep your investments in line with your goals!

Question: How can I make some of my assets more liquid to prepare for an economic downturn?

Marty in Richmond, Virginia, has some real estate investment experience, but he’s concerned about a possible negative turn in the economy and how to protect some of his assets he’s received after selling a property.

We discussed the state of the economy and how to protect and grow wealth at great length in our video series: The Future of Money & Wealth. Take a look at that seminar for valuable insights from incredible experts.

To answer the question, if you think the market is going to downturn, you’ll want to play your investments differently. There are pros and cons for stock market investment and even bank investment, and they all carry different risks.

If you want something that is liquid and fairly stable in relation to the dollar, you could consider a couple options like currencies, precious metals like gold, or putting your money in the bank or a safe.

Some other creative strategies are looking into a private mortgage or note or even paying cash outright for a property. As long as you’re able to cover property taxes, having a property in a stable market is a good way to keep cash flowing in a down market. Even in a poor economy, people need a place to live.

Question: How many times a year is your syndication class given?

This was an easy one from Floyd in Las Vegas, Nevada. We do our Secrets of Successful Syndication podcast twice a year. The next one is coming up in September, and we’d love 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.

Next Page »