Finding High Yields in a Hot Market


Everyone loves a hot market! But hot markets have their disadvantages. 

When markets heat up … prices go up … and yields go down. 

But that doesn’t mean investors are stuck. 

There are things you can do to adapt and keep cash flow up … without having to change markets. 

We sat down to chat with our good friend John Larson to find out how he has made the most of one of the hottest markets in the last ten years. 

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

  • Your heating up host, Robert Helms
  • His hot-head co-host, Russell Gray 
  • Managing Partner of American Real Estate Investments, John Larson

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Adapting in a hot market

Dallas, Texas, has been a hot spot for real estate investors for the last decade. But .. like any market … the tide is starting to turn. 

After 2008, the rules of the market changed. 

Dallas stood out because it had not one … not two … but multiple drivers. 

It had population. It had education. It had transportation. It had a business-friendly environment, low income tax, medical finance, tech distribution … it was the whole package. 

It ended up being the best real estate market of the past ten years … and it’s not over yet … but yields have changed a lot. 

So, what’s an investor to do?

As Managing Partner of American Real Estate Investments, John Larson has had to adapt to the changing Dallas market. 

Many people knew John and his team as the Turnkey Single Family people in Dallas … but his company has had to change what they do while maintaining the big picture of WHY they did it. 

Debt syndication and using your retirement to make money now

John says that the Dallas market is hotter than ever … but in 2017, the cap rates on the single family homes started to get compressed. 

“You can only push rents up so far,” John says. “The values of homes kept going up because of the demand, so property went up as well.”

John says his investors came to him primarily for cash flow. They were looking for passive income. 

So, John needed to find some new ways to provide that cash flow that investors came for in the first place. 

The first project they took on was debt syndication … partnering with a developer and syndicating funds on the debt side. 

“We came in as lenders to buy the lot and get the construction completed and get those units leased as office space,” John says. 

A debt investor is someone that wants to have predictable income flow again, and it’s not as risky as other ventures … with the opportunity for BIG returns. 

At some point, you have to graduate from single family houses and move to the next level, like multifamily or office space. 

John says there are great deals to be found … but you have to do a little nosing around. 

And you can’t beat the opportunity for passive investing. 

With debt syndication, investors can be very hands-off and get as high a return as possible

Especially for the investor who is looking to lend money from their IRA or 401k, debt syndication is a great passive experience for them and a great way to maximize their retirement accounts. 

Many people don’t understand that they can put their retirement dollars to work … but as soon as you can self direct your retirement funds … you’ve opened up a whole world of alternative investments. 

Because of the nature of a retirement account, you can’t have a current benefit. It is really for tomorrow, not for today … so passive investments just make sense. 

These are solid deals in solid marketplaces … but people have a hard time getting their minds around why someone would want to use debt. 

In good deals, the asset pays back so quickly that there’s not a lot of risk on either side. 

It really just depends on how your personal investment philosophy fits in. 

Keep your money working 

If someone is looking to put their money to work in a debt syndication type of deal, the big question is … how long is this deal going to take?

John says that the longest term he has done so far was with a new construction project … that was 18 months. 

The average term for a deal is usually about one year. 

“We want to get you money back within a year and have another deal lined up for you so you can keep your money working,” John says. 

Keeping your money working … that’s the key to finding high yields in a hot market. 

Learn more about the Dallas market and how John and his team are finding new ways to create cash flow without changing markets by listening in to the full episode. 


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Market Spotlight – Three Metros Attracting Attention Now

As major markets grow and mature, residents and businesses start to feel the financial pinch … and follow their wallets to greener pastures.

Savvy investors recognize trending, emerging markets and migrate there in search of value.

It’s all about monitoring where people are moving … and moving faster.

Listen in as we visit with a multi-market investor to find out why and where he is looking for opportunities.

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

  • Your moving-up host, Robert Helms
  • His moving-over co-host, Russell Gray
  • Fourplex Investment Group consultant, Steve Olson

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Metros on the move

One of the most crucial tasks for a real estate investor is finding a market that matches their real estate philosophy.

As an investor, you must think about the personality and culture of your portfolio … then find a location that offers opportunities for growth and cash flow.

On your own, you can do high-level research on rent prices, population growth, job creation, and infrastructure … but you need a team on the ground to succeed.

A local team is in touch with the minute details of a market. They can point you to the specific areas of a metro that are best for your investment.

We rely on people on the ground to help us understand what markets our listeners should have on their radars. Steve Olson is one of those people.

As a consultant for Fourplex Investment Group, Steve oversees several up-and-coming markets … and he is here to introduce us to three metros attracting attention now.

Salt Lake City, Utah

There are a lot of exciting things happening in this rocky mountain metro.

The greater Salt Lake City area encompasses a lot of cities … each with unique investment opportunities and cultures.

This long, skinny metro follows the mountains of the Wasatch front … and houses a little over 2 million people.

A high birth rate paired with large numbers of people migrating from other states is a testament to the metro’s family-friendly and business-friendly culture.

With mountains on both sides, the area is a hot spot for skiing and other winter sports. In the summer, hiking and biking are popular attractions.

From a real estate perspective, Salt Lake has been a stable market for some time now … but it’s growing faster and faster.

Two key areas that draw investment attention are Silicon Slopes and the Northwest Quadrant.

Silicon Slopes is home to towns like Lehi, American Fork, and Draper. The nickname refers to the large number of tech companies that have set up shop there.

Organizations like Adobe, Ancestry.com, and even the National Security Agency (NSA) have built major hubs in the area.

With a rapid influx of new residents, there have been some growing pains for the tech towns … but infrastructure is catching up and new construction is BOOMING.

The Northwest Quadrant is what Steve calls “an interesting opportunity.” Being surrounded by mountains leaves only so much space for new growth.

“For many years, you would just consider it a barren wasteland,” Steve says, “but now it is the only direction to go.”

The Northwest Quadrant is near the Great Salt Lake and the Salt Lake City International Airport.

“If you want land in any kind of quantity that’s affordable, that’s the direction you have to go,” Steve says.

Businesses recognize this and are embracing the blank slate. Amazon recently built a new shipping facility in the area, and so did UPS.

Thousands of new jobs mean new residents … and those residents are looking for affordable places to live.

The two main cities in the Northwest Quadrant are West Valley City and Magna.

In the past 15 years, only ONE new apartment complex has been built in those cities … and it is operating at 97 percent occupancy.

Steve says the location has lots of potential. Tenants can enjoy new, clean, affordable places to live and get to downtown Salt Lake City in 15 minutes.

“You’re going to look at that area in 5 to 10 years and not even recognize it,” Steve says.

Houston, Texas

Houston, Texas, is a go-to market for many investors … but a recently completed toll road is opening new parts of the area for investment opportunity.

After Hurricane Harvey, the fate of the Houston metro housing market was uncertain. But just four weeks after the storm, home sales had rebounded and seen the greatest rental activity of all time.

 

More and more growth is flowing into the northwest part of the Houston metro. For many tenants, Cypress, Texas, is the destination.

This suburb has become one of Houston’s largest communities and recently ranked 50th in the top 100 highest-income urban areas in the country.

The oil and gas industry have a major presence in the area, as well as the healthcare, aviation, and distribution sectors.

With a diverse, expanding economy, Cypress is on track for significant job and population growth … a great sign for real estate!

Boise, Idaho

You don’t normally hear a ton about this market because it isn’t a giant metro. As of 2018, about 700,000 people call Boise, Idaho, home.

But Steve says if you dig into the stats, you’ll feel very confident in its potential. People who are tired of metros like Portland and Seattle are going to Boise.

“Boise is more business friendly, but you’re still in the Pacific Northwest,” Steve says.

Quality of life in the area is marked by access to plenty of outdoor activities like biking, rock climbing, water sports, and skiing.

The metro is notable for its population and job growth … triple the national average … and is landlord-friendly. And who could forget the low taxes?

New residents are moving into suburbs like Nampa and Meridian and targeting new construction.

Find your niche and your market

No matter where you invest, there are many ways to put your money to work for you … and these markets are no exception.

The approach Steve takes with Fourplex Investment Group is a particularly unique niche.

By building brand-new apartment buildings on empty land, Steve and his team can meet rising space needs and offer great incentives and returns for investors.

That means instead of buying the 40-year-old fourplex down the street, you can buy four units in a 100-unit, brand-new apartment complex.

And you’re not at the mercy of apartment or commercial financing!

Whatever your investment approach and chosen market, remember that it is all about finding an opportunity that matches YOUR philosophy and works for YOU.


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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Cypress, TX Market Report

Cypress, TX Market Report

 

Everything’s bigger in Texas … including investment opportunities. High occupancy rates, rising rents, and a growing economy … welcome to Cypress!

Head north of Houston and stumble into a suburban paradise.

Cypress, Texas, is the area’s largest suburban community. Amid thick-forested areas and ranch land are single and multifamily properties filled to the brim with high-income tenants.

Reliable renters and rising rental rates make Cypress an excellent opportunity.

In this special report, the team at Fourplex Investment Group shares the most relevant data on the Cypress market. Discover:

  • Why the market is shifting to high-density multifamily properties
  • Data on occupancy rates and rent increase predictions
  • Information on economic and infrastructure growth
  • And more!

See whether Cypress is the right market for your next investment! Get started by filling out the form below to access the Cypress Market Report.

Ask The Guys – Cash Offers, Crappy Properties, and More

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

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

First, the ground rules.

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

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

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

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

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

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

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

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

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

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

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

Here are a couple alternatives for Wilbert to consider:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Question: What is the definition of a performing asset?

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

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

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


More From The Real Estate Guys™…

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

The Role of Investors in Bouncing Back from Disaster

We’re sure you’ve noticed the upheaval certain areas of the U.S. … it’s been hard to miss.

Hurricane Harvey and Hurricane Irma have swept Texas, Florida, and the Caribbean, leaving a path of destruction in their wake.

Every natural disaster brings a certain amount of tragedy, and our sympathies go out to those who are hurting from the storms.

But we’re heartened to see communities coming together in the aftermath to help heal damage … and we think real estate investors can play a role in building communities that are even stronger than before the storms.

Listen in to this episode of The Real Estate Guys™ show to hear us brainstorm ideas about how investors can help … and how they can prepare for future disasters.

You’ll hear from:

  • Your disaster-pro host, Robert Helms
  • His disaster-prone co-host, Russell Gray

Listen



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Finding opportunities in the midst of tragedy

Perhaps it makes you uncomfortable to think of profiting while people are suffering.

That’s okay. In fact, it’s more than okay … it means you have the right intentions.

But bringing your skills on to the scene after disaster has struck isn’t simply opportunistic.

By getting involved, you’re solving problems and adding value. This is the sunny side of capitalism.

You can make a fair profit … and make a difference too. Just make sure you’re doing the right thing for the right reason.

Remember … the flip side of every problem is an opportunity.

In the aftermath of a disaster, there are myriad opportunities.

Investors can renovate flooded and damaged houses. Some houses will be lost causes until an investor decides to step in and put some capital to work.

But the opportunities don’t stop there.

Out of necessity, huge disasters involve a large displacement of people. Investors can create new housing situations for displaced people.

And disasters also effect the local economy. Jobs are affected, causing a ripple effect for entire communities … including landlords whose tenants’ jobs are affected.

Finding ways to revitalize local communities and create jobs can minimize damage and create huge amounts of good.

Smart choices at opportune times

Getting involved simply because there is an opportunity isn’t always the smartest choice. Make sure you’re getting involved because it makes sense and it’s the right choice for YOU.

Investors have to know that after a major disruption, banks, government agencies, and other financial institutions may create incentives to sweeten the deal and get people involved.

After Hurricane Katrina, the Louisiana government created a “go zone” with adjusted depreciation rates.

These incentives can make investing in disaster-struck areas a smart idea … but we’d warn you to never let the tax tail wag the investment dog.

It’s easy to get caught up in a temporary disruption and make a long-term commitment without realizing that circumstances may revert to what they were pre-incentives.

With that said, Houston is a favorable market … it’s landlord friendly, with many major industries creating jobs.

Most of the things that make Houston make sense haven’t changed. And if you want to invest there, there’s no better time than now.

It may be smart to be the first to make a move … while everyone else is still panicking.

Putting money to work by investing

Let’s look at properties that fall into distress.

Maybe the owners got stuck in a bad situation. Investors can step in pre-foreclosure, buy the home, rehab the property, and put it back into service.

You’re doing good by helping the owners before they’re foreclosed on, and you’re making the neighborhood a better place … all in one fell swoop.

You’re making a difference on the micro scale. The same idea works on the macro scale … when disaster strikes a whole community instead of a single person.

Disaster-struck cities will have blighted areas. Many may have been functionally obsolete even before the storm.

Now is the time to redevelop and rebuild … to create great neighborhoods where none existed before.

It wouldn’t surprise us to see entire neighborhoods change composition if real estate investors have the good sense to identify trends and get in on investment opportunities early.

A smart syndication opportunity

Perhaps you want to help pick up the pieces … but you’re not sure where to find the capital.

Incentives can help. You may also want to consider community banks, who will be eager to get investors on the scene as early as possible.

There’s lots of capital out there. Not all of it has to come from banks, though … syndication is another great option.

Running syndication deals in disaster-struck areas gives people a great opportunity to put a chunk of cash to work. Instead of donating a small amount and getting nothing back, investors can see their money do good … and also make a decent profit.

Entrepreneurs look for a market problem and figure out a way to solve it … profitably.

Look for ways to solve problems instead of despairing about everything that’s gone wrong.

Preparing for the next disaster

A big part of dealing with disasters … perhaps the biggest … is being psychologically and financially ready to step in when the next opportunity comes along.

Always be prepared. If you own properties, make sure you have the proper insurance in place.

Never risk 100% of your net worth. Always ask whether you’re taking too much risk before jumping in to a deal.

If you want to be a first responder next time disaster strikes, it’s smart to have a source of capital ready to deploy when the right opportunity comes up.

If you know you won’t have enough capital on your own but think you’re the right person to syndicate a deal for other investors, build your network before the right opportunity comes along.

Build your brand and your credibility. That way, you’re not running around looking for people to invest when the time is right.

Just like the Boy Scouts, we’d encourage you to always be prepared.

Make sure you’re aware of all possible downsides. Don’t go in looking for the upside first.

Beware of trick ponies. In the words of Warren Buffet, “Rule No. 1: Never lose money. Rule No. 2: Don’t forget rule No. 1.”

That doesn’t mean you should be afraid to jump in when the time is right … absolutely move while the situation’s still hot, but make sure you’re making a smart, calculated risk.

And don’t bet the farm on a single deal or market.


More From The Real Estate Guys™…

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

The Disappearing Middle

Recent reports from the U.S. Census Bureau declared that the U.S. middle class is getting squeezed.  Shocker.  Thank you, Captain Obvious. We were hoping the disappearing middle referred to our beer bellies, but no such luck. 😉

Of course, our good friend Robert Kiyosaki has been saying for years that the rich will get richer, the poor will get poorer and the middle class will get squeezed.  So if you’ve been paying attention, the report from the Census Bureau isn’t a surprise.

The big question is:  what are you going to do about it?

If you’re in the middle class and you’re feeling the squeeze, it may be time to make the leap from employee to entrepreneur.  Yes, it’s hard work.  But so is being poor.  If you’re reading a blog like this, you’re probably already committed to being successful, so we won’t waste time preaching to the choir.

So let’s talk about what a disappearing U.S. middle class means to you as a real estate investor.

In the Clues in the News segments of our Mentoring Club meetings, one of the things we watch for is what “the big dogs” are doing when faced with market shifts. And it isn’t just real estate investors we watch.  It can be fund managers or corporations.  We can learn from anyone who’s watching the economy and managing cash, cash flow, debt and equity.

We saw an article in the Wall Street Journal, As Middle Class Shrinks, P&G Marketing Aims High and Low, that talked about how big corporations are shifting to an “hourglass” marketing strategy.  (When it comes to hourglasses and figures, we understand getting excited…but marketing?  We must be getting old.)

You can read the article yourself, but the point here is that big corporations are making major adjustments to their businesses to adapt to a disappearing U.S. middle class.  Similarly, is there anything a real estate investor should be doing to adjust to the new American reality?

Here are some things to consider:

People will move to where there are jobs.  Duh.  The million dollar question is where in America are their jobs?  If you’ve been watching the Presidential debates, you’ve been hearing about all the jobs in Texas.  Dumb luck or great leadership, it’s no surprise that more people and businesses are moving to Texas than moving out.

People and businesses will move to where it’s cheaper.  State income taxes take a big bite out of most budgets, so look for good investment areas in a no tax (there’s only seven) or low tax state.  Two of our favorites right now are Tennessee and Texas.  Businesses also look for low cost land, a big labor pool (population), and nearby educational institutions.

People will move down before they move away.  They have families and friends and don’t want to leave them.  As the affluent fall down the food chain,  prices will likely soften in the affluent areas, while demand will increase for lower priced properties near those affluent areas.  Watch what’s happening in whatever markets you’re investing in.  Talk to property managers, real estate agents, local resident (it’s amazing what you can learn in a coffee shop!) and the Chamber of Commerce.  Which sub-markets are people and businesses moving away from and to?  As in all investing, the trend is your friend.

Pick markets carefully with “geographically linked” economies.  That is, industries that must be located in the region and can’t be easily moved, if at all.  It’s also important that those industries be permanent (you don’t want to buy all the houses next to video cassette manufacturing plant).

Two great examples of permanent and geographically linked industries are commodities (like oil, gas, lumber, etc.) and distribution.  It might be easy to move a widget manufacturing plant to China or Mexico, but you can’t move mining or farming offshore.  Those jobs have to stay in the area – and those commodities are always in demand.

Similarly, moving boxes from point A to point B is a logistical operation.  Even if the U.S. is poor, there will still be 300+ million people who need food, clothes, household products, etc.  All that stuff might be made in China or Mexico, but it’s moving through the U.S., so those distribution jobs are linked to the real estate.  And it’s not just location, but huge and expensive infrastructure like airports, roads and railways.  Two cities that come to mind are Dallas and Memphis.

Now if the U.S. shakes off the doldrums and comes roaring back to economic life, any market that’s sound in a tough economy will only be more sound in a great economy.  Either way, you win. 🙂

 

 

 

 

 

The Not So Secret Formula for Stable Employment

The presidential campaign rhetoric is kicking into high gear.  Texas Governor Rick Perry says he’s a job creation whiz.  His detractors say it’s just dumb luck because he happens to govern a state with oil and gas under the ground.  But no one is denying there are more jobs happening in Texas than any other state.

Meanwhile, no one is talking about Jack Dalrymple.

Who???

Jack Dalrymple. He’s the governor of the state with the lowest unemployment rate in the USA.  And he’s the Governor of North Dakota.

North Dakota? Really??  Do you even know where North Dakota is? (Hint: It’s just above South Dakota, if that helps.)

According to a recent article by the Associated Press, “Booming oil, agriculture and manufacturing industries have helped the state keep the lowest unemployment rate since November 2008.”

Wow.  Oil, agriculture and manufacturing is the magic formula.  Who knew?

So what’s the lesson for real estate investors?

Well, if you believe like we do, that the best tenants are those with jobs, then paying attention to what, where and why job are happening is obviously important.

In this case, North Dakota’s experience is affirming what we’ve already come to realize:  markets with industries that are strongly linked to the geography are less likely to move off shore.  Oil and agriculture fit that bill.

So when you’re researching prospective markets to buy rental property, pay close attention to which businesses are “primary” (pulling money in from outside the area) and how “linked” they are to the geography.  And of course, those businesses need to provide the kind of jobs that renters need.  Match your property choices and price points to what the employees of the local businesses can best afford.

If that all sounds like common sense, that’s because it is.  But as the legendary football coach Vince Lombardi always reminded his championship teams, winning is matter of mastering the fundamentals.

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Now May Be a Great Time To Invest in Dallas Real Estate

Finding a strong market to invest in is as simple as looking for population growth, job growth, and a diverse economy. That’s why some of the smartest minds in real estate are focused on the long term strength of Dallas, TX.

POPULATION GROWTH: The Dallas-Fort Worth area’s population has grown by nearly 1.3 million from 2000 -2009.  That is more than any other metropolitan area in the United States.  The Dallas–Fort Worth–Arlington MSA is the largest metropolitan area in Texas, the largest in the South, the fourth-largest in the United States (SOURCE: Wikipedia on DFW).

The Dallas, TX metro is forecasted to add 4 million new people from 2010 – 2040 according to the Texas Data Center  and the North Texas Water Board.   That’s one new person every 4 minutes!!! In 2009, the population of Texas grew by 231,539.  That is more growth than Florida, Arizona, California, Nevada and Colorado, combined.

A demographer at the Brookings Institution attributes the population growth to a more diversified economy in Texas and more conservative lending practices during the real estate boom. When combined with the state’s steady growth earlier in the decade, Texas is projected to receive three new seats in Congress.  (SOURCE: Recession Cuts Migration to Sun Belt, New Figures Show 
New York Times).

JOB GROWTH: “Diversified industry and relatively stable housing fundamentals have provided local residents with comparatively secure standards of living. Cities where home prices don’t fluctuate wildly are particularly well-positioned to ride out this recession, because they were spared the domino effect of foreclosures, lost jobs and lost productivity. Rather than chasing rising home prices or apparently plentiful jobs in one-industry towns, families looking for long-term economic stability should seek spots where industry is diverse and housing price shifts are benign.”  (America’s Fastest Recovering Cities
 – Forbes Magazine)  According to the US Bureau of Labor & Statistics, Dallas job growth is twice the national average.  An educated populace and a cost of living below the national average, make Dallas enticing to companies seeking a lower cost but highly qualified workforce.

DIVERSE ECONOMY: The Dallas economy is primarily based on banking, commerce, telecommunications, computer technology, energy, and transportation.  North Texas has 28% of the state’s workforce, employing more than 350,000 in healthcare, 225,000 in high-tech and 68,000 aviation-related jobs.  North Texas has 20 colleges and universities, 17 graduate schools, 3 medical/dental schools, 2 law schools and 20 community college campuses (SOURCE: North Texas Commission).  The Dallas/Fort Worth Metroplex is home to over 10,000 corporate headquarters making it the largest concentration of corporate headquarters in the United States.  The Dallas metro area is home to 25 FORTUNE 500 company headquarters and 7 FORTUNE Global 500 companies which bring more than $819 billion in revenue to North Texas. (Source: Fortune Magazine 2009)

  • WORLD CENTER OF AVIATION
    • DFW International Airport is the third busiest airport in the world
    • There are more than 850 aviation-related businesses in North Texas – more than any other area of its size in the world
    • There are more than 68,000 documented aviation-related jobs in the region
  • LOGISTICS HUB
    • DFW is a major logistics hub and has the lowest distribution costs to the top 50 U.S. consumer markets of any region
    • Since the passage of NAFTA, DFW trade to Mexico and Canada has more than doubled – in large part due to the proximity of Interstate 35 – the NAFTA Superhighway
  • FINANCIAL AND BANKING CENTER
    • North Texas is a major financial center and is home to one of 12 regional Federal Reserve Banks, as well as several regional bank offices and corporate headquarters to Comerica
  • HIGH TECHNOLOGY CENTER
    • North Texas is a national and global leader in the high-tech sector, and 8.3% of the region’s total 2.7 million labor force is employed in high-tech fields, according to the Metroplex Technology Business Council
    • North Texas’ 225,000 high-tech workers account for 52% of Texas’ total technology workforce, and North Texas boasts 6,215 high-tech firms
    • Although the high-tech industry employs 8.3% of the North Texas workforce, the high-tech sector accounts for nearly 13% of wages paid to North Texas workers – indicating the relatively high-paying nature of these sophisticated jobs
  • RETAIL CENTER
    • North Texas is the 10th largest retail market in the country. Dallas Market Center, the world’s most complete wholesale marketplace, hosts approximately 50 markets each year attended by more than 200,000 retail buyers from all 50 states and 84 countries, and conducts more than $8 billion in wholesale sales annually
  • HEALTH CARE EXCELLENCE
    • North Texas is known for its extensive state-of-the-art health care facilities with more than 90 major hospitals and two major medical schools
    • Health care is one of the largest and fastest growing industries in the Dallas-Fort Worth region with more than 350,000 health care jobs

LOW TAXES:

  • No personal or corporate state income tax
  • Maximum state and city sales tax of 8.25%

QUALITY OF LIFE:

  • North Texas features world-class athletes, teams and sports facilities, including the new Cowboys Stadium, host of the 2010 NBA All Star Game, 2010 World Series, 2011 Super Bowl XLV, and the NCAA Men’s Final Four in 2014
  • The region is growing as an arts hub with 7.9 million people attending arts and culture events annually
  • Low cost of living
  • Affordable housing
  • Plentiful water
  • Public transportation and excellent highway system
  • Strong k-12 schools and universities
  • Centrally located
    (SOURCE: North Texas Commission)

For more information about Dallas, visit our Dallas Market page or find a local market expert in our Resource Network.