Trump’s tariffs and your real estate investing …

Let’s take off our blue, red, and orange team colors … hold hands … and take a real-world look at trade tariffs in action.

Most nose-to-the-grindstone real estate investors may not pay attention to, or understand, trade tariffs … or how they could affect real estate investors.

But, like many things we obsess about after 2008, tariffs might mean more to your real estate investing than you realize.

Consider this headline from National Real Estate Investor Online …

Construction Costs Spike for Multifamily Projects 

It’s short and you should read it, but here are some quick highlights …

  • The cost of construction is rising for apartment developers and contractors … including materials, labor, and leasing.
  • Lumber prices are “out of control” having “increased substantially” … with March prices up 25 percent over January and February.  Yikes.
  • “The U.S. has added trade tariffs to Canadian lumber of over 20 percent over the last year” and “government policy is also pushing up the price of steel”. 
  • “Prices of construction materials are outpacing consumer inflation by a factor of two”. 
  • “Contractors have been forced to offer higher wages to attract more workers.” 
  • “… apartment projects are becoming more expensive to build … ‘You can only pass so much of that on to consumer,’ says … the National Home Builders Association.” 
  • “The number of job openings in the construction industry rose to record-breaking or near-record-breaking levels in each of the last five months of 2017 …” 
  • “The number of people employed in the construction industry rose … more than twice the growth compared to … overall non-farm payroll.”

Okay, so there’s the foundation.  Now let’s unpack it …

First, a boom in apartment building has caused a glut in some markets leading to rent concessions.

If increasing leasing expenses, construction loan interest; materials, and labor costs are all increasing … builders will need to either raise rents or stop building.

Both can be good for nearby owners of existing inventory over the long term.

But in the short term, be attentive to property maintenance and customer service … or you might lose some tenants to those short-term concessions.

But beyond the impact on builders, what about the impact of tariffs on markets, labor, and industries?

If tariffs successfully reset the pricing of commodities like lumber, steel, copper and concrete, there are many potential ramifications.

The motivation behind tariffs is to wean domestic buyers off cheaper foreign goods … and make it more profitable to produce those goods domestically.

The goal is to create domestic jobs in lumber, steel, and mining.

In other words, if Chinese steel or Canadian lumber become more expensive, it could pull up domestic prices to where it’s profitable for businesses to expand domestic production … and hire more workers.

This could mean job growth and subsequent housing demand in those markets which produce these items.

So we’re watching this whole tariff tussle carefully for clues about which geographic markets might end up catching a boom … just like the energy industry markets did after 2008.

But rising commodity prices can creep into consumer goods too … making MANY things more expensive.

And if prices rise faster than wages, people will actually be poorer in terms of purchasing power … which puts downward pressure on prices … including rents.

Squeezed far enough by rising costs of living … people will move to more affordable housing … and even to more affordable areas.

So again, this is something to pay attention to.  In spite of the current economic “good times” … we’re still fans of the more affordable markets and properties.

Lastly, we’ve learned to be cautious about construction driven employment and wage booms.  We think it’s dangerous to invest long-term based on a short-term boom.

Think about it … construction is about building something.  But after it’s built, the work is done.  Then what do those workers do?

Unless there’s perpetual building, workers need to change industries or move to where there’s more building going on.

So it’s good to remember that housing is a reflection of economic growth, not a driver of it. Housing is built for and occupied by people who work at something else.

In other words, you don’t want to be buying apartments to house people who are building apartments … or anything else that will be “done” at some point.

Whereas a business is a “going concern” and generates on-going revenue, sustainable jobs, and a long-term pool of tenants.

So even if you’re a residential investor, pay attention to commercial, industrial, warehouse, and office in terms of construction, absorption, and occupancy.

These are leading indicators of where residential property demand might increase.  Because when businesses are expanding in an area, it’s a pretty safe bet residential will too.

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.

Clues In The News – Crisis and Growth Opportunities

Warren Buffet. Also known as the Oracle of Omaha, this investing heavyweight spends a lot of his time doing one particular thing.

It’s not scoping out new investments. Not chatting with folks in the investment industry. Not attending board meetings … although we bet he does spend a bit of time doing all of those things.

This investing genius spends 80 percent of his time reading.

From trade-specific journals to general financial news, reading and listening to the headlines is essential to staying informed. But just as important is reading between the lines.

That’s why we bring you Clues In The News … our take on how recent headlines affect real estate investors like YOU. In this edition, you’ll hear from:

  • Your media examiner host, Robert Helms
  • His (slightly OCD) news peruser co-host, Russell Gray



Broadcasting since 1997 with over 300 episodes on iTunes!

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Mortgage rates for single-family homes rising

Many articles are saying it … mortgage rates continue to climb and show no signs of stopping soon. Note, this information applies specifically to single-family homes.

This is important news … but before you react, stop and ask yourself the question, “If interest rates were guaranteed to rise, what would I do?”

The answer is probably buy a deal that makes sense today and lock in the interest rate so you get a competitive advantage.

Data from this Redfin survey shows less than 4 percent of potential homebuyers would cancel their decision to buy if interest rates increased … so people will keep buying even if it squeezes their bottom line.

But buying at a too-high interest rate means high cost inputs, higher rents, and potentially more vacancies. Getting in while the interest rate is lower is an important factor for success.

We also suggest you consider the advantages of adjustable-rate mortgages versus fixed-rate mortgages. Adjustable-rate mortgages may start lower depending on the market, but have no certainty of staying the same.

Fixed-rate mortgages, on the other hand, allow you to lock in a predictable rate that won’t rise or fall with the market. And when you’re locked into a rate for 10-15 years, having consistency is particularly important.

An equal concern is the strength of the dollar. If rents are sliding upwards faster than wages, your tenants are in trouble.

That’s why investing in A-class properties can be a poor strategy (more on that later).

Tighter guidelines plus higher mortgage rates can mean good things for landlords because fewer people are buying their own homes. So pay attention and think strategically … because a large part of success is getting in at the right time.

Is the multifamily sector overheated?

Multifamily properties have attracted a lot of money. We’re now hearing from many investors who wonder whether the sector is overheated.

Interest rates are rising, and since multifamily properties typically have 10-15 year loan periods, investors do need to be careful here.

If you’re a multifamily investor, you also need to keep in mind that rising interest rates not only affect you … they affect your tenants too.

According to a CNBC article, half of all renter households pay more than 30 percent of their income in rent. That means there’s no real wiggle room for inflation … and no real wiggle room if YOU need to raise rents.

One apartment developer interviewed in the article above says, “There is an acute crisis headed our way.” We can see this in the high numbers of luxury apartments being developed … and then standing empty.

At the same time, we’re seeing a shortage in B- and C-class housing.

Because of today’s costs, it’s difficult for developers to build new buildings for non-luxury buyers. And Wall Street investors see luxury as a safer investment … even though it typically brings 2-3 percent yields.

If you’re a syndicator, all of this information can help you understand the economic world you’re operating in. A development explosion in the high-end apartment space DOES NOT mean you should be investing in that space.

This information should be the start of your research. Read between the lines, look for the wise voices, and start following them … but mostly importantly, talk to the people who have boots on the ground.

And remember, just because the economy looks bad does not mean investment options are bad. In fact, a downturn can be the best time to buy.

What’s happening on Wall Street?

We like to read trade-specific news. But we also think it’s important to read and watch mainstream financial news because that’s what everyone else is seeing.

The difference, though, is that we always attempt to delve into what’s beneath the headlines.

An article published by Bloomberg notes that Wall Street investors are beginning to snap up cheaper single-family properties they had formerly ignored.

After focusing on a particular niche … “safer” luxury-class homes and apartments … Wall Street is now lowering expectations.

Realize that what Wall Street investors are essentially doing is speculation.

They’re trying to “buy low, sell high” without investing the time and effort to research their product and control outcomes the way real estate investors can do.

But Wall Street’s foray into single-family homes affects YOU … because sourcing inventory is harder when there are more hands in the game.

It is possible to get in front of Wall Street investors … in fact, Wall Street by nature is essentially following in the steps of smart real estate investors.

But now you know what the big players are doing … and you can think about where you can step in before the market becomes saturated.

All it takes to spot the right clues is a bit of attention.

How does the tech industry affect investors?

The retail apocalypse has caused a huge shift in the industrial and office space. Products are being sold online … instead of in buildings.

But the industry behind this shift can bring boons to real estate investors.

According to the National Real Estate Investor, tech firms continue to seek out new markets for expansion.

Expanding tech companies bring huge job numbers wherever they go … and with jobs comes a need for housing.

Other markets, like office and retail space, are also impacted directly and indirectly with population and industry shifts.

To get ahead of the game, look at what factors make a market appealing to tech CEOs. A great example is Amazon’s list of market criteria, although each company will seek out different qualities.

A tech hub creates critical mass. Tech companies not only create tech jobs, but attract and are attracted to various other industries, like airlines and shipping companies.

As you pay attention and understand where businesses are growing, your ability to align yourself strategically with market shifts and new hot spots will improve dramatically.

The headlines in this episode of Clues In The News bring both challenges and opportunities. Now it’s your turn … get out there, do some research, and start reading between the lines! It’s the only way to get ahead of the game.

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

Apartment Market Forecast 2018

An essential part of being a real estate investor is finding the perfect combination of market and product type. But markets, product types, and even financing are CONSTANTLY shifting.

How can you read the tea leaves and see what’s in store?

Today, we offer some help in the form of Brad Sumrok. Brad has been investing for 16 years. These days, he also spends a significant amount of time teaching investors how to get into the multi-family space.

In this episode, we discuss choice gems from Brad’s annual Apartment Market Forecast. We’ll also look at what makes a good market and how YOU can get started … or move upwards … in multi-family investing.

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

  • Your princely host, Robert Helms
  • His jester of a co-host, Russell Gray
  • The apartment king, Brad Sumrok



Broadcasting since 1997 with over 300 episodes on iTunes!

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Three factors of the perfect market

Let’s begin with some background.

Sixteen years ago, Brad made his first real estate investment. He didn’t start out with single-family homes … No, Brad’s first investment was a 32-unit apartment building.

Today, Brad teaches beginning and potential investors how they too can make a mark in the multi-family space with his popular Rat Race 2 Retirement courses.

Last year, his students purchased 37 apartment buildings in 14 different markets!

Along with his results-producing educational program, Brad produces a yearly Apartment Market Forecast … a data-driven report that looks at which markets in the U.S. are hot for apartment investors … and which are not.

The forecast can be divided into two main parts … old markets that still hold water, and new markets that hold opportunity for multi-family investors.

Brad gave us the run-down of his most important factors for investors.

“When I look at investing, I look at three things,” he says. “The deal, the market, and the management team.”

We asked him to dive into what makes a good market … and why.

Brad said he does tend to like big primary markets in general because of their diverse economies. But he avoids some large markets like Los Angeles, San Francisco, Seattle, and Boston because of laws that are unfavorable to landlords.

For Brad, landlord-friendly laws and strong economies are two major keys to an ideal market.

Brad says investors can find good deals in the suburbs within an hour of many major markets. While city centers may be too hot right now, surrounding areas have a bit less competition.

Besides landlord-friendly laws, Brad says there are two other major factors investors need to consider … asset appreciation and rent growth.

Together, these factors can help investors choose the perfect market.

Some markets, like Cleveland, Kansas City, and Detroit, have higher than average cap rates but negative population and job growth.

Investors want to look for a market that boasts positive scores in all three areas. Some of Brad’s top picks for asset appreciation, rent growth, and landlord friendliness are Dallas, Tampa, Jacksonville, Orlando, and Phoenix.

Many investors worry that even in excellent markets, competition has heated up too much and they’ve missed the party.

To that, Brad says, “If you invest in your education and surround yourself with a good team, the odds are in your favor to make profitable investments.”

Investors need to understand that all ships rise … and sink … with the tide.

In good times, rents and occupancy will be high. And in bad times, apartments are a safe haven because there is always a need for housing.

Choosing and financing properties

What kind of properties does Brad advise his students to invest in?

The answer is simple … B- and C-class assets.

The reason? In central urban cores, there is too much supply and not enough demand, resulting in high vacancies and low yields.

Outside the city core, investors can still buy for less than they can build. And if you choose your market smartly, job and population growth will guarantee a demand for affordable housing.

Brad says he generally advises investors to plan to hold on to a property for at least five years.

And in terms of loans, he notes it’s essential to have predictability in financing. He works with students to help them obtain 10-12 year fixed-rate loans with an 80 percent loan to value.

It can be hard to find that type of financing in smaller markets and for smaller properties.

But it gets easier, says Brad, when investors realize they don’t need to fork up all the money by themselves.

That’s where syndication comes in.

To earn more and work less, turn to syndication

Without syndication, many investors run out of money.

Syndication not only allows investors to do bigger deals … it also offers economies of scale.

Larger properties with at least 60 units allow investors to hire a management company with the right level of cost to benefit.

At that size, management costs usually end up at about 5 percent of income, and possibly less if you have more units.

Plus, you get more data, more support, and more resources … for a smaller percentage of your revenue.

It’s part of what Brad calls “the magic of apartments.” Management costs for single-family homes, by comparison, usually run about 8-10 percent of your gross income.

Why not a 40-unit apartment? Forty units is enough to pay for a full-time person … without fully utilizing their time or efforts. But 60 is just about perfect.

Another benefit of buying big is that you DON’T have to do everything yourself. When you do a syndicated deal with other investors, your main responsibilities shift from the nitty-gritty details to regular communication with your management company about big-picture trends and issues.

The premise of multi-family investing is really the same as single-family … but financing, managing, tenant-landlord laws, inspections, and other factors are a bit different.

All that is learnable, however. To get educated, start by checking out Brad’s webinar. He’ll discuss why apartment investing is great for building passive streams of income, how YOU can get started, and what his top market picks are for 2018.

Investors evolve with education

In Brad’s own words, “Anyone can do it.” He told us there will always be competition, but even in today’s economy, there are still so many markets that make sense.

“Investors just have to step up to the plate and take a swing,” Brad says.

Just as you evolve as an investor, so do markets evolve … slowly, over time. Sometimes the shift happens so slowly … or so suddenly … that investors don’t see it coming.

That’s why folks like Brad are so important. He knows the apartment market space incredibly well, stays up to date … and is always willing to share his knowledge with other investors.

And although not every investor takes the same path to wealth that Brad did, there’s something EVERY investor can learn from Brad’s recommendations and suggestions for what makes a good market and a high-return investment.

As real estate investors, we have to take educating ourselves seriously. Whether that starts with a podcast, article, webinar, in-person event, or a training seminar like Brad’s, education is the one thing that can help YOU become an effective, efficient 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.

The REAL cause of rising rates …

Maybe it’s just us …

But as we’re preparing for our Future of Money and Wealth conference … (our way of sharing our epic Investor Summit at Sea™ faculty with more people) …

… we keep seeing headlines that make us think there’s more happening in the financial world than just a little stock market volatility …

From Bloomberg on February 7th:

Dollar Will Stay Weak If China Has Its Way, Morgan Stanley Says

There’s SO much we could say about that one headline …

… in which a major U.S. financial institution acknowledges both China’s desireand ability to weaken the almighty dollar.

But we’ll restrain ourselves (for now) and ask a more mundane, but relevant question …

What does a weak dollar mean to real estate investors? 

We’re told a weak dollar is good for U.S. business … because it makes U.S. products cheaper for foreigners to buy with their now relatively stronger currency.

Okay, so maybe that’s good for local economies that depend on exporting.

And maybe it helps landlords in those areas because more export sales might mean more jobs and higher wages for local workers (your tenants).

But a weak dollar also means imports are more expensive for U.S. consumers.  All that stuff made in China now costs MORE for U.S. buyers.

Last time we looked, tenants buy a lot of stuff made in China.  If they’re paying more for it, then they have less money available for rent increases.

So a weak dollar is bad if it leads to consumer price inflation …

And sure enough, from CNBC on February 14th:

Consumer Prices Jump Much More Than Forecast, Sparking Inflation Fears

According to the report …

“Markets reacted sharply to the news, with stocks sliding and government bond yields rising.”

“Bond yields rising” is just fancy talk for rising interest rates.

If you talk to any savvy mortgage broker, they’ll tell you mortgage rates pivot off of 10-year government bonds.

When bond yields go up, so do mortgage rates.

And to no surprise comes this Market Watch headline on February 15th:

Mortgage Rates Rise to Nearly Four-Year High on Inflation Concerns

As Robert Kiyosaki always reminds us, real estate investing is about debt and cash flow.

Your mission is to acquire more of both … but with a positive spread.  So if the debt costs you 5%, you want the cash flow to be at least 2-3% higher.

But when rates are rising, and tenants are being squeezed by inflation, your spread might compress.

Long-time followers know we’ve been advocates of locking rates long term because of the probability rates would turn up.  Now it seems they are.

If the trend continues, short-term adjustable loans could get uncomfortable.

Real estate investors not paying attention may be unprepared for higher rates.

But the mini-news cycle above illustrates an important lesson …

If you understand how these things fit together and their domino effect … you can see them coming … and prepare.

A weak dollar leads to inflation which leads to rising rates.

We could spend a lot more time explaining all that, but that’s the gist of it.

While it played out in the above headlines in just over a week … often these trends chug along over months or even years.

So, it’s easy (but dangerous) to fall asleep at the wheel.

Of course, it isn’t just the 10-year bond that’s signaling dollar weakness.  So is gold (rising), and oil (rising), and even cryptos (exploding).

But as mentioned earlier, for us … the MOST interesting part of the story is China … something we’ve been talking about for over four years.

Morgan Stanley, as reported by Bloomberg, essentially acknowledges that China’s economic size and strength are now able to influence the dollar … and YOUR interest rates.

Of course, U.S. policy also plays a substantial role, and piling on gobs of debt isn’t helping.

The point is that the future of money and wealth is evolving rapidly right before our very eyes … in ways far more profound than just routine economic cycles.

What’s an investor to do?

We think the right real estate, structured with the right debt, will prove to be one of the most attractive investments in the months and years to come.

But lazy or naïve investors seeing only “higher wages” and a “strong economy” and position only for sunshine are living dangerously.

Right now, we’re convinced every serious real estate investor should be paying close attention to the future of money and wealth.

That’s not a sales pitch for our event.

We created the event because headlines have been telling us for years something’s coming … and it’s getting closer every day.

So we’re getting in a room with the smartest people we know for two full days to focus on what’s happening and how to play it for safety and opportunity.

Stay alert, informed, optimistic, and pro-active.

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.

When worlds collide …

Real estate investing is a VERY different approach to wealth building than paper asset investing.  You could say they’re two different worlds.

But the paper world has far more impact on real estate investing than many real estate investors realize.

And when those worlds collide, it’s often a painful shock to real estate investors.

The 2008 financial crisis is a perfect case in point.

When the paper world started securitizing mortgages on Main Street real estate, and then created derivatives from those securities in order to place HUGE paper bets in Wall Street’s casinos …

… when the bets went bad it decimated Main Street real estate.  MANY surprised real estate investors were CRUSHED.

Of course, central banks around the world fired up printing presses and papered over the whole mess … reflating stocks, bonds, and real estate.

Those who got in the game AFTER the crash … or got in position BEFORE the crash … have ridden that reflation wave to build big fat balance sheets.

So it’s all good … right?

But there’s been some tremors in financial markers which make us think it’s a good time to check our financial earthquake preparedness.

And those early warning signs are in the PAPER world …

You’ve probably noticed the stock market’s been jittery.  Which is actually great for real estate … because more people are interested in it, and rightfully so.

But the stock market’s gyrations have baffled many financial TV talking heads.

Earnings are up, they say.  Jobs are up.  Hourly wages are up. Unemployment is down.  Taxes are down.  It’s all good … they say.

And YES … all those things are good.  Good for stocks.  Good for real estate.

But … the dollar has been falling … against gold, against the yen, and certainly against Bitcoin.

What might that mean?

It could that a weak dollar (in spite of a strong economy) means … for whatever reason … big dollar holders are selling.

Our friend Simon Black recently wrote an interesting piece on this topic.

But understanding the causes and opportunities is a BIG discussion … so we’re dedicating two full days with top experts to dig into it.

We realize compared to shopping for properties, negotiating deals, arranging financing, and getting properties prepped for sale or rent … all this financial jabber isn’t very exciting for real estate investors.

We get it.

We spend most of our time chasing opportunities as well.  Offense is fun.  And most of the events we promote focus on building wealth through real estate.

But twice a year, at our annual Investor Summit at Sea™ in the spring, and the New Orleans Investment Conference in the fall …

… we bring the worlds of real estate, paper, and commodities all together to compare notes, and get outside our real estate paradigm.

At the very least, we learn new things, meet new people, discover other interesting investment opportunities … and have a good time.

That’s a good investment right there.

Of course, if we pick up just one great idea, relationship, or insight that helps us avoid a problem or grab an opportunity sooner … it’s a GREAT investment.

We found the BEST real estate deal of our lives … at a conference.  Just sayin’…

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.

Keeping it real in a surreal world …

If you’re a newshawk like us, you’ve probably noticed the world is a little crazy.  Even something as mundane as money and wealth has become weird.

The most obvious case in point is the dramatic rise and retreat of Bitcoin.

In 2017, something triggered a rush of money into Bitcoin … driving it from $1000 in early January to a peak of nearly $20,000 less than a year later.

Pundits are still trying to divine what happened and why.  Of course, what’s just as interesting is how the world reacted.

The People’s Bank of China (PBOC), which is China’s version of the U.S. Federal Reserve, has moved aggressively to crush cryptos.

Okay.  But does that matter if you’re not Chinese or a Bitcoin buyer?  How does any of this relate to Main Street real estate investing?

Patience, grasshopper …

China’s not the only government attacking private cryptos.  Six others have already banned it, though they admittedly aren’t big players.

But India is reportedly about to join the anti-crypto club.  They’re pretty big.

South Korea (home of Samsung, LG and Hyundai) is another biggie that’s floating the idea of banning cryptos.

Of course, legislation isn’t the only way to attack an alternative to government issued currency …

We’ve been listening to precious metals pundits allege that central banks … surreptitiously through their agents … use futures contracts to manipulate the price of gold and silver.

Interesting.  Let’s put on our tinfoil hats and think about it  …

According to this CNBC report, Bitcoin started trading on the futures exchanges on December 18th.

This chart shows Bitcoin’s price peaked at $19,180 on Sunday, December 17th.

But since then, Bitcoin’s been declined sharply … all the way down to under $7000 this week.  That’s a HUGE decline.  And it started December 18th …

Weird.  Probably just a coincidence.

Of course, the story of cryptos and their impact on the future of money and wealth is a MUCH bigger discussion.

But we think it’s safe to say that cryptos are here to stay in some shape or form.

What’s also interesting is how governments are now connecting cryptos to both gold and oil … linkages which are the heritage of U.S. dollar dominance.

Meanwhile, Russia (the world’s largest producer of oil) and China (the world’s largest consumer of oil) have both been accumulating TONS (literally) of gold.


According to this article in the India Times, “The Chinese central bank is trying to diversify from the US dollar on which it has become overly reliant

(Side note: you might want to think about how reliant YOU are on the dollar … maybe China knows something …)

This article in Russia affirms the role of gold in diversifying away from the U.S. dollar.

Apparently, gold does actually have a role in global economics … even though most Americans think of it as a barbarous relic or merely a trading tool to accumulate dollars.

But major sovereign nations are using gold as a hedge against the U.S. dollar.

Smart.  Turns out 2017 was the dollar’s worst performance in 14 years.

So if Bitcoin and gold each expose the dollar’s weakness … it’s not totally shocking the issuer of dollars, the Federal Reserve, might want to see both Bitcoin and gold prices held down.

We’re not saying the Fed is behind any alleged suppression.  But we’re not saying they aren’t.  We don’t know.

But in this surreal world where we’re not quite sure of the real motivations of those in power, nothing would surprise us.

The bigger questions are … what does it all mean to Main Street investors and how can we position ourselves to both grow and protect wealth in this crazy world?

Here’s some thoughts …

If the dollar is doomed to continue its 100+ year decline … then debt and real assets are your best friend.

Debt lets you pull future dollars into the present, where you can use them at today’s purchasing power (stronger than the future’s) to acquire things of real value.

By “real value” we mean utility …  things that provide permanent and essential service to people.  Food, housing, farmland, energy, and commodities all come to mind.

Of course, when you use debt, you have those pesky payments.

So it’s REALLY nice when you can acquire real assets that produce enough cash flow to service the debt you used to buy them.  They literally pay for themselves.

Naturally, debt-financed income-producing real estate is arguably one of the best investment vehicles in a falling dollar environment.

You can buy it with relatively cheap debt and use the income to service the debt.

Over time, as the dollar falls, the dollar price of the property rises while the debt stays fixed.

Not only that, but a debt-ridden government is highly motivated to perpetuate a weakening dollar (inflation), which benefits all debtors … including YOU.

In other words, using debt aligns your investing with the government’s motivations and likely actions.

Nice.  But it gets better …

Because real estate provides housing for people … who vote, work, and have pitchforks … or in the case of the USA, AR-15s …

…  governments are much more motivated to SUPPORT real estate than attack it.

They might go after cryptos (until they can issue their own).  They might go after gold again.

They might print free money for their friends in Wall Street to blow up paper asset bubbles and drive down interest rates (nice, if you’re a real estate investor).

But if they attack real estate … that hits home (literally) … and it’s a revolution.

That’s why, as we saw in 2008, even when they screw up and real estate is collateral damage to their financial shenanigans …

… governments, central banks, Wall Street, and even corporate America all rally to prop up real estate.

From that stand point, people still hold the power.  And people live, work, and depend on real estate.

So to keep things real in a surreal world, you could do a lot worse than making real estate the anchor of your investment portfolio.

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.

A tale of two Americas …

You might think this is a political rant about income inequality … or contrasting the America of today to some past period of “the good old days.”

But it’s really more pragmatic.

Right now headlines say the economy is booming, unemployment is down, the stock market is up, and the biggest problem in housing is there’s not enough inventory.

While all that may be true, there are certainly markets where pricing is low, vacancies are high, and “bargains” can be found.

And with lots of newbie investors getting on the real estate bandwagon, we think it’s a good time to revisit a timeless piece of investment wisdom …

Cheap isn’t necessarily a good deal.

Before we expound, let’s consider the opportunities which may lie hidden inside of a U.S. economy in transition.

In other words, might one of yesterday’s disaster markets turn out to be tomorrow’s rising star?

After all, the Trump administration is putting a big emphasis on bringing manufacturing back to the USA.

And as you’ll see, many of today’s distressed real estate markets are in so-called “rust-belt” states … many of which declined substantially since “the good old days” (sorry, had to) of the heyday of U.S. manufacturing.

Now, just because Trump wants manufacturing to come back doesn’t mean it will.  And even if it does, it doesn’t mean it will come back to where it left from.

But it might.  At least in some places.  So it all bears watching.

Because if you can see something happening before most other people, you can make your move in front of the wave and go for a nice ride.

Back in November, 24/7 Wall Street published an article 30 American Ghost Towns.

It was all about neighborhoods with TOO many vacant homes … even in the midst of a housing shortage.

Naturally, houses in these areas are CHEAP …  WAY less than $100,000 per house.  In some cases, as low as $20,000.

And there are some MAJOR cities on this list including Baltimore, Kansas City, St. Louis, Cleveland, Detroit, and Cincinnati.

Now before the hate-mail starts flying, we’re not saying these are all bad cities to invest in … or that houses are cheap and vacancies are high in the ENTIRE cities mentioned.

Big cities are made up of multiple zip codes, and when you look at the 24/7 Wall Street report, you’ll see it’s reporting on SPECIFIC zip codes within those cities.

So THIS is our first point for all out-of-area investors … especially newbies …

You don’t invest in cities.  You invest in NEIGHBORHOODS. 

 And you either need to take the time to get to know your neighborhoods well … or to build a good relationship with someone who does (our favorite method).

Over the years, we’ve seen rookies get into some bad deals by researching a city and seeing promise, then buying the wrong neighborhood and ending up with a big problem.

So be smart.

Also, just because a city or zip code has fallen on bad times, doesn’t mean it will last forever.  By paying attention, you might catch a down-and-out area on the upswing.

Of course, you can die of old age bird-dogging a dead market, so how do you tell the difference between a market with potential … and one that’s probably terminally ill?

Here’s what we look for …

Population – If there’s not enough people for politicians and CEOs to pay attention to, you can be sure that town won’t get much love … or money … to change any time soon.

Education – Industry needs skilled labor, which today is still fairly intellectual (as opposed to manual).  Even in trades, computers and sophisticated equipment are often involved.

When a community has access to quality education, it’s easier for a population to upgrade skills to take advantage of opportunity when it arrives.

Families also prefer to live in areas where educational opportunities are better in the elementary to high-school levels, so education’s impact on an area’s appeal is more than just college and trade schools.

Transportation – In order for people and goods to move around, there needs to be a good airport, highway system, and in some cases, a rail system for raw materials.

Public transportation is helpful too, especially if residential areas are distanced from employment centers.

But don’t discount a small town, IF it’s near a big one.  If the commute isn’t bad, when the big city economy picks up, that nearby small town can benefit too.

Business-friendly State – Some cities are just disadvantaged because they happen to be in a state that’s unfriendly to business.

We like to talk with the local Chamber of Commerce, and read the local Business Journal, because it gives us insight into how businesses feel about themselves, their community, and what they’re working on.

Most expansions don’t happen in a vacuum, so if you’re paying attention you can see trends (both positive and negative) developing ahead of the curve … giving you the opportunity to make your moves … in or out.

Become a student of markets …

It’s more than we can go into here, but a fun exercise if you’re a real estate investing geek is to do your own common-sense analysis of what markets on a list like this have in common.

When you know the common characteristics of good markets, or bad markets, then you’ll recognize when a shift is in progress.

Obviously, recognizing trends early allows you to get out of the path of problems, and ride a wave in the path of progress.

So it’s probably not good enough to simply buy a big market or a booming economy … because things change.

Detroit was once the richest city in the world.  Then it became the largest municipal bankruptcy in the world.  That’s a big shift.  And it happened for many reasons.

It also took decades, so even sleepy investors could adjust.  Even so, there were people who didn’t see it … or bought into a decline they didn’t understand.

Sometimes when prices fall, it doesn’t mean they’ll come back any time soon.

It’s also important to realize the world is moving faster today, so a market might go from boom to bust or vice-versa more rapidly than in the past.

That’s partly because information travels faster, so people paying attention see things sooner … and they react quicker.

But if you fail to pay attention, then no amount of information can help you. The world will just spin faster … with or without you … and you’ll miss out.

To paraphrase the late, great Jim Rohn …

The book, seminar, podcast, article, or homework you don’t see or do … can’t help you.

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.

Doomsday scenario …

Imagine a scenario where a giant asteroid is on a collision course with Earth.  When it hits, a huge portion of the world will be destroyed.

Scientists and politicians know it’s coming.  But it’s years away.

Fearful of triggering panic, the information is suppressed.  Even when leaks get out, they’re spun to seem insignificant.

Of course, those in the know realize real estate and businesses in the region facing obliteration will become worthless.

They also realize values in safe areas will skyrocket once people realize what’s happening and flee the danger zone … bidding up anything available where it’s safe.

So insiders begin quietly divesting themselves of assets in the danger zone … and begin to systematically accumulate assets in the safe zone.

They know there’s time to warn people, but want to make all their moves before acknowledging to the world the gravity of the situation.

Along the way, astute observers piece together the clues.  They realize what’s happening and use all means available to sound the alarm.

Some are dismissed as conspiracy theorists.  Others as doom porn profiteers.

Meanwhile, news feeds are filled with sensational, but trivial headlines … keeping the masses distracted.

So most people go about their daily business, completely unaware a disaster of epic proportions is slowly, steadily looming closer.

Most will be caught completely off-guard.  Some will reap huge profits simply through happenstance … because they accidentally own property in the safe zone.

Most in the danger zone escape with their lives, but not their fortunes.  Because their wealth and income are all based exclusively in the danger zone, they lose everything.

However, a few alert people in the suspected danger zone decide to hedge by acquiring property and expanding their businesses into other areas.

They reason that so long as the underlying investment makes good sense in its own right, even if a disaster never strikes, they really aren’t worse off for diversifying.

Sure, it takes extra time and effort to learn a new area, build relationships, and make the investments … but the incremental expense is accounted for as an insurance premium.

What would YOU do? 

And what does this have to do with your investing?

Perhaps obviously, the asteroid is a metaphor for a catastrophic financial event … say, the collapse of the U.S. dollar or the global financial system.

Could it happen?  Will it?

Of course, no one knows.  But there’s plenty of smart people out there who think it’s already started … and is inevitable.

It may not destroy the entire world.  But it could destroy yours … depending on how well you’re prepared … or not.

Robert Kiyosaki says the stock market will eventually collapse under the weight of baby-boomers hitting age 70-1/2 and beginning forced liquidations.

It hasn’t happened yet, but that doesn’t mean his premise is false.

It can be reasonably argued massive money printing and Central Bank interventions are propping markets way up … at least temporarily.

Chris Martenson says an economic system reliant on compounding growth and abundant energy is doomed to fail.  You can print money, but you can’t print energy.

So when energy production fails to compound as quickly as debt, an economic implosion is inevitable.  There’s no economic activity without energy.

Worse, Chris says, collapse will happen quickly because of the exponential nature of debt.

You can double the straw on the camel’s back many times … but the final doubling ends it all very quickly.

Consider the growth of only U.S. debt (the rest of the world is just as bad) …

1992 – $4 trillion

2000 – $6 trillion

2008 – $10 trillion

2012 – $16 trillion

2017 – $20 trillion

Notice the speed at which the debt is growing.  It’s compounding like a cancer.  And at some point, it consumes the host.

In 2006, Peter Schiff warned the world about the 2008 financial crisis.  People scoffed.

Peter says the next crash will be even bigger because everything wrong in 2006 is MORE wrong today.

Critics of Schiff’s theory point at the stock market … and the fortunes being made … to claim all is well.

Maybe.  But Venezuela’s had one of the best performing stock markets in recent history … and it’s plain all is not well in Venezuela.

Not surprisingly, people are fleeing Venezuela… a reminder of how economic conditions, harsh or otherwise, stimulate migration.  Of course, that’s of interest to real estate investors.

But this isn’t about Venezuela.  It’s about human behavior in the face of possible disaster.

Some ignore facts they don’t like.  Others deny them.  Still others spin them, while most simply don’t understand and can’t be bothered to try.

A few will remain rational, curious, diligent, and proactive.  Common sense says those folks generally fare better.

Clues in the News …

Bloomberg recently reported China is considering slowing or even ending lending money to the United States.

Markets responded by dumping bonds, which drove up interest rates.

So yes, what China does with its balance sheet affects YOUR interest rates on your Main Street USA rental properties.

Of course, China doesn’t want bond prices to fall when it’s holding a bunch of them … especially if they’re thinking of selling.  They just want to quietly unload.

Unsurprisingly, China decried the Bloomberg report as “fake news”.

But if U.S. news is “fake”, what are non U.S. news sources saying?

Here’s an interesting headline from Sputnik News on January 16th …

Chinese Media Explain How Russia and China Can Escape “Dollar Domination”

You should read it, but two important components are oil and gold.

“ … both Russia and China are also stepping up with exploration and acquisition of physical gold reserves, hedging against the implications of a possible collapse of the de-facto world currency.”

Of course, the de-factor reserve currency they’re referring to is the almighty U.S. dollar.

Hmmm … maybe China and Russia see an asteroid on the horizon.

Doom porn?  Conspiracy theory?  Or clues of a possible cataclysmic event coming to an economy near you?

We don’t know.  But we took Robert Kiyosaki’s warnings in 2006 too lightly and paid a BIG price.

Since then, we’ve gotten to know Peter Schiff, Chris Martenson, and Simon Black.

Peter keeps us sufficiently freaked out.  He makes sure we don’t fall asleep at the watch.

Kiyosaki teaches us to keep an open mind, to seek out diverse perspectives, and talk with other interested and thoughtful observers.

Chris Martenson reminds us to pay attention to energy.  And he’s accurately predicted the recent run-up in the price of oil.

Simon Black advocates the pragmatic wisdom of having a Plan B … not being overly dependent on one location, economy, currency, or investment.

Simon says you’re no worse off to be prepared … and it could make all the difference in your future.

All of these very smart friends … and many more … will be with us for our Investor Summit at Sea™ in April.

It’s unfortunate not everyone reading this can afford the time and expense to be there.

Even more unfortunate are those who can, but choose not to.  They have the most to lose … and gain.

We don’t know if the “asteroid” reports are true or not.  But every investor owes it to themselves to consider the arguments and the options.

Better to be prepared and not have a crisis, than have a crisis and not be prepared.

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.

The disrupted American Dream …

One of today’s most popular buzzwords is “disruptive”.  It describes an event, idea, or invention that upends the status quo in some aspect of life or society.

“Disruptive technology” is used for everything from Amazon to Uber.

And as we’ve previously discussed, many of these things impact real estate and investing.

But disruption transcends technology.

Donald Trump’s election and Brexit are two examples.  The world appeared to be on one course … then boom.  A new direction.

So, political norms, societal norms, government and business models …almost everything is being disrupted right before our eyes.

In fact, disruption is so commonplace, it’s become the new normal.

But really, disruption is nothing new.  It goes back to pre-historic times.

The wheel was disruptive … and revolutionized the world (sorry, we had to…)

Farming was disruptive.  It changed the entire societal model … accelerating labor specialization, commerce … even banking.

The printing press was disruptive … connecting human minds past and present at greater speed, for lower cost, and with greater accuracy than ever before.

The U.S. Constitution was disruptive … protecting private property rights for the common man … the foundation on which all personal wealth is based.

That’s a personal favorite. 😉

Radio, telephone, personal computing, the internet, smart phone … all disruptive … each one taking idea sharing to never-before-seen levels.

Trains, automobiles, and airplanes all disrupted the transportation norms of their time … allowing people and their possessions to circulate faster and less expensively.

Now blockchain technology … at least for now … is threatening to disrupt how freely money and wealth circulate.  And governments have noticed.  Uh oh.

Of course, history shows with every disruption, there are winners and losers.

For every railroad baron or millionaire automobile maker, there were thousands of wagon-makers and liveries put out of business.

So while disruption isn’t new … the rate is unprecedented.  The world we live and invest in is evolving at a dizzying pace.

Blink and you miss huge opportunity.  Or worse, you get wiped out by a trend you didn’t even see coming.

The faster the world is going … the further ahead you need to look.

 So with this mindset, here’s a headline that caught our attention …

Why it makes more sense to rent than buy – Market Watch, 1/13/18

Obviously, a real estate headline.  But disruptive?  Seems pretty mundane.

After all, the rent vs. buy debate has been going on forever … usually linked to temporary circumstances favoring one side over the other at the time.

But this article references two interesting reports …

One is the ATTOM Data Solutions 2018 Rental Affordability Report.

It notes … buying a home is more affordable than renting in 54 percent of U.S. markets, but 64 percent of the population live where it’s cheaper to rent.

Hmmm …

Looks like folks prefer to rent where they want to live than buy where the numbers make sense.  Apparently, buying just isn’t that important to them.

Which leads to the second report, A Revision of the American Dream of Homeownership.

This one’s a premium report, so the link’s to the press release … but look at the title … “a REVISION of the American Dream”.

The idea that something so foundational as the American Dream is being … disrupted … is something worth thinking about.

Market Watch did another article based on this report … “Renting is better than owning to build wealth – if you’re disciplined to invest as well.”

Some might say it’s a hit-piece on real estate to entice millennials to put their savings in the stock market rather than a home.

But that would be cynical.

More interesting is the possibility there’s really a disruptive trend developing in terms of the way society views home ownership.

Consider this …

We have a friend who’s a very successful millennial, who can easily afford to own any kind of car … several of them … if he wanted to.

He doesn’t.

Now that he’s discovered ride-sharing, he sees no value in owning a car … not as a status symbol or an investment.

We’re not suggesting this guy’s viewpoint represents the millions of millennials out there.  But it’s worth noting.

Millennials are a big, powerful demographic rolling through the seasons of life … just like the baby boomers did.

Except millennials aren’t like Boomers …they live in a different world and view it through their own lens.

Career, opportunity, family, community, home ownership … roots … are very different today compared to 50 years ago.

In a world where you may change jobs a dozen or more times in a career, and you operate in a global economy, with a social network that’s not local, but virtual …

… home ownership can go from being stabilizing to burdensome.

The sharing economy is changing the way people think about the value of owning things they simply want the use of.

Absent paradigms of ownership, sharing is arguably more efficient.  But for the first time in history, it’s logistically possible.

No generation before has had as many options for sharing as there are today.  

And while pay-per-use seems like a no-brainer when discussing a depreciating asset like a vehicle, Market Watch isn’t the first to argue a home isn’t a great investment.

The pioneer in the “your home is not an asset” mindset is none other than our good friend (and boomer), Robert Kiyosaki.

Of course, Robert’s an avid real estate investor, so his issue isn’t real estate.  It’s about respecting the difference between consuming and investing.

Investing is about profit.  But when you consume, you want value … the right mix of quality, service, and price.

Some people rent their residence because they get a better value, have less responsibility, enjoy more flexibility and variety …

… and it frees up money to invest in rental properties.  They get a better ROI.

So they own real estate … just not the home they live in.

If there’s a new attitude about home ownership working its way into the marketplace, it could lead to a new experience in landlording too.

Because now you might have more affluent, well-qualified tenants competing for longer term tenancies in nicer properties in better areas.

Stable people with good jobs and incomes, who want to live and keep a nice home in a good area, but don’t want the responsibility of home ownership … can be great tenants.

They can also be a way for you to collect premium properties while someone else pays for them.

It’s a trend we’re watching.

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.

Looking Ahead with Our Predictions Panel – Part 1

There’s a lot of change on the horizon as we sail into the new year.

To help us process it all, we dialed up some of the biggest brains we know to share their insights, perspectives, and predictions.

In part one of our two-part Predictions Panel, we’ll have these smart guests take a look into their crystal balls and introduce the hot topics that will help YOU inform your investing decisions in 2018.

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

  • Your future-predicting host, Robert Helms
  • His predictable co-host, Russell Gray
  • John Burns of John Burns Consulting
  • Frank Holmes from U.S. Global Investors
  • Money Strong’s Danielle DiMartino Booth
  • Peak Prosperity’s Chris Martenson



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What is 2018 going to be like for investors?

This is the big question on everyone’s minds. As real estate investors, there are a lot of factors that impact our marketplace. So, we need to look beyond the real estate market and examine the broader economy.

There are many variables that will determine how 2018 plays out … like the new tax law, the second year of the Trump administration, a new chairman of the Federal Reserve, record high stock markets, the rebirth of U.S. manufacturing, and international trade deals.

And that’s just the beginning!

Any of our guests today could fill an entire show … and most of them have! But today we are just hitting the highlights. It’s part one of our 2018 Predictions Panel.

What the Trump administration means for real estate investors

“Trump is a disrupter,” says Frank Holmes of U.S. Global Investors, “but that’s not necessarily a bad thing. Many positive changes can come because of that.”

We’ve seen how other great disrupters … like AirBnB, Amazon, and Uber … have boosted marketplaces in the end.

“I think the government won’t be able to raise rates too much and is going to do everything they can to maintain economic growth,” Frank adds.

One of the biggest changes the Trump administration is facing in the new year is at the Federal Reserve. Money Strong’s Danielle DiMartino Booth reminds us that President Trump has three vacancies to fill at the Fed. And A LOT is riding on who he chooses to fill those positions.

“2017 was clearly the year of the natural disaster, so we are seeing a ‘sugar high’ from the rebuilding that is happening in places like Puerto Rico, California, Florida, and Texas,” Danielle says. “But we are also starting to see signs that the U.S. household is simply buckling under the strain of inflation.”

How these Fed appointees choose to adjust rates could have a major impact on the economy … and that means the real estate market too.

What about the new tax cuts? John Burns of John Burns consulting predicts that the new tax cuts will be a boost to the economy, particularly to entry level buyers looking for median-priced homes.

Get educated on cryptocurrency

Cryptocurrency is a hot topic in the investment industry. From Bitcoin to Ethereum, it seems like everyone is rushing to get a piece of the pie. But what do our experts think?

“I am completely in love with the technology itself,” says Peak Prosperity’s Chris Martenson. “But it’s hard to predict who is going to be the winner in the end. Which piece of cryptocurrency will survive and still be viable 10 years from now?”

For Chris, it’s really too early to say. He likens it to when the technology to record movies and play them back at home hit the scene.

The core technology was amazing, but who could have predicted that it would evolve from VHS to DVDs to Blockbuster to Netflix?

“My advice would be to understand that when it comes to cryptocurrency, you are speculating,” Chris says. “If you’re interested in these assets, have a small portion of your speculative money there. This isn’t investing at this stage. It really is just speculation.”

Danielle agrees, “The exchanges of the world are not your friends. When it comes to cryptocurrency, I’m not saying avoid it altogether. Just remember that there is nothing backing this right now, so be careful.”

Watch for signs of an economic downturn

They say what goes up must come down. So, it’s natural in times of good economics to wonder when the next recession will arrive.

The number one most important thing in real estate is the economy. If any other sector collapses, the real estate industry will suffer too.

Pay close attention to other industries to spot indicators of economic change.

“After Hurricane Harvey, one of the things I will be watching most closely in 2018 is car sales,” Danielle says. “They’re a good sign of where the economy is heading.”

Danielle also suggests monitoring economic conditions internationally. With so many geopolitical ties and trade deals, our economy relies heavily on the economies of other countries.

“I wouldn’t be surprised if the catalyst for the next American recession came from somewhere overseas,” Danielle says.

Real estate investors can also look within the U.S. market to monitor conditions. For John, one area to keep an eye on is the growth and supply of new homes coming to market.

“If you look at the numbers of new homes coming into the marketplace, you’ll see that those numbers are pretty stagnant,” John says. “Construction costs have gotten so out of control that many homebuilders aren’t able to grow their businesses over time.”

However, John says that right now, he feels there aren’t any major markers pointing toward recession in the real estate industry. But it’s always a good idea to keep an eye out for potential risks.

In the words of Frank Holmes, “A lot of money has gone into real estate, so I think it is going to remain attractive to investors.”

Now you … the investor … get to take all these ideas and ask, “What does it mean to me?”

And there’s more information to come next week in part two of our Predictions Panel. Tune in so you can gather even more facts and be ready to make a plan for a profitable 2018.

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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