Wealth redistribution by hook or by crook …

You’ve probably heard the expression …

“There’s more than one way to skin a cat.”

We’re not sure why anyone would want to skin a cat… that sounds gross and cruel.  But the idea is there’s often more than one way to get something done.

In this case, we’re talking about wealth re-distribution.

We realize that’s a politically charged topic, but anyone who’s rich … or plans to be … should be paying close attention to the winds of change on this hot topic.

No matter which side of the political spectrum you’re on, the problem everyone is staring at is the same …

There’s a big and growing gap between the rich and the poor.

Meanwhile, only a small percentage of middle-class are successfully fighting their way into the realm of the rich.

Most are falling off the back of the bus into the pit of poverty.

We’re not here to point fingers.  There’s plenty of blame to go around.

But we think it can be credibly argued that the Fed’s decade-long easy-money policy has inflated both asset prices and the cost of living.

This worked to the advantage of asset owners, but to the detriment of the paycheck-to-paycheck folks.  It’s no surprise they’re mad about it.

Of course, there’s no point in ranting about what we think policy makers should or shouldn’t do.  They don’t listen to us anyway.

So we simply watch and consider how the future might unfold … then get in position to capture opportunity and mitigate risk.

You’re probably aware, the USA is ramping up for yet another knock-down drag-out presidential election cycle.

In addition to stocking up on popcorn, we’re thinking about which issues will frame the debates.

Based on the mid-term results … and the predominant philosophies espoused by the challengers …

… it seems a major objective is to make rich people do more for the poor … by hook or by crook.

There’s the “Robin Hood” approach of taxing the rich and giving benefits to the poor … free college, healthcare, basic income, etc.

Let’s call the Robin Hood approach “by crook.”

Then there’s the “Opportunity Zone” approach …

The Opportunity Zone idea is to provide tax incentives to the rich so they voluntarily move their money into poor areas … thereby creating jobs and commerce for the currently disenfranchised.

We’ll call the Opportunity Zone approach “by hook.”

There’s a lot of history on the crook approach … and it doesn’t have a strong track record of creating abundance.  But it’s easily sold to desperate people.

Obviously, no one yet knows how the Opportunity Zone “hook” will work out … but the idea seems promising, so we’re watching it closely.

And when you consider the common sense wisdom in the saying …

“The definition of insanity is doing the same thing over and over but expecting a different result.”

… at least Opportunity Zones are a new approach to the problem of getting capital to where it’s needed most.

That’s why when we saw Yardi Matrix had released this well-written and informative white paper on Opportunity Zones, it captured our attention.

You should read it, but there are a few excerpts we think are noteworthy …

“… within Opportunity Zones, there are either in place or under construction 1.9 million multi-family units, 960 million square feet of office space and 189 million square feet of self-storage.”

Clearly, Opportunity Zone pioneers are quickly moving from idea to action.  And even though it’s still ramping up, the scope is impressive …

“As a percentage of total space, properties in opportunity zones that are in place or under construction represent 13.1% of total multifamily units nationwide, 13.7% of total office space and 11.4% of total self-storage space.”

So Opportunity Zone development is already up to over 10% market share nationwide in not one, but THREE real estate niches.

That’s impressive.

And even though many details about the Opportunity Zone program remain unclear ….

… BIG money is moving forward NOW and creating a wave of capital small investors can potentially ride to profits of their own.

This creates an unprecedented opportunity for Main Street investors.

Because while a small investor might have the means to fix up a single derelict property on his own, he can’t really change the local economy all by himself.

Sure, a large group of small investors might team up to upgrade a specific neighborhood … changing the personality of the neighborhood and improving everyone’s chance of seeing their value-add stick long-term.

But only BIG money can rehab entire regions … or “zones.”

And when it does, it creates critical mass which can fundamentally change the economic drivers and opportunities of entire local economies …

… including jobs, and access to services and opportunities for those people who get left out of financial boom times.

After all, you can only benefit from asset inflation if you own assets.  Most lower-income folks don’t.  For them, inflation just means higher living expenses and a higher hill to climb to become an asset owner.

But Opportunity Zone incentives entice rich people to move their profits from inflated financial assets into depressed real estate.

But not as flippers.

The best Opportunity Zone perks go to those who stay in their markets for at least TEN years.  That’s enough time to light a permanent flame in a local economy.

And as jobs are created to do the actual work of rehabbing these regions …

(and remember, these are jobs which can’t be off-shored)

… the workers will have both the incomes and opportunities to purchase affordable properties themselves.

Now the worker can get into the asset owner class.  And until they do, they have paychecks to pay YOU rent.

Of course, as the workers’ labor is partnered with investors’ capital to improve the Opportunity Zone, the asset owning laborers also get to ride the equity wave they’ve helped create.

And so do YOU … if you’re in the right position.

So we encourage you to read the Yardi Matrix white paper because there’s useful data and insights to help identify specific markets to explore.

Opportunity Zones may not yet be a proven model for creating access to prosperity for lower-income folks, but the potential is there.

And if YOU aren’t as high up the economic food chain as you’d like to be … consider syndication as a way to get rich helping the rich get richer.

When you syndicate, YOU marry your capital and labor to the capital of your wealthy investors … and then marry all that to the BIG money driving the growth in these Opportunity Zones.

It’s a win-win-win.

Until next time … good investing!


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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.


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Choose the Right Tax Advisor and Preparer

Choose the Right Tax Advisor and Preparer

 

If tax season gives you heart palpitations, fear no more. The secret to protecting your wealth and reducing your costs is finding the right tax advisor. Here’s how!

 

Certified Public Accountant Tom Wheelwright has devoted his life to studying the tax law, teaching the tax law, and using the tax law to help his clients reduce their tax burdens. Now, he’s sharing his extensive knowledge with investors like YOU.
When you reduce your taxes, you increase your CASH FLOW. When you increase your cash flow, you increase your WEALTH. It all starts with finding the right tax advisor and preparer.
Read this special report to discover …

  • The top characteristics of a good tax advisor
  • Questions you should ask potential tax advisors and preparers
  • The questions your tax advisor should be asking YOU

Your tax bill is affected more by the tax advisor you choose … than by any other single decision. So delve into this special report for wisdom on what kind of tax advisor is right for YOU.

Fill out the form below to access your complimentary copy of Choose the Right Tax Advisor and Preparer by Tom Wheelwright, CPA.

WealthAbility – Tom Wheelwright

WealthAbility – Tom Wheelwright

 

Tax-saving software, self-paced online courses, and a network of CPAs at your disposal … it’s a smart investor’s dream. Discover WealthAbility!

 

Tom Wheelwright has spent the last three decades of his life studying and practicing tax law. On top of that, he is a Certified Public Accountant and a best-selling author.

Did we mention he is also a tax advisor to legendary Rich Dad Poor Dad author Robert Kiyosaki?

Now, he is putting his expertise to work for YOU.

WealthAbility is a global network of CPAs and a platform of educational tools. Tom created the platform to share innovative strategies for reducing taxes and creating wealth with investors like you.

With WealthAbility, design your own plan to achieve your financial dreams … all while working hand-in-hand with vetted advisors to legally reduce your taxes by up to 40 percent.

WealthAbility’s network of financial experts help you optimize your business structure and operations to maximize your tax incentives. You don’t need Wall Street to take control of your money.

Access tax-saving software, self-paced online courses, and free articles and advice from Tom and his team.

Tap into the WealthAbility resources by completing the confidential form below.

You will receive your own free copy of How to Choose the Right Tax Advisor and Preparer.

BONUS! You’ll also receive information on how to sign up for Tom’s FREE Weekly Report … the No. 1 source for tax-saving and wealth-building strategies.

Simply complete the form below to begin your path to reducing taxes now …

Can you handle the truth?

“You can’t handle the truth!” 

 – Jack Nicholson in A Few Good Men

Neither optimists or pessimists can handle the truth.Optimists refuse to acknowledge the part of reality that’s negative …

… while pessimists can’t see the ever-present opportunities hidden behind the problems.

While we’d rather be optimistic than pessimistic, maybe it’s better to be BOTH.“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” 

 – F. Scott Fitzgerald 

Here are some thoughts about risk and opportunity from legendary real estate investor Sam Zell …

People love focusing on the upside.  That’s where the fun is.  What amazes me is how superficially they consider the downside.”  

“For me, the calculation in making a deal starts with the downside.  If I can identify that, then I understand the risk I’m taking.   Can I bear the cost?  Can I survive it?” 

You can only take calculated risks if you look carefully at both the upside AND the downside.

Today, the entire global financial system is largely based on “full faith and credit” … primarily in the United States dollar.

And there’s a gigantic investment industry that’s built on perpetual optimism …and a belief non-stop debt-fueled growth FOREVER is actually possible.

Even worse, the entire financial system’s fundamental structure literally REQUIRES perpetual growth to avoid implosion.

That’s why central banks and governments are COMMITTED to debt and inflation … at almost ANY cost.

But as Simon Black points out in Future of Money and Wealth 

History is CLEAR.  Empires and world reserve currencies don’t last forever.

And irredeemable paper currencies and out-of-control debt ALWAYS end badly … at least for the unaware and unprepared.

Optimists can’t see this.  So they take HUGE risks they don’t even know exist.

Pessimists can’t act.  So they miss out on the HUGE opportunities that are the flip-side of the very problems they obsess over.

Robert Kiyosaki stresses the importance of being REALISTS …

… standing on the edge of the coin, seeing BOTH sides … and then being decisive and confident to ACT in pursuit of opportunities while being keenly aware of the risks. 

We created the Future of Money and Wealth to gather a diverse collection of speakers and panelists together … to examine the good, the bad, and the ugly …

… so YOU can have more context and information to make better investing decisions. 

Chris Martenson opens our eyes to the physical limitations of long-term perpetual exponential growth which depends on unlimited supplies of clearly LIMITED resources.

Of course, as these critical resources dwindle, they’ll become very expensive as too much demand competes for too little supply.

When you see nation’s fighting over scarce resources, it’s a sign of the times.

But of course, there’s OPPORTUNITY hidden inside of crisis.

And to seize the opportunity, you must understand it … or it just sits there like a hidden treasure under your feet.

But it’s not just recognizing trends.  It’s also TIMING.  And being a lot early is much better than being even just a little late.

To beat the crowd, you can’t wait for the crowd to affirm you. 

To get timing right, it’s important YOU know what the signs are.

What does it mean when Russia dumps Treasuries and buys gold?  What caused Bitcoin to sky-rocket in 2017?  Why are there bail-in provisions in U.S. banking laws?

Peter Schiff saw fundamental problems in the financial system back in 2006 … and screamed from the rooftops that the financial system couldn’t support the then red-hot economy.

Few listened … then WHAM!  In 2008, the weakness of the financial SYSTEM was exposed … and MANY people were CRUSHED.

Peter insists the REAL crash is still yet to occur … and everything that made the financial SYSTEM weak in 2006 is MUCH WORSE today.

Yet small business and consumer OPTIMISM is at all-time highs.  The ECONOMY appears to be BOOMING … again.  And Peter’s still screaming out his warnings.

The Fed is RAISING interest rates to cool things down.  But history says EVERY SINGLE TIME the Fed embarks on a rate raising campaign it ends in RECESSION.

In Future of Money and WealthFannie Mae chief economist Doug Duncan reveals when he thinks the next recession is coming … and WHY.  We listen to Doug because he’s got a really good track record.

The 2008 crisis exposed real estate investors to the REALITY that what happens on Wall Street, at the Fed, and in the global economy … can all rain down HARD on Main Street. 

Ignoring it doesn’t make it go away.  And you’ll die of old age waiting for the storm clouds to blow away.

There will ALWAYS be risk.  There will always be OPPORTUNITY. 

It’s not the external circumstances which dictate what YOU get.

It’s really up to YOU … and your ability, like Sam Zell, to see both opportunity and risk, so you can aggressively reach for opportunity while carefully navigating risks.

Education, perspective, information, and thoughtful consideration are all part of the formula.

That’s why we created the Future of Money and Wealth video series.

Future of Money and Wealth features TWENTY videos … over fourteen hours of expert presentations and panels …

… covering the dollar, oil, gold, real estate, crypto-currencies, economics, geo-politics, the new tax law …

… PLUS specific strategies to protect and GROW wealth in the face of potentially foundation-shaking changes to the financial system.

Just ONE great idea can make or save you a fortune. 

Future of Money and Wealth might just be one of the best investments you’ll ever make.

To order immediate access to Future of Money and Wealth … 

Click here now >> 


More From The Real Estate Guys™…

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

Headlines say real estate funds performing well …

Regular followers know we’re news hawks.  We scour the headlines for clues about opportunities and threats facing real estate investors.

We look at the good, the bad, the ugly … and consider things at the micro, macro, geo-political, and systemic level.

Even though we watch a broad range of real estate niches … we tend to look at the world through the eyes of a syndicator.

We think raising private capital to invest in real estate is the single BEST opportunity for real estate investors … and one of the best business opportunities in ANY industry.

So it didn’t surprise us when the following headline popped up on page one ofYahoo Finance, the most visited financial website on the internet …

Closed-End Real Estate Funds Are Performing Well

The real estate market is booming … Not surprisingly … funds that focus on real estate have been posting good numbers …”

A “closed-end fund” just means a fund which raises a specified amount of money, then closes to new investors.

This is different than a typical “open-end fund” like a mutual fund which continually accepts new investors.

Our point today is … 

Mainstream headlines are informing the market real estate is a winner …

…and that individual investors can access real estate through funds … versus taking on the personal hassles of tenants, toilets, and termites.

Of course, the aforementioned article is talking about publicly traded funds, which come with a host of risks most Main Street investors are unaware of.

But if YOU are thinking of investing in real estate through a publicly traded fund, OR …

… if you’re talking to Main Street investors about investing in YOUR real estateprivate placement (syndication) …

… then you’ll find it VERY helpful to understand the risks in public funds.

Publicly-traded real estate funds can be used as gambling chips in Wall Street casinos … just like any publicly traded stock.

This means speculators (gamblers) can short-sell, trade on margin, and use options … all of which add volatility to the share price.

So even if the underlying asset is as stable as the rock of Gibraltar … the share price can bounce all over the place as it’s traded in the casinos.

Of course, if you’re a long-term buy-and-hold paper-asset investor, maybe that doesn’t matter to you … just don’t watch the share prices or you might get nauseous.

But MUCH less understood is the counter-party risk every paper-asset investor faces because of the way paper-asset trading is facilitated.

In short, counter-party risk is the exposure you have when an asset on your balance sheet (a stock, bank account, a bond) which is simultaneously someone else’s liability.

In other words, they own the the asset and OWE it to you.  YOU own an IOU.

If the counter-party fails to perform or deliver … you LOSE.

Most people understand the concept of counter-party risk … but many don’t understand all the places they’re actually exposed to it.

And it’s a LOT more than you might think.

In the case of publicly-traded securities, like closed-end real estate funds, you’re NOT the registered owner … your broker is.

You get “beneficial ownership” through what is effectively an IOU from your broker to you.  The fund doesn’t even know you exist.

Of course, this is all fine as long as the financial system supporting all this is sound.  But in a crisis, if the broker fails, you might end up a loser.

It’s not unlike what happened in the 2008 financial crisis …

In short, individual mortgages … which are great assets to own … were pooled into securities and made into gambling chips in the Wall Street casinos.

Because the “beneficial ownership” of the mortgages changed hands so quickly, it was all facilitated through a system called Mortgage Electronic Registration Systems (MERS).

When the financial system nearly collapsed in 2008, the flaws of MERS were exposed … as the legal documentation required to affirm clean title to the asset wasn’t properly maintained.

Some of the beneficial owners of the mortgages couldn’t prove legal ownership and lost when property owners challenged foreclosure in courts. Huge mess.

So there’s a BIG difference between “beneficial ownership” and actual ownership.  And the difference isn’t exposed until it matters.

Sometimes that’s ugly for investors.

The GREAT news for you and your investors is … it’s NOT necessary to play in the Wall Street casinos to get into a real estate fund.

In fact, we’d argue it’s better if you don’t.

If you’re following The Real Estate Guys™, you’re probably already a fan of real estate and may already be a successful individual property investor.

Maybe you’re considering, or have already started, putting together groups of investors to syndicate bigger deals.

Or maybe you’re tired of being an active investor … and now you’re looking to stay in real estate, but as a passive investor in another investor’s deal.

In any case, it’s important to understand the BIG differences between public and private real estate fund investing.

As an investor in a private offering, you directly own the entity which directly owns the asset.  There’s no counter-party who owes you the shares. YOU own them.

We think when you delve into the differences, you’ll agree private offerings are arguably a MUCH better way to go.

Of course, if you’re interested in starting your OWN real estate investment fund, the timing couldn’t be much better.

Headlines are telling the marketplace real estate funds are performing well.

And when you explain the important differences between public and private funds, we’re guessing you’ll get more than your fair share of investors interested in investing with YOU.

Main Street investing in Main Street … outside of the Wall Street casinos.  We like it.

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.

SWOT are you worried about …

A common adage is “treat your investing as a business”.  

Good advice!  And at first blush, you might think it means …

  • Figuring out your mission, vision, values …
  • Establishing clearly defined goals and objectives …
  • Developing strategies, tactics, processes, policies and procedures …
  • Recruiting, training, and leading a team …
  • Setting up communication and accountability rhythms, and processes for evaluating progress and making adjustments

All true.  But it’s also very important to pay attention to the economic environment you’re operating in.

A popular business planning tool is SWOT analysis … which stands for Strengths, Weaknesses, Opportunities, Threats.

SWOT helps you make better decisions about where to focus time, attention, and resources.

Most amateur investors focus only on opportunity.  They look for it.  They chase it.  They stretch their limits reaching for it.

And sometimes they end up in dangerous deals by not leveraging their strengths, acknowledging their weaknesses, or recognizing external threats.

In Am I Being Too Subtle?, multi-billionaire real estate investor Sam Zell says a big part of his success is the ability to understand the DOWNSIDE … and still proceed.

Most people ignore threats because they’re a downer.  It FEELS better to focus on sunshine.  It’s just not smart.

Risk is gloomy.  It doesn’t sell seminars, books, or video-courses.  And it can chase away an audience.

So investors are under-served by most gurus, media, and pundits because few talk candidly about threats.

Yet it can SAVE YOUR FINANCIAL LIFE.  So we do it anyway.

Besides, the flip-side of most risk is opportunity.  So when you frame looking at threats as searching for opportunities, it’s not so bad.

Part of SWOT is about assessing the environment you’re operating in.

We divide investing environments into four categories … Micro, Macro, Geo-Political, and Systemic.

Micro factors include …

  • The property, parties to the transaction; financing, etc.
  • The neighborhood, local economy; local laws, taxes, customs, etc.
  • The local team … property manager, on-site staff, etc.

Micro factors are where most investors start and finish … because micro factors are easiest to see and handle along the shortest path to getting the deal done.

Macro factors include …

  • Interest rates and factors which drive them
  • Federal taxes and laws
  • Policies affecting job creation, living costs, real wages, consumer and business confidence
  • Economic factors affecting energy, materials and commodities costs, currency strength, etc.

Sure … this is some heady stuff …

And if you’re only going to play small and VERY conservatively, maybe not worth all the effort to watch and interpret macro factors.

Then again … many small investors got killed when the Tax Reform Act of 1987 changed the tax treatment of rental properties.

They probably wish they’d been more aware and prepared.  When things are changing, a “wait and see” approach can be painful.

But if you plan to play big … and especially if you’re going to raise money from private investors … you’ll definitely want to invest in your macro education.

Remember … the 2008 crisis which crushed many unprepared investors started at the macro level … before crashing down on the micro level.

Most micro-players (including us), didn’t see the storm forming at the macro level until the monsoon hit.  Bad scene.

So … how much advance notice do YOU want when something major is lurking on the horizon?  More is probably better.

Geo-Political factors include …

  • Currency and trade wars
  • Oil and energy policies
  • International treaties (trade, land-use, etc.)

Most people hear about geo-political factors in the news all the time … but don’t consider or understand their impact on Main Street micro-investing.

Systemic factors include …

  • The financial system … currency, banking, bond market, etc.
  • The environment … energy, climate, water, etc.

We think systemic factors just might be the BIGGEST threat most investors aren’t paying any attention to.

Yes, it’s a lot to consider.  And maybe you doubt it really matters to your daily real estate investing.

That’s what we thought … before 2008.

Then we found out the VERY hard way these things DO affect Main Street investing … so thinking about them isn’t just for wonky paper asset pundits.

Let’s look at some recent headlines … how they might affect our Main Street investing … and let’s just focus on oil …

Is The Oil Industry Repeating A Critical Error – Oilprice.com 7/14/18

 “ … Wall Street has been subsidizing the consumption of oil on Main Street.”

“… the punishing price decline in oil from 2014 to 2016 … resulted in deep cuts in exploration and development throughout the industry …”

“… there isn’t an oil price … both low enough to avoid economic stagnation …  yet high enough … to prevent a decline in the overall rate of production worldwide.”

Let’s break it down …

Energy is essential to economic activity.  No energy, no growth. Restricted energy, restricted growth.  Expensive energy, expensive growth.  You get the idea.

Energy is a key input into the cost of EVERYTHING.  When subsidies mask rising costs, economic numbers look better than they really are.

Remember …  a strong economy is NOT the same thing as a strong financial system.

Investors make mistakes when they deploy capital based on false readings or temporary circumstances.

Remember what happened to real estate investors who flocked to North Dakota because of the oil boom … a boom only possible because of high oil prices.

When oil prices crashed, so did the North Dakota real estate boom.  Investors only watching micro-factors … and even macro-factors … didn’t see it coming.

Whether it was Saudi Arabia attacking U.S. frackers … or the U.S. directing an economic assault on Russia’s oil revenue … oil prices fell because of what was happening at the geo-political level.

So today, knowing oil prices affect economic growth, consider these recent headlines …

It takes cheap energy to grow an economy fast.  And with the Fed raising interest rates, Trump’s using tax cuts and cheap energy to goose the economy.

He’s got to out-run ballooning deficits and rising interest costs.  Cheap energy … even if only temporary … buys some time.

But cheap energy doesn’t fund the exploration necessary to replace oil being consumed.  Very few people on financial TV talk about this.

That’s why we hang out with brainiac Chris Martenson.  He’s a fun guy … a positive guy … but he’s a realist.  It’s sobering.  Brutal facts can be that way.

At some point, supply and demand take over and prices rise … slowing or reversing economic growth, driving up costs, and probably bankrupting marginal businesses.

Many billions in oil industry debt could go bad.  Remember when sub-prime mortgage debt went bad?

The financial system today is rife with counter-party risk, so bad debt can spread like wildfire through credit markets.

We’re not saying it’s going to happen, but we’re watching.  If something starts to break, we want to see it sooner rather than later.

Of course, we’re also watching oil, like gold, for its role in currency wars.  We remain convinced the dollar will be a major story in the next ten years… or less.

A little spooky.  But pulling the sheets over our heads doesn’t make it go away.

The good news is there are smart people watching all this … and thinking deeply about what it all means.

That’s why we get together with them regularly on our Investor Summit at Sea and the New Orleans Investment Conference.

These are voices mainstream sunshine-sellers don’t promote.  It’s bad for ratings.

But we put together nearly 14 hours of presentations and panels with all the big brains from our Future of Money and Wealth conference …

So if you missed the live event, you can still see and hear what everyone has to say. Click here to learn more.

Smart business people and investors practice SWOT… and invest in growing their education and network … so they can make better, faster investing decisions … in ANY economic environment.

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.

Protecting equity from bursting bubbles …

One of the primary purposes of easy money (“quantitative easing” or QE) is to inflate asset prices, bloat balance sheets, and create a wealth effect.

The formula is simple.  Print gobs of money, buy bonds to drop interest rates, and flood the markets with liquidity.

Corporations borrow cheap money to buyback stocks … pushing stock prices up and triggering big bonuses for execs.

Corporate raiders borrow cheap money leveraging operating cash flow into leveraged buyouts … triggering mega-mergers and acquisitions … and fat fees.

Real estate investors borrow cheap money … leveraging rental income into big mortgages … bidding up prices, creating lots of equity, and compressing cap rates.

Even everyday homeowners get in on the action … borrowing cheap money and leveraging their paychecks into big mortgages … pushing up prices and creating lots of equity.

And some of the equity boom in real estate comes from folks moving some of their stock equity into fancier houses.

Of course, from a portfolio management perspective, it’s probably not a bad idea to reposition fickle, volatile paper equity into boring, stable real estate equity.

For those with real estate equity in bubbly markets, it’s probably a good idea to consider repositioning some of that equity into less bubbly real estate markets.

After all, if quantitative easing was about inflating asset prices … what’s the likely outcome of quantitative tightening?

Right now, the Federal Reserve is raising rates and shrinking its balance sheet … which is the OPPOSITE of what they did to inflate asset prices.

So it’s reasonable to be concerned about the equity on your balance sheet.  If the prices of your stocks and real estate fall, so does your equity.

This all begs the big question … how can you protect your equity from bursting bubbles?

Aside from selling everything and sitting in cash … which has its own risks … one strategy is to simply reposition equity into assets which are less affected by leverage.

It’s why Jim Rickards (Currency WarsDeath of MoneyRoad to Ruin) recommends allocating a portion of your balance sheet into real assets, including gold and unleveraged real estate.

Of course, these strategies are easy to talk about.  But in the real world, it takes some work to actually implement them.  And it starts with education.

But you’ve read this far, so you’ve already begun the process.  Good job!

We get into much greater detail in the Future of Money and Wealth video series.

In fact, in module 13 of 20, there’s a detailed strategy (too big to explain here) for repositioning equity for wealth preservation, privacy, and increased cash flow … and some other VERY cool benefits.

But there’s more to protecting equity than simply understanding a strategy.

If you’re going to move equity from highly-leveraged stock or real estate markets into less-leveraged real estate markets, you’ll need to find and learn those markets.

One of our favorite un-leveraged real estate markets is Belize.

There’s a long list of reasons why we like a very specific market in Belize, including the fact it’s not leveraged … yet.

That’s because getting wealth into non-leveraged real estate markets insulates your equity if credit markets seize up like they did in 2008.

Just look back on what happened in Texas in the financial crisis that temporarily wiped out lots of equity for a several painful years …

Sure, you could get loans in Texas … but Texas law restricted some of the more aggressive lending.  So less air got into Texas values.

That’s a big reason why the Texas markets didn’t bubble as much as other markets, which made it boring pre-crash … but VERY attractive post-crash.

Well, Belize was even MORE stable than Texas going through the crisis … and that was before Belize had as much global exposure and demand to prop it up as it has today.

We thought Belize made sense heading into back then and we like it even better today.  That’s why we continue to share it with people through our discovery trips.

It’s not for everybody, but we think everyone would be wise to take a closer look.

Last year, Hilton Hotels decided to plant a flag in Belize.  Marriott just announced earlier this year.  Big players like this little market for a reason.

When you see big brands making moves into a market, it’s a leading indicator of market strength.

And when you have a chance to get in a market BEFORE leverage arrives, you have a good chance of catching a big equity wave.

Of course, if the leverage never happens … you simply have a chunk of your wealth parked in a stable market with some VERY desirable lifestyle perks.

So whether you do it in your own account or with partners through syndication, Belize is a market to consider right now … and you can learn all about it on our next fun-filled discovery trip to beautiful Belize.

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.

Capitalizing on the American dumbbell …

Ohhhh … there’s SO many directions we could go with that subject line … but let’s pick something both potentially polarizing and unifying …

Income inequality.  It’s a political cause and an economic reality.

But we’re not here to talk politics.  Because it doesn’t matter if we think it’s fair or not.  We’ll leave that to the politicians and activists.

Income inequality is what it is.  And while our politics might affect our voting habits … the economic reality is what drives our investing decisions.

So what is income inequality … and what does it mean to real estate investors?

Great question … so glad you asked.

In simple terms, income inequality refers to a disproportionate amount of a society’s income concentrated in a small percentage of people at the top …

… with a big gap between the masses at the bottom who average much less income per person.

Sadly, this topic often descends into an argument of accusations between political viewpoints … a blame game.

People at the top look down on the lower income masses with contempt …

They don’t work. They don’t save.  They don’t invest.  They don’t take risks.  They’ve made their own bed.

People at the bottom look up at the rich with envy and jealousy …

The game is rigged.  It takes money to make money.  The rich are greedy selfish exploiters of the little guy.

Ironically, both are probably right … and both are probably wrong.  But again, we’ll let the politicians and activists fight over all that.

Investors are best served to set all that aside … and simply focus on the opportunities inside the economics and demographics of income inequality.

For many years, Rich Dad Poor Dad author Robert Kiyosaki has been saying the financial system is helping the rich get richer, while the poor get poorer … and the middle-class gets squeezed.

It’s like a dumbbell … where one end is fat with the wealth of the rich … and the other is fat with the poverty of the masses.  The skinny part in between is the middle-class.

But of course, all this has a direct impact on real estate … and should be taken into account when making real estate investing decisions.

John Burns Consulting recently took a look at this very subject …

What the Shrinking Middle Class Means for Housing

“The widening gap in income distribution trends in the US has significant implications for home buying activity and homeownership.” 

More rental demand.  More demand for homes at the highest and lowest price points.  Less demand for median-priced homes.”

If you’ve been following us for a while, this is probably old news.

We’ve been touting the opportunities in affordable housing like apartments and mobile homes …

… as well as higher-end opportunities in resort property and residential assisted living.

That’s working both ends of the dumbbell.

Smart investors should probably also watch migration patterns created by income inequality … and changing government policies.

Obviously, if there’s “more demand for homes at the … lowest price points” … it doesn’t mean people need to live on the streets of high-priced markets like San Francisco or New York.

They can move … to the suburbs of affordable states like Utah, Nevada, Arizona, Texas, and Florida.  And they are.

But it’s not just middle-class folks looking to lower their costs …

Millionaires Flee California After Tax Hike  – Forbes, July 7, 2018

New Jersey’s Tax Gift to Florida – Wall Street Journal, July 1, 2018

In 2014, Florida passed New York as the third most populous state.  It’s one of the reasons we’ve been high on the Central Florida market for quite some time.

A big part of Florida’s growth is from retired and wealthy boomers heading south for warm weather, affordable housing, and NO state income tax.

Of course, when they move … they bring their incomes and spending with them.  One state loses.  The other wins.

So while affluent retirees might not rent their home from you, they’ll spend money with the local businesses who employ your tenants.

The point is money moves people … and policies moves money.

So whether you love, hate, or even ignore a policy … it affects the movement of money and people … which affects real estate.

Lastly, it’s wise to also consider the systemic causes of income inequality … and put them to work for you.

The global financial system is inherently inflationary.  It’s the stated goal of all central banks … most notably the Federal Reserve … to CREATE inflation.

That means anything denominated in currency (dollars) is destined to rise in dollar price over time.

In other words, as dollars lose value … it takes more of them to buy the samethings.  That’s inflation.

That’s why a typical house in the U.S. which used to cost $20,000 is now $200,000 … even though it’s the SAME house, only older.

So from that standpoint, the system is rigged.   People who own assets pull further ahead of those who don’t.

But people who don’t have assets like real estate, stocks, and commodities on their balance sheets get no paper wealth from inflation.

Relatively speaking, they get poorer.

Over time, the poor get poorer in real terms also … as the costs of housing, energy, food, and products of all types goes UP faster than their incomes.

The financial system is the ROOT cause of income inequality.

It’s also the fastest path to wealth for those who can use long-term debt to acquire long-term income producing assets … like real estate.

Sure, we know there’s cronyism, regulatory barriers that protect big corporations from competition, tax loopholes, insider trading, and all kinds of unfairness helping the rich get richer.

You need to be an insider to play that game successfully.

But real estate is available to almost everyone.  It’s a sacred cow of sorts.  It’s hard to manipulate, and most everyone in power protects it.

So the sooner Main Street pulls its money out of Wall Street and takes advantage of real estate … the sooner the playing field gets flatter and fairer for Main Streeters.

It’s why we love real estate.  It’s why we teach syndication.

MAYBE someday the politicians will quit arguing with each other and really fix the system.  We’ll keep breathing in and out.

Meanwhile, we encourage YOU to take what the system gives you … and do it in a way that adds a lot of value to Main Street.

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.

Better check that foundation …

We know a guy who bought a property with NO foundation.  He didn’t know it because he paid cash … and with no lender forcing an inspection, he skipped it.

Oops.

He figured since the property had been in use for decades, everything was fine.  But just because a building is standing, it doesn’t make it safe or sound.

Similarly, the financial system is the foundation of the economy.  Last time, we noted the U.S. economy is reportedly doing well.  Great!

But … there’s a BIG difference between a strong economy and a strong financial system.

Now before you crawl up in a ball and go full fetal, remember … bad times are good times for the informed, connected, and prepared.  That’s why we do what we do.

So let’s dig a little deeper …

An economy is about ACTIVITY … making, selling, buying things … and saving to create pools of capital for lending to do more of all those activities.

A financial system is the INFRASTRUCTURE which supports the activity … banks, credit, stock and bond markets … even the currency itself.

People can see and feel economic activity. It’s visible all around.  The news reports on it day and night.

But it’s a LOT harder to see the strength or weakness of the financial system.

Most people simply go about doing their economic activity and trust (consciously or unconsciously) that smart, responsible people are maintaining the system.

Others don’t really trust the folks in charge … but aren’t sure how to know whether the financial system operators are doing a good job or not.

So sadly, most people are completely blind-sided when the system fails in some way.  Just think about the millions of people wiped out in 1929, 1971, 1987, 2000, and 2008.

And if you’re not sure why those dates are significant, it’s probably time to allocate some of your financial focus to more than just your economic activity.

We know.  It’s boring.  It’s hard to understand and relate to.  Just like a building’s foundation … most people would rather walk the property than climb under the house.

We get it.  But stick with us … because if you’re riding any part of the boom, it’s wise to consider when, where, and how fast the party ends.  Because parties ALWAYS end.

This is why some of the pundits we follow … guys like Peter Schiff, Robert Kiyosaki, Chris Martenson, Simon Black … sometimes seem a little gloomy.

While mainstream media is telling you how pretty the economy is … these guys are inspecting the foundation and seeing cracks … which are perhaps not obvious to the untrained eye.

Debt

One of the biggest cracks is the obscene amounts of individual, corporate, municipal, national, and global debt.  The world’s NEVER been in debt like it is right now.

The problem is debt needs to be serviced.  And when debt is growing faster than productivity (income), defaults occur.   This leads to the next huge concern …

Derivatives

When Party A borrows from Party B, Party A has a liability … and Party B has an asset.  Party A’s liability is Party B’s asset.

When Party B pledges their “asset” (Party A’s debt) as collateral for a new loan from Party C … now TWO loans depend on the performance of Party A.  Make sense?

Of course, Party B’s loan now becomes Party C’s asset … and Party C can pledge it as collateral for another loan … and on and on.  Party on.

Daisy Chains

These debt parties link balance sheets of financial institutions together like a group of mountain climbers all tethered together.

The obvious problem is because of the linkage … when debts go bad, the entire system is subject to …

Counter-Party Risk

They call this “contagion” and it was the heart of the 2008 financial crisis … even as the Federal Reserve assured everyone things were “contained.”

But asset prices are fragile … based on most players holding their positions and not dumping them.

However, when debt implodes, players sell whatever they have as fast as they can to raise cash to cover the bad debt.

That’s what happened to stocks in 2008.  And even though people weren’t dumping real estate to raise cash, real estate values fell when money stopped flowing into mortgages.

So yes … all of this matters a LOT to real estate investors. 

When credit markets collapse, it chokes lending, crashes asset prices, and stalls economic activity.

That’s bad for everyone who depends on asset prices and credit markets.

(Of course, for the prepared, it’s a shopping spree!)

Central Banks 

Last time the credit markets failed, central banks stepped in and printed TRILLIONS to buy up bad debt, backstop failing banks, and reflate asset prices.

Can they do it again?

Maybe.  But some say interest rates aren’t yet high enough to drop far enough fast enough in a crisis to jump start the economy.

Also, central banks balance sheets are still bloated with bad assets they printed money to buy up in the last crisis.

Will the world stand by as trillions more are printed to do it again on an even grander scale?  Or would the world lose faith in …

The Dollar

As we describe in detail in Future of Money and Wealth, China and Russia have been openly leading a rebellion against dollar dominance.

And while the Chinese currency is arguably some distance from supplanting the dollar globally, it’s picking up steam.

The yuan is now a MUCH more viable dollar alternative than anything else was in 2008.   This is a developing story we’re following closely.  Meanwhile …

Let the Good Times Roll

Don’t get us wrong.  The economy appears to be strong.  There’s a lot of opportunity in the market RIGHT NOW.

If you’re in the right markets and product niches, this is a fun and profitable time to be an investor.

BUT … the financial system these good times are based on hasn’t really changed.  In fact, in some ways the cracks are getting larger.

So while the good times roll, remember things usually roll downhill … and sometimes right off the edge.  Best to stay aware and 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.

STRONG economy, BUT ….

This may be one of the most interesting times in economic history. 

The pace and amount of change is creating significant challenges and opportunities for both investors and entrepreneurs … not to mention policy makers.

It’s fun to watch, hard to keep up with, and impossible to avoid.

The changing future of money and wealth will affect everyone … believe it or not, like it or not, prepared or not.

Aside from growing threats to dollar dominance in global trade … there’s a tug-of-war going on between stimulating and constraining the flow of dollars through the economy.

We recently said the rollback of Dodd-Frank might increase community lending … especially into real estate.  This stimulates the economy.

But the Fed decided to raise interest rates again … ever so slightly … and toss in some hawk talk (more hikes coming this year).

Obviously, higher rates mean fewer borrowers qualify for loans, and those who do can’t borrow as much.  This constrains the economy … and directly affects real estate investors.

Earlier this year, Uncle Sam implemented tax cuts and a ginormous government budget.  Tax cuts leaves more money in the hands of individuals and corporations, hoping they’ll spend it.

That’s stimulating … IF they really deploy the funds.

Of course, even if individuals and corporations won’t spend, the government is going to (shocker, we know).  This generally stimulates the economy.

Meanwhile, rising prices … led by gas prices and healthcare … and let’s not forget tariffs … mean dollars don’t go as far, so people can’t buy as much.  This constrains economic activity.

Dizzy yet?  It’s like watching a tennis match.  And we’re not done …

The dollar is strengthening because of an improving economy, rising rates, and its safe-haven status in times of geo-political uncertainty (like now).

strong dollar makes foreign products cheaper for Americans.

Domestically, this can stimulate activity … if people buy more stuff … if it’s made overseas … and if it’s not subject to tariffs.

On the other hand, a strong dollar makes exports harder to sell, which is a drag on sales made to foreigners.  This potentially constrains cash coming into the USA.

Meanwhile, a tight U.S. labor market and the rising wages we’re told will follow tends to increase people’s ability to borrow and spend.  This stimulates the economy.

Unsurprisingly, both consumer confidence and small business confidence are VERY strong right now.

People and businesses generally feel good about their economic future.

When people feel good, they spend, borrow, and invest.  All are stimulating to the economy.

So on the surface, the U.S. economy seems to be leaning towards growth and stability.  And because a rising tide lifts all boats, real estate investors should be very happy right now too.

Still, there’s an obvious tug-of-war going on between stimulating and constraining the economy.

The challenge (and opportunity) is that SO much is changing SO fast.  Too much stimulation is a problem and so is too much constraint.

And with so much happening at once, it’s probably dangerous for an investor to put TOO much emphasis on any one thing … or prepare for only one outcome.

After all, the economy is a very complex system.

Investors who bought too much into the sunshine narrative leading up to 2008 weren’t prepared for a storm. When it came, many got washed away.

Those who bought too much of the gloom and doom story missed out on one of the best real estate cycles in recent memory.

So it’s important to listen to a variety of viewpoints … then have a plan for variable outcomes.

For years, we’ve talked about the benefits of healthy tension … opposing forces tugging hard at each other.  Just like an old-fashioned rooftop TV antenna …  it’s the tension between opposing positions that creates stability.

So we like all the debate and chatter in the market right now. It’s less confusing than comforting.  It helps us see both the opportunities AND the risks.

Robert Kiyosaki reminds us all the time to stand on the edge … so you can see both sides of the coin.  And there’s no one-size-fits-all answer.

We think it’s important to keep in mind that strong economy and astrong financial system are two very different things.

It’s like getting into a boat and thinking it’s seaworthy simply because it’s fast.  A bad hull with a slow leak will eventually sink even the fastest boat.

Right now, even though corporate profits are up and more jobs are being created, interest rates are rising in the largest sea of global debt in history.

As we learned in 2008, when debt goes bad, financial ships can sink VERY fast.

But dangerous global debt levels is only one of several concerns about what some consider to be a fragile financial system tasked with supporting robusteconomic activity.

Will it hold up?  What if it doesn’t?  How will you know things are starting to break?  What will you do if it does?

Sunshine is awesome and we should all enjoy it.  But it’s always smart to watch the weather reports … and pack an umbrella just in case.

We’ll have much more to say on this important topic in the near future …

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.

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