Self Directed Investor Talk: Alternative Asset Investing through Self-Directed IRA's & Solo 401k's

What is LABOR DAY really all about?  And why does it matter for Self Directed Investors?  I’m Bryan Ellis.  I’ll tell you in today’s special episode #127.

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Hello, SDI Nation!  This is your raspy-voiced host Bryan Ellis… welcome to the podcast of record for savvy self-directed investors like you!

My friends, I regret that you’re hearing me in this condition, and hopefully my voice will improve quickly.  I’ve got both bronchitis and pneumonia at the moment, and in general am really just feeling rotten.

So today’s show will be a little shorter than normal…  But being with you is truly one of the high points of my day, and I didn’t want to miss this chance, so here I am… and more importantly, there you are… and I thank you for that!

My friends, before the next 7 minutes are done, you’re likely to be tempted to think that today’s show is political in nature.  It’s not.  It’s all about Core Value #1 of self-directed investors:  To respect your own capital.  You’ll see exactly why that’s true in just a moment, so hang with me.

So, Labor Day was yesterday.  By the way… I had no voice at all yesterday, which explains why you’re hearing this today rather than on the actual day itself.

Americans look forward to Labor day because it’s a paid vacation day from work.  And sure, what’s not to like about that?

Well, my friends, the truth of the matter is that labor day is NOT a celebration of you as a worker, or an expression of gratitude for your efforts.  Historically, it’s actually a celebration of labor UNIONS, not laborers.

Yes, labor unions.  Those quasi-governmental organizations that, while they represent a measly 11% of the work force, still somehow manage to be the second most HORRIBLE drag on our economy, behind only overreaching government regulations.

There was a time when workers weren’t treated well in this country, and labor unions played a useful role in ending that abuse.

But like a Congressman getting a taste of power and remaining entrenched for decades in Washington DC’s Capital building, labor unions have stuck around endlessly, far beyond their necessary or useful lives, and have become a clear force for BAD in our economy.

This isn’t a political statement.  It’s a factual observation.  And it’s relevant to your portfolio, either as an investor in stocks OR real estate, and I’ll tell you exactly how:

Let’s consider the business community.  There is one observation that is indisputable:  The presence of labor unions SUBSTANTIALLY and CONSISTENTLY drives UP the cost of production.  There’s simply no questioning of that reality.  Feel free to check it out yourself online if you’re interested.  They drive up costs in regular, consistent ways because it’s virtually always the case that labor unions are the most expensive option versus all other choices… and they drive up costs because the presence of unions inherently means higher legal costs for the company, along with the fact that there will likely be strikes from time to time.

As a business owner, this outrages me.  It’s the blood, sweat, tears and CAPITAL of the owners of the company that matter.  Without that vision, that sacrifice, and that risk, the business – the source of the employment – simply wouldn’t exist to begin with.  Yet in many states, labor unions have the legal authority to blackmail and harass these employers into paying far more for the same work than they’d otherwise have to pay.

And let’s not forget… those costs come out of YOUR pocket, and my POCKET… and those profits that are lost to labor unions come out of the pockets of the families of the people who had the vision, and who took the risk, to start the business in the first place, and to grow it to a point of success… success substantial enough to attract the attention of blood-sucking labor unions.

So if labor unions are such bad news for business, why does anyone ever choose to do business with them?

Well, it’s because those businesses don’t have a choice.

Only 25 states in America – mostly in the southern and western part of the country – have what’s called “right to work” laws.  Right to work laws prohibit unions from imposing restrictions on employers and their employees in terms of requiring payment of membership dues, minimum salaries and benefits.  In all other states, unions are free to move into a company, pressure employees to unionize – and the thuggish, illegal nature of that pressure is well documented – and thereby drive UP the costs for the business, the costs for consumers like you and me, and DESTROY the control a company’s owners and managers need in order to make the business as successful as it could be.

To compound that problem, the national labor relations board – the government entity that regulates labor unions – is not an unbiased bystander.  It’s an activist organization that aggressively advocates FOR unions, not for regular people.

Oh, by the way – union membership is WAY down.  Only about 11% of the workers in America are union members – that’s less than half of what it was back in the 80’s.  So a lot of people are catching on.

But because union are so entrenched in GOVERNMENT, their power has NOT declined commensurately, even though the U.S. public clearly recognizes that there’s no legitimate motivation to work for labor unions.

In fact, a huge percentage of those who DO work for labor unions at this time do so for legacy reasons.  They were working at a company that was unionized and then became union-dominated, and they were forced to join in order not to lose their jobs.  It’s disgusting.

So a good thing to consider when choosing STOCKS in which to invest is to evaluate their exposure to labor unions.  You’ll not likely be able to wholly avoid stocks just based on whether they use union labor, but to the greatest extent possible, you should do so.  Because, remember:  The overwhelming additional expense of union labor comes out of profits… and profits are what drive your stock price.  The other thing that drives your stock values are the wisdom of good management decisions.  And in a business where unions dominate, the authority of management to do the right thing for the business is SUBSTANTIALLY hindered, because labor unions invariably force a seat at the management table for themselves… and their ONLY objective is to expand the power of the labor unions.  There’s nothing admirable about what they do.

And if you’re a real estate investor… particularly in multi-family or commercial real estate… and if your property is in a non-right-to-work state, you’ve got to think about these issues as well.  Because when the inevitable time comes for repairs, maintenance or even reconstruction, you’re going to see exactly how painful it is to use union labor rather than work directly with good companies whose only motivation is to build the best, most profitable company they can.

Because my friends, a business that achieves and sustains profitability long-term only does so by performing very, very well, and by becoming valuable to its customers.

And THAT is why today’s show is all about respecting your own capital.  If you have a choice to invest in two companies, and one of them is subject to labor union influence and the other is not, you should give STRONG preference to the one that has no labor union influence.

If you’re considering investing in real estate in multiple states, but only one of those states has right-to-work laws that prohibit labor unions from infesting businesses that will serve you, you should give STRONG preference to investing in real estate in the places where there’s no forced labor union influence.

It’s all about respecting… and protecting… your capital, my friends.

How do we know labor unions are bad for America’s economy?  It’s because the only way they exist and survive is by protection of law.  Without that legal protection, labor unions would disappear even more quickly than they have.

My friends… politics frequently collides directly with the interests of your portfolio.  And for your reference, in the upcoming political season, there are 3 presidential candidates or potential candidates who are loud advocates of empowering unions – and are thus in favor of bringing harm to YOUR portfolio as a result.  Those candidates are Hillary Clinton, Bernie Sanders and Joe Biden.  So, vote carefully.

Folks… I appreciate you. I really do.  Thank you for suffering through my raspy voice today.  And one more thing:

Invest wisely today… and live well forever!

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Nothing else matters if the real estate you buy declines in value.  So EXACTLY when should you buy… and EXACTLY when should you sell?  Get ready to have your mind blow, my friends.  I’m Bryan Ellis.  This is Episode 126.

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Hello, SDI Nation!  I look forward to greeting you every single day, my friends!  Welcome to Self Directed Investor Radio, the PODCAST OF RECORD for savvy, self-directed investors like you!

I’ve got something special for you today, my friends.  We’re going to talk about a scientific and astoundingly accurate way to PREDICT THE FUTURE when it comes to real estate values.  No, we’re not going to get deep into the weeds on science or math, because as it turns out, this MARKET PREDICTOR is actually about PSYCHOLOGY – the psychology of all of the other people in the market who will drive up, or drive down, the prices of real estate.  So get ready to have your mind opened up and some earth-shaking knowledge poured into it!

But first…

Folks, I’m going to brag for just a moment, and I think you’ll be ok with it, because I’m bragging on YOU!

You folks have made this show grow so much, so quickly… I’m just amazed.  Last month was, far and away, the biggest month for this show, which was true for each of the preceding months as well.  And yesterday was the biggest day for this show ever, eclipsing a record that had been set about a week prior, which eclipsed a record that had been set about a week prior.  The point is:  This show is BOOMING, and it’s ALL because of YOU!  This show has more listeners than radio stations in many good-sized markets… and we’re barely 6 months old!

So, THANK YOU… and I’d like to extend a PARTICULAR thanks to those of you who actually spread the word about this show to your friends and colleagues.  Those of you who do that have a particularly special place in my heart, and I’m so very, very, very grateful to you.

I guess I’ll move on from gushing over you guys for now… but one final time… THANK YOU.  And remember – there are now 126 regular episodes and few special episodes, and every single one of them is worth your listening to and freely available at SDIRadio.com!

So, onward to the mind-blowing stuff!

YESTERDAY, which, by the way, was one of the most popular episodes of this show of all time, revealed one of two ways to analyze real estate markets.  This works for stocks too, but that’s not the best game in town, so we’ll focus on real estate.

The way you learned yesterday is called “Fundamental Analysis”, in which the astute investor considers factors like population growth and interest rates and unemployment and other such factors to determine whether there’s a rational case for the value of real estate to go up.

The idea is to buy into a market on the basis of a factor or combination of factors that’s not widely known.  And there’s real value to fundamental analysis, no doubt about it. 

But some people criticize fundamental analysis.  They’ll tell you that fundamental analysis isn’t worthwhile because there’s no clear tie from those factors to property values.  For example, everybody thinks that changing interest rates have a big impact on real estate prices, but history shows that’s simply not true with any consistency, so interest rates really aren’t a useful way to directly predict changes to real estate value. 

And there’s some truth to that.  If you have little-known knowledge about a market that should lead to appreciation, who’s to say that the market actually just doesn’t care about your reasoning?  That’s always a risk with fundamental analysis, which leads to the other way to pick strong markets… and even more importantly it’s also a way to TIME your entry to and exit from markets.

That other method is called Technical Analysis.  The basic idea is that we use past pricing history to predict future valuation.  An astoundingly simplified version of it is this:  Let’s imagine that in Poughkeepsie, New York, real estate values crash by 15% in January of every 5th year, but that the average annual appreciation rate is 8%.

Now, please keep in mind, folks:  This is a made-up example.  It doesn’t really work this way in Poughkeepsie, or anywhere.  But if one could find patters like that, what would it mean?  It would mean, very simply, that it would be very wise to buy real estate immediately when property values crashed in January of every 5th year, and to sell that real estate no later than December of every 4th year.  By doing so, you’re in the market when it’s good, and you’re out when it’s bad.

That’s a really simple example of technical analysis.  All we’re doing is looking for patters than show how values have historically changed so that we can make predictions about how the market will react in the present day, and in the near future.

Technical analysis is used very, very extensively in the financial markets.  Literally TRILLIONS of dollars’ worth of trade volume happens every single year in the currency markets, wholly as a result of technical analysis.  This is an area of math and science that is really quite well developed.

No, it is NOT perfect.  But using it wisely gives one a huge advantage over not using it.

Why haven’t you heard about technical analysis being used in the real estate market?  Because it’s really not used that much, and the reason is simple:  It’s very hard, and very expensive, to get the actual DATA to do this kind of analysis.  It’s not like the stock market, where every single transaction is funneled through one of a very small number of exchanges, from which one can derive a complete historical record of pricing.  Instead, we have over 3,000 counties in America where real estate records are recorded, each of them varying in terms of the systems they use and the data they can easily produce.  So it’s a huge, expensive challenge to have the data necessary to do this type of analysis.

But VERY HARD and VERY EXPENSIVE don’t mean impossible.  And given the proper data, one would absolutely have a huge advantage in being able to predict real estate market value changes.  In fact, many proponents of technical analysis suggest you can entirely DISREGARD fundamental analysis if you’ve got a good technical analysis, because at the end of the day, you might not really care very much about the core health of a market if you have a way to profit from the swings in it’s prices.

And that’s really what technical analysis is all about:  It uses pricing history to measure the PSYCHOLOGY of the market itself.  Mass psychology in financial markets is a fascinating thing.  Remember last week when the Dow Jones Industrial Average fell by over 1,100 points immediately upon opening, then rose by about 1,000 points, only to end the day down about 600 points.

Do you think that the REAL VALUE of those companies actually changed that much during the course of a single day?  Of course not.  But mass psychology was at work, changing market prices in a massive way… and it’s constantly at work in the real estate market, too.

What if you could see, very clearly, when a shift in mass psychology was happening in the real estate market?  More importantly… what if you could see it on a market-by-market basis?  Because as we know, there’s not really a NATIONAL real estate market… real estate is distinctly local.

So what if you could see markets from a totally different point of view… one where, as values change – and as the mass psychology about your specific market changes – you can clearly see the BEGINNING of trends and the END of trends as they occur?

THAT would be worthwhile.  THAT would give YOU as a self-directed investor a MASSIVE advantage… You’d be able to INTELLIGENTLY buy into good markets, hold on to those purchases for the 1-4 years that is the typical length of up trends, and then unload your investments BEFORE mass psychology turns against you, and your investment.

And what if you could do all of this without even understanding technical analysis?

I’ve got good news, my friends:  I’ll be bringing this to you very, very soon.  And it’s going to rock your world.

In the meantime, make sure you’re a part of the SDI Discussion Group by texting the word SDIGROUP to 33444.  That group gets advance warning about EVERYTHING… and for now, it’s free to join that group.  Again, just text the word SDIGROUP with no spaces or periods to 33444, or visit SDIRadio.com.

My friends:  Invest wisely today… and live well forever!

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Real estate is all about location, location, location… or is it?  Here’s how you determine EXACTLY which market is best for your portfolio dollars… along with the one thing that might matter even more than location.  I’m Bryan Ellis.  This is Episode #125.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you.

What is the very best market in America for real estate investing?  What about the top 5?

I’ll get to that in just a moment, but first:

Later today, I’ll be sending out an update to my TOP PICKS list with some great new rental properties that can be purchased FAR below retail price… seriously excellent deals, to be frank.

So if you’re looking for an actual GREAT real estate deal, in a very desirable market, that you can acquire for a very attractive price – then be SURE to be on my Top Picks notification list.  To get on that list, text the word TOP PICKS with no spaces to 33444.  Again, text the word TOP PICKS with no spaces to 33444 and later today, I’ll send out the notice to you!

So… which real estate markets are absolutely the best?

More importantly, how does one accurately determine this information?

The best approach, of course, is a crystal ball.  That’s what I use, and it’s served me very well.  Hehehehehe

Just kidding, of course!  I could practically hear all of my more woo-woo listeners in California going gaga in the realization that I’m one of them.   Hehehehehe

But actually, I’m not.  I’m more of a hard numbers, analyze a spreadsheet, black-and-white standards sort of guy.  Not as exciting as the hocus pocus, but it works a lot better!

So, short of invoking the supernatural, how do we know where real estate is likely to boom or bust?

Incidentally, what I’m about to tell you is relevant for stocks, too.

There are 2 general approaches to analyzing markets… regardless of what the market is.  One is called “Fundamental Analysis” and one is called “Technical Analysis”.

You should have conceptual familiarity with both.  So I’ll give that to you right now.

Here’s the gist of fundamental analysis:  There are some factors that tend to have an impact on asset pricing.  The most fundamental of fundamental factors is supply and demand.  Recently, there’s been a relative shortage of housing inventory in cities like Charlotte, San Antonio and San Diego.  And since people continue to want to move into those areas, prices are naturally driven higher.

So, the SUPPLY of housing inventory in a market is a very, very important consideration, and it’s fairly easy to know.  The U.S. Census Bureau freely offers this data, and you can get this information from the National Association of Realtors as well.

But what about the other side of the coin:  Demand?  Assuming a market isn’t oversaturated with housing, how can you know whether there will be demand for real estate there?

Here again, adherents to the discipline of fundamental analysis believe that logically connected factors drive demand, and therefore pricing, of real estate markets.  Some of the most commonly relied upon fundamental factors are:

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What is the SINGLE BIGGEST FACTOR for investing success… in BOTH the stock market and in real estate?  I’m Bryan Ellis.  I’ll tell you right now in Episode 124.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!

Another crazy day on Wall Street yesterday, with the Dow Jones Industrial Average dropping another nearly 500 points.  Oh, what?  You didn’t hear about that one?  These rather massive swings have really become the norm, haven’t they?

I have a question for you:  Do you think that’s the sign of a healthy market?  Seriously, do you?  Neither do I.

And, by extension, it’s not a healthy environment for your capital.

So, a couple of days ago, I offered a free copy of my upcoming new book to the first 100 of you who asked for it.  And WOW, did you folks ever respond.  All 100 copies were snapped up on the first day.

But here’s the reason I bring that up:  I’m finishing up the last bit of work on that book, when it occurred to me that I have the PERFECT way to explain to you the single biggest factor for investing success in stocks and in real estate… really, in any asset class where your success is a function of appreciation.

What is that factor?

I’ll explain it to you with a story.

My wife and daughters love to go tubing.  That’s where you sit in large inner tube and float down a river.  Yep, that’s it.  The way it works is you go to a little business that rents tubes where you pay your money, they lend you a tube, then they drive you up river a couple miles and drop you off.  You get in the water, and the river carries you back down to the starting point.

It’s just a really fun, relaxing way to hang out together.  Just perfect for laughing and goofing off and just being together.  We’ve only done it 2 or 3 times, but it’s something we really enjoy.

So, recently, the 4 of us went tubing down the Chattahoochee River in North Georgia.  Just like normal, we paid our money to the guy at the tubing company and engaged in some friendly banter.  Somewhere along the way, he rather casually mentioned that the water level was a little low, but that we’d be just fine, and that there were a lot of people out there today having fun.  And truth be told, we were eager to join them.

So we hop on the van that takes us to the entry point, and we jump into our tubes.

And within minutes after getting in the water, I get stuck on a small rock outcropping.  It’s no big deal… I’m a pretty big guy, and my wife and daughters are still floating merrily down the river, so no problem.  Besides, this time they gave me a handy staff to use to push myself off in case I needed to do so.

At this point, I caught a small current that helped me go forward a bit… but most of the time, I kept hearing a “scraping noise” that I couldn’t quite make out.

I also noticed that a few people here and there had gotten out of the water and were sitting with their tubes along the riverbank.  Not many, but usually, nobody does that.

A moment later I’m stuck on another rock, and then another.

I’m still moving forward, because I’ve got the stick to push off with, and I’m hearing the scraping noise more and more.

Then, I just stop.  I’m not stuck on a rock, and there’s water around me, but I’m not moving at all anymore.

Well, it turns out that the river isn’t just a little low… it’s DESPERATELY low.  There’s literally so little water flowing that my inner tube is stuck against the riverbed.  And while there’s water in the river… there’s not much, and there’s just not enough to push me forward.

And do you know what?  No matter how much I wanted it to be different, the BEST I could hope for was the occasional forward momentum in the specific parts of the river where the water was a bit deeper… and even that momentum would, necessarily, be short lived.

Bottom line?  I had to get out of the river.  I wanted it to work, but it just DIDN’T… and before I finally got the message and stopped trying to force something that wasn’t going to happen, there was a WHOLE LOT of frustration for me along the way.  And a bunch of bumps and bruises, as I had to get out of the tube several times to actually pull it forward over the shallow water, but managed to stumble and fall because, even though the water was too shallow to carry me forward, it was still deep enough to cover rocks that tripped me up.

My friends, I really enjoy tubing.  But as I discovered, I HATE tubing when the water level is low.

What’s this mean for you?  Well, there’s ONE THING that matter more than any other factor when it comes to making money from real estate or stocks, and it’s kind of like the water in that river.

What is it?  It’s the MARKET itself.  It’s the activity of the other people in the world who are interested in the thing you’re investing in… and the psychology under which they, as a group, are operating.

The “Market” is really nothing more than the way people are behaving who are making investments similar to yours.

So in stocks, if you’re buying Google, you probably are also paying attention to what’s going on with Facebook and Netflix and Amazon… they’re all tech stocks, a clear market sector.  Because it’s very rare for ONE stock to have a strong run without other similar stocks also having a strong run.

Same thing in real estate. If you’re buying real estate in Atlanta or Boston, the thing that’s going to make the most difference to whether that real estate increases in value is how much activity there is from OTHER investors in Atlanta or Boston… but what’s going on in Dallas or Los Angeles don’t matter as much, because they are entirely different markets.

My friends, mark my words:  It’s almost impossible to buy real estate that will go up in value if that property is in a stagnant or declining market.  And, thankfully, the converse is true, too:  It’s actually pretty hard to lose money on real estate if you’re buying into a market that’s fundamentally healthy and on uptrending.

What’s the lesson for you?  Don’t buy properties, buy markets. 

And you know what?  When those markets run dry, get out.  Buy-and-hold-forever is a fool’s game.  Why?  Sometimes, markets flow like raging rapids, and sometimes they’re dry.  And there are ALWAYS hints in advance of what’s to come.

I’ll spend more time on this in future episodes, because I suspect there’s a real appetite out there for knowing which markets look best and which look poised to fall apart.  Want to know more?  Then there are 2 things you MUST do:

First, be sure that you’re subscribed to this show through iTunes or Stitcher.  It’s important that you do so… and it costs you nothing to make sure you don’t miss this information.

Second, even more importantly, make sure you’re on the Self Directed Investor private discussion group.  Just text the word SDIGROUP to 33444 to join at no cost.  Again, text the word SDIGROUP with no spaces or periods to 33444.

Which markets are best?  Which have the right amount of water to push your portfolio profitably down the river and on to predictable profitability?

Join me again for the next episode of Self Directed Investor Radio, my friends, and I’ll tell you more.

In the mean time:  Invest WISELY today, and live well forever!

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The face of housing in America is changing, my friends… and it translates DIRECTLY into real opportunity for YOUR PORTFOLIO!  I’m Bryan Ellis.  I’ll tell you how RIGHT NOW in Episode #123.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy, self directed investors like you!

My friends, something is happening in America.  Frankly, I don’t think it’s a good thing for America, but as they say:  It is what it is.  And what it is, is:  A clear, undeniable shift from a nation of home owners to a nation of renters.

For various reasons, Americans are choosing to rent rather than to own.  We’ll talk about some of the reasons why in just a moment… and how that translates into opportunity for you.  But first, let’s look at the hard data.

Right now, the home ownership rate is at 63.4%.  So what, right?  Here’s why that matters:  It’s been nearly 50 years since the home ownership rate was this low… and it’s on a MASSIVE DECLINE.  That rate hit the highest it’s ever been in 2004… and in the 11 years since, the U.S. home ownership rate has absolutely PLUMMETTED.  It’s now a mere ½ percentage point from being at the lowest level EVER recorded.

And yet… the population of our country is at it’s highest ever, and more and more housing is being built every single day.  Household formation is RISING!

What gives?

The answer is simple:  A figurative TECTONIC shift in the attitudes of Americans about home ownership… and particularly that crew that gets so much attention, the “Millenials”.

The prevailing attitude today is NOT to put down roots into a community, but for transience to constantly be an option.  And it’s pretty rational, if you think about it:

First, you have the perceived risk in owning real estate… the perception is that risk is still rather high, with the carnage from the real estate crisis of a few years ago still fresh in the minds of adults, young and old.

But it’s not just that… there’s also the employment situation.  Let’s face it:  The job market is awful.  Don’t believe the 5%ish number that the Labor Department is reporting.  If you do, be sure to listen to Episode 117 of this show to see the harsh truth about that.  Today’s worker feels the need to uproot at the first offer of a job, rather than hope to find great employment close to home.

And finally – there’s a “mind shift” that’s happened.  Even though America’s population is bigger than it’s ever been, the “feeling” about America is that it’s smaller… meaning more accessible… than it’s ever been.  As a function of the internet generally and Facebook specifically, it’s easy to FEEL like you’re a member of communities far beyond your geographic locale… and it’s easier to be willing to pick and physically move, too.

But here’s the thing, my friends:  This bias AGAINST home ownership presents an opportunity for you, the savvy self-directed investor.  And that opportunity is simple:  Be the PROVIDER of that housing by owning rental property!

Now, folks, you can’t do this haphazardly.  You can’t buy just anywhere, nor will just any property do the trick.  You’ve got to understand the bigger trends and the market dynamics in play.

Well, let me correct myself there.  You CAN buy just anywhere.  And, as you learned back in Episode 119, randomly buying real estate in America is a nearly guaranteed way to LOSE money, even if ALL you do is factor in the cost of inflation, and no other expenses.

But folks, as you can see, if you can pick the RIGHT rental properties, there’s great opportunity because, the fundamental, prevailing attitude of the latest generation of American adults is coalescing around the idea that RENTAL HOUSING – even long-term rental – is a superior idea to ownership.

But there are 3 factors you MUST get right every single time in order to be predictably successful as a rental owner in today’s new environment:

Those factors are:  MARKET, VALUE and MANAGEMENT.

All 3 must be present.  The absence of any one of those legs makes for a stool that can’t stand up… and that can’t support your financial needs.

Look, I’m not going to belabor the point, so very quickly, here’s what I mean by “market, value and management”:

The market is the geographic location of your property.  Really, it’s about one thing:  How desirable is the location, both now, and for the foreseeable future.  Because my friends, frequently the biggest single benefit one will get out of being a landlord is the windfall of profit that comes at the end when the property is sold, and… nothing, absolutely nothing, is more of a determinant of future appreciation than the market in which the property is located.  The market is EVERYTHING.

Then there’s the value factor.  People, unless you have a crystal ball, don’t throw your capital to the wind by purchasing real estate at it’s retail price.  If some random Joe Blow would pay $X for the property on the open market, you need to pay BELOW $X.  You’re not buying real estate because you’re a collector, you’re buying it because you’re an investor.  And investors buy into GREAT VALUE… the best approach to which is to never, ever pay retail value for your properties.

And the final element is MANAGEMENT.  No, my friends, don’t even think about managing the property yourself.  Don’t think about it.  NOT a good idea.  Not only does that restrict you to your own local market, but do you want to reduce yourself to menial labor like collecting rents and calling repairmen and tracking down mortgage statements?  NO… you need a good manager to handle that for you.  But here’s the thing:  A GOOD property manager is HARD TO FIND.  Darn near impossible, even.  You’ve GOT to find this person as a result of serious research into available options.  Or… better yet… a first-hand referral.

Market.  Value.  Management.  All key.  All required.  All critical.

Want to know how to get all 3 of those things… even if you’re not “well connected” in the real estate business?

I can help you there, my friends.  As it turns out, I’ve got a book about this very topic coming out VERY SOON.  This one isn’t another book that just attempts to convince you that rental investing is a good idea.  It’s specifically for those of you who are ready, willing and financially able to buy great rental properties… but you need expert guidance on selecting property in the RIGHT MARKET, at the right VALUE, under the right MANAGEMENT.

This is the book for those of you who want to get it right the first time… or for those of you who may not have done it perfectly the first time, and who wants to correct course while you still can.

So… if that’s you… you’re ready, willing and able to start or expand your portfolio now, but you want to do it the RIGHT WAY… then I’ve got a free copy of this book for you… or, specifically, for the first 100 of you to respond.  (It’s not free to print these books, people!  Gimme a break… many thousands of you will hear this show, and I just can’t give away that many copies!)  Hehehehe

So to reserve your free copy, please text the word RENTALBOOK to 33444.  Again, that’s RENTALBOOK – no spaces, put the word RENTAL and the word BOOK together and text it to 33444.

But remember – this is only for those of you who are seriously interested in building your rental portfolio in the RIGHT MARKET… at the RIGHT VALUE… and under the RIGHT MANAGEMENT!

Folks, invest wisely today… and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

Do you love the idea of cash flow from rental properties, but you’re TERRIFIED that an air conditioner will break or a tenant will sue or that something will happen that consumes all your cash flow and turns your rental into a money pit?  Fret no more, my friends:  There’s an ULTRA SAFE way to profit from rentals, and never, ever worry about a single one of those risks.  I’m Bryan Ellis.  I’ll tell you all about it right now in Episode #122.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you.

This is a big day, my friends!  Later today, and also this evening, I’ll be delivering a special webinar for those of you who are REALLY SMART about rental property investing.  We’ve got a number of opportunities – 17 houses in 3 different markets, to be precise – which are all EXCELLENT rental opportunities… they are located in great markets with SOLID appreciation prospects and a strong supply of tenants, they each come already loaded with a paying renter and immediate cash flow for the buyer, they each have experienced, competent property management in place, and, BEST OF ALL… each of these occupied properties are available for purchase by savvy investors like you at BELOW-MARKET pricing.  That’s right… no cap rate-based pricing mumbo jumbo here!  We figure out what the property would sell for under normal market conditions to a normal retail buyer… and we sell it to you for LESS!

Every one of these properties are Certified as S3-Compliant:  Simple, Safe and Strong.  Really solid bets.

That event happens once this afternoon and once this evening, so if you’d like to get an invitation to join us at no cost as my guest, just text the word INVITATION to 33444 right now, or visit SDIRadio.com/invitation.  Either way works, but this particular event happens once later today and once more later tonight, so you’ve got to jump on this right away!  Just text the word INVITATION to 33444 or visit SDIRadio.com/invitation right now!

So… when you buy rental property the RIGHT WAY… meaning in a way that’s 100% consistent with my SIMPLE, SAFE and STRONG formula… you’re in a solid position for near-term cash flow and tax benefits and for substantial long-term growth in equity and therefore your wealth.  That’s a beautiful, beautiful thing… and for most of you, it’s an option to be seriously considered.

But there are some of you who, entirely reasonably, simply do not want to take the risk that there could be big unforeseen expenses with a rental property.  Let’s face it, folks:  Even in the best of rental properties, things can go wrong – severe weather can damage property, perfectly stable tenants can experience sudden emotional upheaval, and damage the property, or the surrounding area can go into decline, hurting rents and appreciation. Now, with proper planning, the risk of these things drops to nearly zero, but the risk remains.  And for some people, even the thought of the possibility of that risk is sufficiently stressful that it would be worthwhile to avoid that risk entirely.

But there’s a GREAT way for those of you who agree with the fundamental wisdom of buying rental property in the S3 way – simple, safe and strong – to benefit from rentals without facing down those risks for even one single moment.

Here it is:  Let’s say you’ve got $100,000 that, ideally, you’d like to invest into a rental, but you just don’t want the stress from that risk.  What could you do instead?

How about this:  Why don’t you LEND that $100,000 to ANOTHER INVESTOR who is buying really solid S3-Certified rental property?  You’ve got some great assurance that they’re investing into an asset of high quality, because the S3 Certification is a high standard which most rental properties are unable to meet.  And that’s important, because that S3-Certified property is going to be your COLLATERAL… your GUARANTEE, that you get your payment every single month.

But YOU must do that safely.  So if an investor wants to buy a property that costs $100,000, then why don’t you lend him HALF of that… $50,000?  That way, your collateral – the real estate – is worth exactly twice what you lend against it.  This puts you in an INCREDIBLY safe situation, and makes it a virtual certainty that the investor will always make their payments on time to you.  And those payments will bring you an interest rate that is EXTREMELY attractive for the right investor.

Who is the RIGHT investor for this type of opportunity?  Well, if you’ve still got decades before retirement, this isn’t for you at all.  But for those of you nearing or already in your retirement years, this is a great option.

I was speaking just yesterday to one of your fellow listeners to this show named Bob.  Bob, if you’re listening now, it was a pleasure to speak with you!  Bob is clearly a very savvy investor and has a substantial portfolio.  He was looking for great investment opportunities for himself, but what struck me most was part of the conversation towards the end when he told me about his mother.

Bob’s mother is about to be moved into an assisted living facility.  She has some savings of her own, and Bob has some responsibility for helping her with that money.  He mentioned that he was frustrated because her money is in a bank CD collecting 0.1% interest.  0.1% interest?  WOW!  My friends, that’s not a certificate of deposit, that’s a certificate of depreciation!  I checked at my own small local bank and found out that he’s not kidding about that rate.  It’s disgusting.

So Bob’s mother could benefit profoundly from this type of strategy, because she’d collect a very respectable rate of about 5% - literally 50 TIMES what her CD is paying her – and the capital would be safe, Safe SAFE!  Folks, loans made for only ½ of the property value virtually never go bad.  And the monthly payments would just hit Bob’s mom’s account each and every month, month in and month out, reliably, like clockwork.  In fact, a lot of lenders have their payments automatically debited from their borrower’s checking accounts!

And the best part?  If you or your parent get involved in this lending, there’s PLENTY of opportunity to deploy your capital, AND it’s very, very easy to get a 3rd party guarantee so that in the indescribably unlikely event that the loan goes bad, the 3rd party will step in and cash you out with no trouble at all.  It’s an amazing win-win scenario.

Folks, obviously, this isn’t for everybody.  But it might be for somebody you know and love.  For most of my listeners, the wisest thing for you to do is to join us for today’s training where I’ll introduce you to 3 great rental markets, and the 17 properties we have on offer there that are available at BELOW market pricing.  Great opportunities, every one… and I’m eager to explain them to you.

But for those of you looking for an ultra-conservative strategy that pays up to 50 TIMES the prevailing rates on CD’s… it’s an extraordinary fit.

So here’s how to move forward, regardless of which camp you sit in:

If you – or your parent or other loved one – needs a strong but ultra-conservative way to generate consistent income, just as I’ve described in this episode, then set up a time to talk with me.  You can do that by texting the word GUIDANCE to 33444 or by visiting SDIRadio.com/guidance.

Or, if you’re on the other side of that equation, and you’re looking to actually accumulate GREAT rental properties in GREAT markets with SOLID tenants and highly reliable property management… at well-below-market pricing, then I’d love to have you on today’s training.  To get your invitation, you can text the word INVITATION to 33444 or you can visit SDIRadio.com/invitation.

Either way, my friends, I have one piece of advice I’ll hope you’ll live by, and it is:

Invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

There’s a heinous risk that lurks with every single rental property investment.  One false move with this powder keg, and your portfolio can go BOOM.  I’m Bryan Ellis… I’ll tell you what it is, and how to mitigate it RIGHT NOW in Episode #121

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!  If you’re looking for advice that’s adequate for nearly any investor… strategy that any John or Jane Doe can use… opportunities for the masses… well then, this AIN’T your show.  I’m here to bring great clarity and expose exceptional opportunities to the affluent self-directed investor… and to you alone.  If that’s you, let’s get started, shall we?

So, yesterday was a crazy day on Wall Street, huh?  The Dow was down well over 1,000 points to start the day, then it rallied back almost as much, only to close the day down a net of nearly 600 points.  Absolute insanity is what it is.

And you know what?  All indications are that today will be a huge UP-day.  Not for fundamental reasons, but for reactionary ones.  And before I get to the focus of today’s show – which is one mega-risk that exists with rental property as an asset class – I’d like for you to ponder this, my friends:

Core Value #1 of wise self-directed investors is this:  We RESPECT our own capital.  That capital came as a result of your own time, energy and effort… or maybe it found its way to you through the blood, sweat and tears of someone who cares about you.  Either way, that capital deserves to be RESPECTED.

Is it really showing respect for your capital to have it exposed to the incredible risk that is Wall Street?  Is it showing respect for your capital to expose it to a risk that is absolute, ferocious, and wholly outside of your control?  Think hard, my friends.  Think hard.

So, on to today’s discussion about rental risk – and how to mitigate it.  Just a quick note:  This week I’m hosting a GREAT training… I’ll be teaching you about 3 different geographic markets that MAKE THE GRADE as excellent rental property locales.  But even within those markets, not every single property gets the SDI seal of approval as SIMPLE, SAFE and STRONG.  But I’ll tell you EXACTLY how to find those properties and what makes them such great opportunities.  In fact, I’ll have several samples currently available to share with you.  More about this training at the end of this show, but if you’d like to go ahead and register now, you can do so by texting the word INVITATION to 33444 or by visiting SDIRadio.com/invitation.

Folks, I think that buying and holding rental property can be a great way to build a sustainable base of wealth for your portfolio.  I really do.  Look – on the training I mentioned to you just a moment ago, which happens later this week, I’m going to introduce you to some great off-market properties that, in my humble but entirely accurate opinion, represent really, really solid investment opportunities.

But I’m also a realist.  And there’s a risk that exists with rental property ownership that, frankly, is terrifying… and that most companies who market “turnkey” rental properties are careful to avoid discussing with you.

What’s that risk?  Lawsuits.  And more specifically, the astounding cost of those lawsuits.

Really, if you think about it, lawsuits go with the territory of real estate.  Even in the normal course of business, you’ll occasionally have a tenant who doesn’t turn out quite right, and will have to evict the tenant.  In most states, eviction involves a legal proceeding of some sort, and sometimes even a court appearance.  Sure, it’s likely your property manager who handles that for you, but the point remains:  Lawsuits really are part and parcel to the rental property business.

I won’t spend any real time talking about mitigation of legal risks involved in eviction, other than to say that 99% of the battle there is proper documentation.  Documentation of things like:  The terms of your lease, move in/move out inspections, handling of security deposits, maintenance responsibiliteis, etc.  Again, this stuff is the job of your property manager, so you shouldn’t have to think much about it.  But you should, at the very least, determine before hiring a property manager what their success rate is when filing evictions.  It should be very close to 100%.  If it’s not, either the property manager isn’t documenting the important things well, or the regulatory environment is unfavorable to landlords.  You can always replace your property manager.  But you can’t easily change the law… so buy carefully to begin with.

But far more ominous than eviction lawsuits are what I’d call real lawsuits… the kind where somebody on your property trips over a stump, falls down, hits their head on a stump and dies or is seriously injured from the impact.  Or more likely, the kind of lawsuit that results when you’re in a minor fender-bender, but the other party decides to sue you for all you’re worth… which includes your rental property.

Folks, the thing about lawsuits is this:  They can be CATASTROPHIC, even if you win them.  Here’s an example from my own life:  I once took on a business partner, and it was a poor decision.  Very poor decision.  Great learning experience – taught me the horrible effects of insufficient due diligence – but still a very poor decision.  What I failed to discover in time was that this guy was actually a convicted felon AND was very, very fond of suing people.  And ultimately, he sued me – as he’d done with so many of his past business associates.  Now, here’s the thing:  I won.  Won convincingly.  In fact, he sued twice, and both times, we got his case dismissed before trial.  It’s hard to win more convincingly than that.  But do you know what?  It still cost me about $80,000 to win.  Not good!  That’s the cost of a rental property by itself.

What’s the solution?  Well, there’s good news and there’s bad news.  The Bad news:  There’s absolutely no way to absolutely eliminate the threat of lawsuits.  You can – and should, after confirming with your own lawyers – use language in your contracts that sets strict limits on liability and firm guidelines for how disputes will be resolved, but that only goes so far.  If you’re involved in a fender bender with a litigious counter party, there won’t be any prior agreement between the two of you determining how to settle the conflict.  It’ll just be a matter for the legal system.

So what’s the good news?  It’s possible to make yourself a very, very unattractive target for that kind of lawsuit.  How?  I’ll bet you think it has something to do with putting your properties into LLC’s or corporations or something.  Sure, that’s one way to go… and maybe it’s the right call for you.  But there are other, easier ways to practically be very, very wealthy while being legally very, very poor.

One great approach is to legally SHIFT the equity in your properties so that, in effect, nobody even knows that equity exists.  If you appear to own a lot of property, but you have no – or even negative – equity in them, you become very unappealing as a lawsuit target.  There are a number of ways to do this, and the right way to do it for YOU is not a cookie-cutter answer.  In fact, one way of doing it that’s perfect for me might actually cause YOU even more legal trouble.  That’s why, by the way, every client in my SDI Core 100 group – the small group of investors with whom I work most closely – is required to have a pre-purchase consultation with the asset protection attorney that is my SECRET WEAPON for avoiding legal trouble.  We actually pay for this consultation for our members… it’s that important that it happen.  You see, you’ve got to get this stuff right from day 1, and in fact, I won’t even work with clients who refuse to be proactive about protecting themselves from legal risks.  Because, you know what?  It’s really pretty easy to get it right… when you think about it in advance.  And that’s part of what I FORCE my clients to do before I allow them to purchase any of the great deals we offer from time to time.

So what about you?  If you’d like to learn about 3 GREAT markets for rental property in America… along with an introduction to several specific off-market rental properties that fully embody the criteria of SIMPLE, SAFE and STRONG – and maybe even learn how you can have a solid dose of legal protection built into your rental property investments from day 1 – then join me for our special webinar this week.  To get your invitation, text the word INVITATION to 33444 or visit SDIRadio.com/invitation.  Respectfully, I recommend you move quickly on this.

My friends:  Invest wisely today… and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

The CRUSH IS ON in the stock market.  Yes, I’ll continue our analysis of the RISK of rental property investing… but with what’s happening in the stock market right now… well, America is crying out for leadership where the caving-in of the stock market is concerned, and I’m here to give it to you.  I’m Bryan Ellis.  This is episode #120.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you.  Ever wonder why the topics I discuss so frequently find their way onto other financial shows?  It’s simple:  Self Directed Investor Radio is SHOW PREP for everyone else.  We set the table… everyone else sits at it.  And you, my friends, are welcomed guests!

Back on August 5, I gave you a warning about the stock market.  I focused on Apple computer, and suggested to you that as Apple goes, so goes the rest of the market.  I told you the reason that I feared for Apple was because of the weakness of China’s economy, and the dependency Apple has on that market for future growth.

On that day, I advised:  Consider taking at least some of your profits out of Apple… and fast.

And since that day?  Well, it’s a big, fat, I told-you-so.

Since then:

Apple stock has dropped by 8.3%.

The S&P 500 has dropped by over 6%.

And, oh yeah… China devalued their currency in the wake of a crash in their stock market… confirming for all the world to see that the great economic power of the east is, at very best, on shaky ground after decades of misrepresenting the truth.

And, oh, by the way, as of this moment – about 8am Eastern on Monday, August 24 – Dow Jones Industrial Average Futures were down by over 700 points at one point this morning.  The Nasdaq is presently locked at what’s called “Limit Down”… meaning that traders are pushing the market lower, but the market circuit breakers are kicking in and forcing an artificial stop to the descent.

Who knows what will actually happen.  The whole thing could recover before the market opens.  But I doubt it.  There are some really negative indicators going on right now.

Now, my friends, I want you to understand the gravity of what’s going on here.

If you had $100,000 invested in Apple stock back on August 5 when I brought this up, you’ve now lost about $8,300 if you didn’t take action based on my analysis back then.  Who’s to say that Apple won’t rally and achieve new all-time highs?  Nobody, absolutely nobody.  But here’s the thing:  The chart doesn’t look good…

…Either for Apple, or for the broader market.

Folks, there’s a time and place for everything.  I respectfully submit to you that now is not the time, and this is not the place to be a retail stock investor.

There are many companies out there that are very well run, and that represent fundamentally wise plays, if you’re analyzing the quality of those companies in a vacuum separate from the broader economy.  But folks, you know that’s not wise.

How do you feel about our economy?  Do you feel like it’s really as strong as the media is telling you?  I told you just a few days ago, in Episode 117, the hard evidence of how the government is very aggressively lying to all of us about the state of this economy.  And as the insanely vicious and racially bigoted preacher Jeremiah Wright one said, “America’s chickens are coming home to roost!”

My friends… in the middle of this chaos… in the middle of this concern…  Things have been pretty boring around my house.  Pleasantly so.  We keep getting checks in the mail.  It’s not sexy like the stock market.  We know exactly what the amount of those checks will be every month.  I mean… in one way – the profitability – it’s WAY sexier than the stock market.  But it’s boring.  Checks month after month.  Month after month.  Not volatile.  Not exciting.  Very boring.

And PROFOUNDLY RELIABLE.

My friends, listen up:  This show is not for the faint of heart.  If you want somebody to tell you some middle-of-the-road advice… if you want to hear ideas that are merely acceptable for everybody but truly great for nobody… this isn’t your show.

But if you want the hard truth, people, here it is:

The truth about the U.S. stock market has been manipulated so incredibly thoroughly, and it simply can’t go on.  The media hasn’t even had to lie to you about the situation in stocks for several years, because it’s looked so positive.  But it’s a LIE, my friends… and if we’re not on the precipice of the big reveal of that fact, we’re not far away.

Folks, you’ve doubtlessly heard the phrase “Quantitative Easing”.  You may have even heard it as QE1 or QE2 or QE3… because the government did it in 3 different distinct, massive rounds.  I’ll not bother you with what they SAY quantitative easing was all about.  But I will tell you what it actually was:  It was a way for the federal reserve to print a HUGE amount of new money, dump it into the stock market in order to see the averages go higher, and thereby distract the entire country from the fact that the fundamentals of this economy are HORRIBLE.

Folks… it’s been more than 40 years since our labor force participation was as awful as it is right now.

The REAL unemployment rate – factoring in people who are working menial part time jobs or other obvious underemployment – is, according to the Bureau of Labor Statistic’s own admission – is over 10%... and much higher than that according to some very reputable sources, including the Gallup organization.

My friends:  The time for you to do as you’re told with your money is long since over.

I’d like to remind you of something I said just a moment ago:  In the midst of this financial chaos – and I fear that’s exactly what’s brewing, is real chaos – things have been pleasantly calm in the Ellis household.  The stock market can fall apart, and, while it’s certainly not true that I don’t care about that, what I can say is… it doesn’t affect me.  Those boring, consistent, predictable checks keep coming in… month after month… and the profits keep mounting.

Folks, I’m not telling you it’s time to sell your portfolio.  Though… who’s to say.  What I am telling you is this:  It’s time to consider a new CORE for your portfolio.  An entirely new basis… something that’s strong, something based on real value, something that’s profitable, something you can predict and plan for.

You need something that’s SIMPLE.  You need something that’s SAFE.  You need something that’s STRONG.

It’s time for a return to SANITY.

If you’re worried about what the current terror in the market will mean for your portfolio, let’s talk.  You can set up an appointment by texting the word GUIDANCE to 33444 or visiting SDIRadio.com/guidance.

Better yet, my friends, if you’d like to never, ever have to be worried again about what the terror in the market will mean for your portfolio, that’s an even better reason for us to talk, and to talk right away.  It’s not too late.  Again, you can set up an appointment by texting the word GUIDANCE to 33444 or visiting SDIRadio.com/guidance.

My friends, remember that core value #1 of wise self-directed investors is this:  We always RESPECT our own capital.  Is it showing respect for your capital to leave it sitting in a market with a foundation as shaky as that of the U.S. stock market.

Wouldn’t you like to have a firm foundation for your portfolio, folks?  I love these words about building on a firm foundation:  “The rain came down, the streams rose, and the winds blew and beat against that house, yet it did not fall, because it had its foundation on the rock.”

Like I said, it’s entirely possible that the market will recover entirely today and it will turn out to be a “normal” day… at least as far as the history books are concerned.  But what’s happening right now isn’t normal for a foundation built on solid rock.

I’d love to help you build that foundation in your portfolio.

My friends:  Invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

It’s time for some more BRUTAL HONESTY.  You think that “buy and hold” real estate is a good bet… that home values usually grow over time.  Well, my friends:  Somebody – EVERYBODY – lied to you.  U.S. housing is, generally speaking, a LOSING PROPOSITION as a buy-and-hold investment, and I’ve got the data to prove it.  I’m Bryan Ellis.  Get ready for the shocking truth RIGHT NOW in Episode #119.

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Hello, hello, hello SDI Nation!  What a great day to be alive, and thank you for spending the next 7 minutes with me again today.

As my thanks for your attention, how about I just go ahead and BLOW YOUR MIND?

Here goes:  There’s a long-standing believe that the odds are on your side if you buy real estate and just hold it.  Alas, my friends:  It’s just not true… and I’ve got the HARD EVIDENCE to prove it.

Before I do that, let’s establish some context.  In the last episode of this show, we began to analyze the notion of buying rental properties in the context of the S3 Investing Criteria of SIMPLE, SAFE and STRONG.  I gave you some pointers on determining whether rental property ownership is, as a concept and in terms of implementation, sufficiently SIMPLE to be worthy of your portfolio dollars.  Remember, complexity hides risk, and so SIMPLICITY is a key component for every wise investment.

One other thing we discussed on the last episode, which really comes into sharper focus today, is the reality that not all rental properties are the same.  If someone is trying to sell you a rental property, you should ALWAYS seek out additional options for comparison – maybe even in entirely different markets and with entirely different providers – because rental property is NOT a commodity.  One deal is NOT the same as the next.  Folks, it’s very realistic that two separate deals could look really good to you, but one will lead to profit and the other will lead to financial ruin.  How do you know the difference?  Well, start with what you learned on yesterday’s episode, and then pay attention to this, too:

SAFETY is the 2nd leg of the Simple-Safe-Strong trifecta of investment excellence, and nothing is more fundamental to the question of safety than having a strong reason to believe that your property will increase in value over time.  In fact, equity appreciation is frequently the very biggest part of the payoff for owning rental property at all.

That’s why it’s so easy for slick salespeople to mislead you about the likelihood that your property will be worth more in the future.  They’re relying on the same thing that everybody else relies upon:  The assumed knowledge that housing values go up over time.

My friends, it just isn’t true… as much as I wish it was.  And this isn’t my opinion.  Here’s the data:

For a recent 45-year-period, the average home price in America – whether new or existing – DID increase at a rate of 5.4% annually.  That’s the statistic that makes it so easy to claim that home prices increase.

But that’s incredibly deceptive, because in that time period, the SIZE of the average house went from under 1,000 square feet to over 2,300 square feet, so it stands to reason that average home prices went up during that time as well, and they did.

So average home price is the wrong metric.  What’s a better metric?  Average price per square foot.  That’s where the real story is told.

And when we look at THAT metric, the National Association of Realtors tells us that existing homes prices increased by 3.7% per year.

So what’s the problem?

Well, PRICES are increasing, but VALUE is actually DECLINING.  That’s because those figures do not factor in the most silent killer of wealth:  INFLATION.

I’m not going to bore you to tears with inflation rates or statistics, so here’s what I’ll tell you to make it clear:  In 1992, an average square foot of housing was worth 76 loaves of bread.  By 2010 – 18 years later – that same square foot could only buy about 60 loaves of bread.

So… while your net worth would have increased rather nicely in that time frame, your REAL WEALTH – your BUYING POWER – would have decreased… a LOT.

What’s the lesson here?  Is it that you shouldn’t invest in residential rental property?

Well, YES, that’s the lesson… if you’re going to do it indiscriminately.  You can’t rely on platitudes like “real estate has made more millionaires than any other investment” or that “real estate is the most historically proven asset class”.  Those things just aren’t true.

But if you can internalize the fact that real estate isn’t an automatic winner – that some rental property is inherently FOOLISH and some is inherently WISE – you STILL can do well, and do well safely.  There are 2 reasons this is true:

First:  Real estate is a distinctly local issue.   National statistics are great for understanding broad trends, and for counteracting fundamentally false beliefs like those I mentioned before, but the truth is that certain specific regions of the country are more inclined than others to show increases in value, and those places are where you should focus your investment dollars.

Second:  You can still do well in real estate because all of those statistics make one big assumption:  They assume that you’re paying regular retail prices for your properties.  And if you’re thinking of buying your real estate from a turnkey real estate company, you probably are paying full retail… and possibly a bit more.

But did you know that the situation changes rather dramatically if you are able to get as little as a 10% discount on the price you pay versus the retail value of the property?  In other words, the dynamics change greatly if you pay $90,000 for that $100,000 house.  By making that adjustment – by insisting that you never pay more than 90% of retail value, and ideally less – for your rental properties, suddenly your real estate buys MORE BREAD at the end of the investment than at the beginning.  You actually make money rather than losing it.

Buying real estate below market value is what enables you to be Profitable From Day 1.  That, my friends, should ALWAYS be your operational standard for investing.

Now, there are a few other risk points that affect the safety of investing in rental property, and I’ll discuss them with you in the next episode.

So then the question becomes:  How do you find properties in strong markets that you can purchase for at least 10% below market value?  That’s where you have to start.  If you can’t get an attractive price in a desirable market, nothing else matters.

This isn’t a minor thing, folks.  It’s not easy to find real estate that you can buy below its real value.

But, my friends, I’m happy to help you.  Right now, we at Self Directed Investor Network have identified 3 HIGHLY FAVORABLE real estate markets across America that have THE RIGHT STUFF… strong rental rates, solid expectancy for appreciation… and most importantly, because of our influence in the market, the ability to purchase property SOLIDLY below retail value.

If you’d like to know what those markets are… and how YOU can own property well below it’s actual value – so that you can be PROFITABLE FROM DAY 1 – then please plan to join me for my upcoming webinar called:  “Profitable From Day 1:  3 Ideal Markets For Building Wealth”.  Sponsored by Self-Directed Investor Radio, this webinar will feature YOURS TRULY as I help you to understand exactly WHAT characteristics make for a great rental investment, what are the hidden red flags, and – most importantly – an introduction to exactly the right people who can help you to grow your cash flow and your wealth by investing in rentals the right way, the SDI way – Simple, Safe and Strong.

To get your invitation for this webinar, just text the word INVITATION to 33444 and I’ll send you one right away.  Again, text the word INVITATION to 33444.  But I do recommend you do this right away… I’m telling you about it first here on SDI Radio so you’ll get first shot, but when I announce it to my email list in a couple of days, it will fill up instantly, so please do request your invitation now by texting the word INVITATION to 33444.  Or if texting doesn’t work for you, just go to SDIRadio.com/invitation.

My friends:  Invest wisely today – the SDI way – and live well forever!

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EXACTLY what matters when you’re evaluating a rental property investment?  It’s a short list, but every single thing matters.  I’m Bryan Ellis.  I’ll tell you the CRITICAL FACTORS for evaluating rental property investments RIGHT NOW in Episode #118

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It’s a wonderful day to be alive, isn’t it my friends!  It is SO AMAZING to get another great day on God’s green earth!

Welcome to another exciting edition of the podcast of record for savvy, self-directed investors like you!

Today, we’re talking rental property.  It’s an important topic because the change in consumer mentality towards living arrangements has shifted DRAMATICALLY towards rentals and away from ownership, presenting a great opportunity for you and me.

But, my friends, please listen very carefully to this:  Rental properties are not inherently a great investment.  Sorry, no, it’s just not true.  They are not all the same.  Not all properties are the same.  Not all markets are the same.  Not all tenants are the same, not all property managers are the same.  These are not commodity products.

Repeat after me:  Some rental deals are better than others.  Some are far worse.  Do only the best ones!

But which are the best ones?  This episode was inspired by a great conversation I had with a new client just yesterday, who bought a rental property from us for a very deeply-below-retail-value price on Monday.  He since received a solicitation from a turnkey rental company for some other investment properties, and he asked for my help in figuring out whether the properties they offered him made sense.  Jack… it was a pleasure to speak with you!  I hope our conversation was helpful!

So let’s you and I talk about what makes for a good rental property investment, shall we?

Folks, think like a business person.  If you own rental property, then your product is housing.  The fundamental question is:  How desirable is your product?  Doesn’t really matter which property you consider… there’s an occupant for it on some level of the scale.  On the one end of the scale is the property that has all of the bells and whistles, in the nicest part of town, that commands the highest premiums in rent.  And on the other end of the scale is the property that’s occupied by vagrants and is an eyesore and a physical danger.

Where does your property fall on that scale?

Being on either end of that spectrum is the wrong place for most investors.  You’re generally looking for salt-of-the-earth type properties that are, in most markets, in the $50,000 to $150,000 range.

So aside from price range, what are some of the factors to consider?

As always, the criteria to use at the start is the S3 Investing Criteria of SIMPLE, SAFE and STRONG.

Let’s look at SIMPLICITY.  Obviously, the rental property is a conceptually simple business.  So we’re good there.  But looking deeper… is the specific PROPERTY simple to deal with?  Is the MARKET where it’s located strategically wise such that you can make a SIMPLE case for why you should invest there?

For example:  There’s a geographic part of the country that we at Self Directed Investor Network are VERY excited about.  We’ve done our homework, and this part of the country is absolutely in the path of progress and has, in my humble – but astoundingly accurate – opinion, a GREAT chance at substantial appreciation in the coming decade.  The reasons are simple – it’s between two major cities connected by a major highway, and there’s an overwhelming amount of evidence that infrastructure is rapidly growing between those two cities, raising demand for property and associated pricing.  It’s a slam dunk.  But the BEST thing about it is that with a bit of market expertise, one can still buy properties there VERY inexpensively, below appraised value… and these properties are PERFECT as rentals!  So it’s a beautiful, beautiful opportunity.  Simple to understand, simple to explain.  Just simple.  By the way – if you’d like more information about this market, hang on a minute and I’ll give you that information at the end of the show.

Another consideration for simplicity is your choice of property manager.  It’s basically their job to make it simple for you to benefit from your rental property.  Have you taken a moment to talk to a few other clients of the property management firm to find out their experiences?  Particularly if you’re buying a rental property from a turnkey company, who provides a property manager along with the property when you buy it, you need to be particularly diligent.  A few turnkey companies do a great job of vetting the property managers they recommend.  Most do not.  It’s YOUR JOB to make sure, because at the end of the day, it’s YOUR MONEY… and your sanity… that’s on the line!

Another element of simplicity is the regulatory environment.  Yes, it’s your property manager’s job to handle most regulatory issues on your behalf but your property manager is definitely subject to the constraints of the law.  For example, is it simple or difficult to raise rental rates?  Are you required to provide inspection reports to the government?  Is it simple or difficult – in other words, quick or slow – to evict a problem tenant?  Even if you have the greatest property manager in the world, they can do nothing about an unfavorable regulatory environment.

So, for example, some markets that offer strong favorability towards landlords are Arizona, Georgia, Texas and Indiana.  But New York, California, Washington and Connecticut are states that can represent serious expenses, challenges and delays for rental property owners.  Remember that delays mean extended periods where you don’t collect rent.  During these times, your rental property becomes a LIABILITY rather than an asset… so it’s CRITICAL to pick markets that are favorable – and simple – for rental property investors.

And one other quick note about this issue:  The regulatory or political environment can vary dramatically from one city to the next within the same state.  For example, San Francisco is notoriously challenging as an environment for landlords, even more than most of the rest of the cities in California.  So look at this issue from both a state-wide and city perspective.

One other note about simplicity:  Exactly how simple is it to find tenants in the market you’re considering.  This is one of the big issues with buying a rental property that already has a tenant living in it.  You simply don’t know how long it took to find that tenant.  A long search suggest that either there’s little demand or that you’ve got a subpar property manager.  Both are warning signs.  So ask your potential property manager to give you specific stats about how long it takes their firm to fill a vacant rental generally, and whether they have other rentals in the same area.  If they do have other rentals in the same area, that’s a good sign… and it’s a good source for information about exactly how simple it has been historically to find good tenants.

And, while we’re at it, my friends:  A good way to evaluate property management companies is to get a report from the local county courthouse for how many evictions have been filed by your prospective property manager.  Then, find out how many properties are being managed by that firm.  If the number of evictions filed in the past 12-24 months versus the number of properties under management seems high to you, that’s probably a sign that the property manager is good at finding tenants, but not good at choosing the best ones.

Ok, so today we’ve covered the how to evaluate whether owning a particular rental property is going to be sufficiently SIMPLE to be a wise investment for you.  There’s more to the mix, though, folks.  There’s also SAFE and STRONG.  We’ll get to those tomorrow.

Now I do want to tell you that we’ve got some AMAZING rental property investment opportunities coming up right away that MANY of you will want to consider.  But you’ll definitely have to act QUICKLY, as the properties we offer are always priced so attractively that they sell quickly.  The latest example:  I made one property available this past Thursday afternoon, and it was taken Thursday evening.

And if this notion of building wealth through rental property appeals to you, then I’d recommend you set aside some time to join me for a very special webinar that’s coming up, where I’ll introduce you to some GREAT properties in some GREAT markets that we’ve pre-vetted to confirm that they fully comply with the S3 Investment Criteria of SIMPLE, SAFE and STRONG.

To get an invitation to that webinar, you must be part of my Top Picks group.  The only way to get in that group is to text the word TOPPICKS – that’s one word with no spaces, spelled TOPPICKS – text TOPPICKS to 33444.  Again, text TOPPICKS to 33444 to get on the Top Picks list and to receive an invitation for the upcoming webinar where you’ll learn all about how to get access to pre-vetted rental property investment opportunities that ABSOLUTELY measure up to the SIMPLE, SAFE and STRONG criteria that MUST be the core of your evaluation process.

More about how to recognize great rental opportunities in tomorrow’s episode.  Until then, my friends, remember:

Invest wisely today, and live well forever!

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