The Creating Wealth Show Blogcast

Latest Episodes:

CW Blogcast 9 - Income property arbitrage Apr 17, 2013

Show notes

Let’s define arbitrage. Arbitrage is when an investor profits by exploiting small price differences between similar (or identical) financial instruments. Arbitrage occurs because of pricing inefficiencies in a market. These small price blips can add up to big money for the shrewd investor. Think George Soros – he made his fortune in the margins of the currency market.

But we don’t care about George. We’re here to talk about Double Inflation Arbitrage in the income property market. Here’s how that works.

You walk up to the bank and say, “Bank, I have proposition. I’m going to put down 20% of the purchase price for this property and you’re going to loan me the rest.” If you have a good credit record, there’s a fair chance they’ll say, “Okay.”

But now you’re left with the loan debt that must be paid back. Yes, real life can be irritating like that. But then you get the bright idea to rent your property out so that the tenant is the one actually paying the carrying costs of the mortgage, while that mortgage is losing real value from inflation. Bad for the bank. Good for your. That’s your first inflation benefit.

It gets even better. Historically, assets like properties have appreciated faster than the rate of inflation. Whammo, you’re benefiting from this also. Double Inflation Arbitrage. This is no fantasy. It works in real life. Use it to create life-changing wealth.

CW Blogcast 8 - How do WE make money? Apr 17, 2013

Show notes

Maybe it’s been nibbling at the back of your brain – how do these people at Platinum Properties Investor Network make money anyway? They seem to be giving all the good information for free. We do give away a lot. It’s part of the business model. The first thing to understand is we’re not a traditional real estate company. Our focus is teaching people to invest the right way and then offering them quality opportunities via recommendations through our network.

Obviously, we make money through our own income property investments. We don’t just talk the talk. We’re out there buying the same properties in the same markets that you are. The process is an education in itself, an education which we gladly make available to you through podcasts, e-books, and our expert investment counselors.

We don’t make a lot of money when you buy one property. Like a restaurant, we rely on repeat business. To earn that repeat business, we do everything we can think of to make it so you’ll always want to buy your properties through us. It’s a symbiotic relationship. You make money, we make money, and the greatest form of investing ever invented, income property, keeps right on working.

At Platinum Properties Investor Network, we can show you how to expect 30% annual returns on your money. We figure that’s a pretty good reason to want to do business with us.

CW Blogcast 7 - What exactly does a property manager do? Apr 16, 2013

Show notes

As you may know, we are BIG fans of property managers. The small percentage of monthly rent diverted to their wallets for services rendered could very well save you an aneurysm from handling tenant complaints. Trust us, whether you live next door to your investment or across the country, you DO want a good property manager.

What sorts of tasks will a property manager take off your plate? Here’s a quick overview.

1. Conduct property inspections and/or final walk though with builder.2. Advertise for tenants and conduct showings.3. Pre-screen applicants and present prospective tenants to owner.4. Coordinate vendors to prepare for tenants moving in.5. Turn on utilities for showings and transfer to tenant upon lease.6. Complete leasing agreement with tenant.7. Accept security deposits and hold in trust account for owner.8. Collect rent and provide check and statement to owner.9. Conduct property inspections as needed on behalf of owner.10. Schedule and monitor authorized repairs.11. Complete eviction process when necessary.

This is an incomplete list of the primary responsibilities of a property manager. In the real world, a good one will be worth his weight in gold. They are your eyes, ears, and caretaker of your investment. At Platinum Properties Investor Network, we can recommend excellent property managers who we have worked with and trust to manage our own properties. We’re real estate investors too, remember?

CW Blogcast 6 - A definition of "investment." Apr 16, 2013

Show notes

You see the word “investment” tossed around quite often within these posts but what do we really mean when we refer to an investment? You likely have (correctly) ascertained we don’t consider anything sold on the Wall Street exchange an investment. Ditto for NASDAQ. Double ditto for treasuries or CD’s.

But what is an investment and why do we define it as that? Anything that does not produce income or rent is only speculation. Investing is not about speculation or gambling and it is not a get-rich-quick scheme. Do it the right way, like we teach at Platinum Properties Investor Network, and it’s almost guaranteed you won’t get rich quick – but the odds of you getting rich at all are much better.

What does “quick” mean anyway? Is seven years too long to wait to be able to quit working and live off the proceeds of your income property portfolio? Most people have enough equity resting in their home that could be put to work and to create a yearly income of nearly $67,000 within seven years. How many people do you know who have done that with stocks?

It’s not a sure bet but it’s the surest one in history. Look it up. If you’re putting your hard earned money into any other asset, you’re fighting history. Why do that? History almost always wins because, more times than not, it’s one big circle that always comes back around to repeat itself.

CW Blogcast 5 - Ditch the dollar during temporary deflation Apr 15, 2013

Show notes

While it is our fervent belief that “inflationary times, they are a comin’ back”, there’s no denying that we are in a period of deflation right now. What does that mean? Prices are a little lower and the dollar is a little stronger. While this market condition might wander along for a couple of years, don’t kid yourself. It’s just the calm before the coming inflationary storm.

Is it time to sing praises to the economic geniuses guiding federal fiscal policy? No. Is it time to put on your happy hat because the Obama policy of hope has finally paid off? Not quite. Now is the time, while the dollar is still showing signs of life, to roll up your sleeves and get to work ditching dollar-based assets like home equity, stocks, savings accounts. There are probably readers out there replacing pacemaker batteries about now. Ditch your savings? Why, for heaven’s sake?

Because when inflation returns all those types of assets will be depreciating at about 10% per year due solely to inflation. For every $1,000 you have stuffed in the sorts of assets mentioned, you’re going to lose $100 in purchasing power each and every year.

How do you avoid this revolting development? Like we said, get out of the bad stuff and into income property investing. Use your money to leverage real estate loans and let the banker be the one to get flattened by inflation. From behind our crystal ball, this is the ONLY way to create wealth in the future.

CW Blogcast 4 - Does your property make sense or is it the village idiot? Apr 14, 2013

Show notes

One of Jason’s favorite concepts regarding the search for suitable investment property is does it make sense the day you buy it? What exactly does he mean by this? It all relates to the idea of sustainable investing. By sustainable we mean that the metrics of the deal will insure the property can sustain itself through rental income cash flow and you won’t be forced to sell it at the wrong time.

The main reason people get themselves into trouble with real estate investing is they bought on speculation a property that never made financial sense and was a ticking time bomb waiting to go off from day one.

Why would you speculate when it’s so easy to determine if a particular property makes sense or not. The number one metric to look at is the Rent-To-Value (RV) ratio. In other words, compare the value of the property to the monthly rental income potential. The ideal RV ratio is .7 %. 5% is acceptable but 7% is better. It only takes simple math to figure out that the $200,000 property you’re pining for needs to generate $1,400 per month in rent to keep you out of trouble. If it doesn’t, don’t waste another moment thinking about buying it.

There’s plenty of property out there. Find another one.

If you knew nothing else about income property investing except how to use the RV ratio properly, you’d be head and shoulders above the majority of investors who take a blind swing at real estate.

CW Blogcast 3 - China needs concrete. You get rich. Apr 04, 2013

Show notes

Did you know that house or apartment building sitting on your property is a packaged commodity? Think about it. What is a structure except a compilation of commodities like copper, wood, steel…and concrete. Low tech sticks and bricks, if you will, that contribute to how expensive or how cheap the price tag is. Despite frequent appearances to the contrary, the value of a property isn’t just a number plucked out of thin air. There are very simple forces at work behind the scenes driving the bus.

First, let’s realize that the overall value of a property should be divided into two components. There’s the land, and then there’s the improvement or structure. As prices rise these days, almost the entire gain is due to the rising prices of the basic commodities used to build the house.

Why are the prices rising? Because millions of Chinese families are reaching middle class status. Homes must be built because they have money to pay for them. When China needs more concrete, the demand drives the price higher for everyone else. Basic law of supply and demand.

Do you think China will suddenly decide to opt out of modern civilization? Probably not. Demand will only continue to increase. If you know the concept of packaged commodities is going to keep property values going up, what should you do?

Don’t know about you but we’re going to be buying rental properties.

CW Blogcast 2 - How does inflation devour debt? Apr 03, 2013

Show notes

It seems counter-intuitive and the idea that debt is GREAT for the real estate investor is one of the hardest ideas to communicate to property investors who show up on our doorstep eager to learn the right way to invest in real estate.

There are plenty of wrong ways. Paying off your mortgage quickly is one of the worst ways! Please believe us when we say this. It’s much better to put as little of your own money into the property as possible and try to stretch that note out to 30 years or longer if you can. This is how you make your banker take the majority of the risk.

But exactly how does correctly structured debt get paid down by inflation?

First you should understand the idea of “real” value versus “nominal value. Nominal means that a one hundred dollar bill from 1950 and a one hundred dollar bill from 2009 are essentially the same. There might be a few minor cosmetic changes but, in the absence of inflation, you could (theoretically) go to sleep in 1950 with your hundred dollar bill, then wake up 59 years later and the buying power would be the same. You could buy the same amount of stuff now as then

But inflation rears its ugly head and devalues your money so that your 2009 spending spree with that Benjamin Franklin comes to a screeching stop very darn fast. Take that idea and spin it around. While inflation is bad for you if you hold cash, it actually works in your favor if you’re a borrower. In nominal terms, your loan balance is the same in 10 years as it is now. But in real terms, inflation has devalued the balance to the detriment of the banker and the benefit of you!

Rest now. We’ll talk more about it later.

CW Blogcast 1- Invest Like Jason's Mom Apr 03, 2013

Show notes

Real estate investing is in Jason’s blood. His mom has been doing it a long time and recently retired with 13 properties owned free and clear (paid off). The properties are worth about $7 million and the rental income adds up to about $220,000 annually. At this point she has several options but let’s pretend like she has decided to take the equity out and invest it.

She could toss it into “safe” CD’s or mutual funds and, even if they returned 5% a year, she would earn $350,000. Not so fast! Got to pay taxes on that, which will be a mighty big chunk in that income bracket.

What else could she do? Hmm, what else COULD she do?

If she were to ask her son, who’s done pretty well for himself with a few innovative strategies, he might say, “Mom, haven’t you been paying attention? Refi ‘til ya die!” What this means is get that equity out of those 13 properties, where it’s wasting away with a chronic case of inflationitis, and use maximum prudent leverage to put it to work increasing her portfolio even more.

“But, I’m retired,” Mom might say, “and that sounds suspiciously like work.”

Nonsense. She’s still retired. Sign her name on a few forms, put property management in place, stay retired but keep building wealth with an automatic ATM running in the background we like to call real estate investing the right way. Come on, Mom. It’s Jason’s inheritance. Let’s make it a big one.

Our TOPPODCAST Picks

Follow Us

Stay Connected

The Creating Wealth Show Blogcast

Related Podcasts

Links

Stay Connected