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TAKE-AWAYS FROM TEN DAYS OF MASTERMINDS

Darin and I are compulsive learners, and we’re always looking for an edge that will improve your returns and grow our business. Personally, I spend a lot of money and time on masterminds. It’s a great way to learn new information, check the pulse of your chosen industry, and network with successful people.

You get out of masterminds what you put in. So, I try to take good notes and connect with people in the room. I also try to take everything with a grain of salt. Though I may not agree with the person who is speaking, I want to understand their point of view, in case I’m missing something.

I also attempt to avoid the “echo chamber” syndrome. It’s easy to blindly agree with a presenter if they are reinforcing your point of view. But that can be detrimental if you don’t step back and examine your own paradigms and beliefs. So, masterminds and seminars can be a mental balancing act, but I highly recommend them. There is always someone to learn from. If you happen to be the smartest person in that room, you need to find another mastermind.

I recently attended two such events over a ten-day period. It goes without saying that I was far from the smartest guy in the room, so I took notes, listened and asked questions when I was confused. Our mission is to produce content that will help you achieve your goals, so here’s a recap of what I gleaned about the economy, real estate, taxes, cryptocurrency, and gold.

ECONOMY OUTLOOK

Despite record highs in the stock market and real estate sector, most people are preparing for some sort of pullback. That said, though seasoned investors expect headwinds, they continue to deploy capital, creating profit where they can.

Governments around the world are printing money at a record pace. It was postulated that, eventually, this will lead to economic calamity. However, their capacity to print money could sustain this “hollow” economic growth for longer than expected. This is the reason investors stay in the game but are cautious about high-risk ventures.

It is assumed by a credible source from Fannie Mae that the Federal Reserve Board will begin to raise interest rates in 2022.

REAL ESTATE TRENDS

Fannie Mae, the government-sponsored enterprise that backs loans on housing and apartments, remains bullish on the housing market. That’s good news for us real estate folks but still requires diligent research. Demographics might favor apartments, but market and submarket selection is important. The debt for apartment construction and acquisition remains some of the most attractive money available.

The highest number of 18–34-year-olds are currently living with their parents. So, as millennials leave their parents’ homes and begin to form households, they will drive demand for the next few years. Many of them will not be able to afford to purchase a home, so they will go into the rental pool, strengthening the rental market.

Single-family rentals have historically produced good rental performance and less delinquency than multifamily. Manufactured housing and storage facilities tend to resist down markets. However, cap rates have compressed in these asset classes, pushing up prices and decreasing yields.

There are still deals out there that can create a return on investment, but it takes experience, a good team, and kissing a lot of frogs before you find a property that makes sense.

TAX STRATEGIES

Maya Angelou said, “If you don’t like something, change it. If you can’t change it, change your attitude.” That’s sound advice for life and potentially a good strategy for the coming tax season. However, the mantra for this year might be, “If you can’t change it, change your tax strategy.”

There will be changes for 2021 and 2022. I am not a CPA, but I sat next to one at dinner once. Those that understand the tax code and coming legislation have advised that some of us may need to make some revisions to save on taxes. It is possible that the Section 1031 tax exchange might be taken away. If that has been your strategy, you might need to make an adjustment.

If you put your investments into LLCs, there will potentially be a revision to the tax code that would make transfer into an LLC a taxable event, if it is executed after December 31, 2021. Prior planning will help you avoid surprises.

Broadly, it appears that the current administration favors big business and will be less friendly to small business. Thus, there could be heavier taxes on self-employed and employed people. The more assets you have on the investment and business side, the better your tax situation might be.

I have kept the descriptions broad so that you can discuss the coming shifts in policy with your tax advisor and can come up with a plan that fits your situation.

CRYPTOCURRENCY/BLOCKCHAIN

Blockchain technology is here to stay, but the cryptocurrency world is still the “wild west.” Developers continue to create protocols in decentralized finance (DeFi) that one day will change how we conduct business.

Nobody knows what cryptocurrency tokens will survive, but Bitcoin is the obvious top choice. Many will fail and some will survive. It’s early in the game.

Central governments have embraced digital currency and they will want their own. The question is: Will the power of the governments be strong enough to overpower the decentralized nature of the cryptocurrency world?

GOLD

Gold remains a polarizing subject. It doesn’t create cash flow, though you can borrow against it. It has remained a stable hard asset for 5,000 years. China and Russia continue to accumulate, which should not be overlooked. It is not as sexy as cryptocurrency.

Could there be a gold-backed cryptocurrency in the future?

CONCLUSION | HARD ASSETS RETAIN VALUE

Most of the seasoned guys I know are converting their dollars into hard assets. It’s difficult to find attractive yield in real estate now, but the ability to lock in long-term debt on an appreciating asset is their way to hedge a falling dollar.

Nobody expects the government to stop giving handouts any time soon. This will inevitably decrease the buying power of fiat currency. Hard assets will protect that value. Thus, some investors are accepting lower yields, deriving comfort from having their investments in something that retains value and protects the buying power of their money.

While this was not award-winning prose, I hope it helps you in some way. There is still time to make changes to your tax situation. There are still ways to make profit in real estate, but it’s not easy. The economy seems to be booming now, but the only thing constant is change.

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