How Brexit May (or May NOT) Affect Your US Real Estate Portfolio

How Brexit May (or May NOT) Affect Your US Real Estate Portfolio

this article was written by Nick Eddy – real estate investor, practicing attorney, and guest blogger at Hassle-Free Cashflow Investing.

On June 23rd the United Kingdom voted to leave the European Union. The Brexit vote came as a surprise to most considering recent polls showed voters preferred to remain part of the EU. Regardless, by the time the polls had closed it became obvious the UK would sever its ties with the EU. The Brexit vote was quickly followed up with British Prime Minister David Cameron, a staunch supporter of remaining within the EU, announcing his resignation.

Then, the world financial markets took a drastic tumble. Right away, pundits and gurus began to speculate on how Brexit would affect the US real estate market. The majority of these pundits seemed to speculate that for US real estate investors, Brexit would be great. Generalized widespread statements were made that “US real estate demand and prices will increase.” However, with this article we’re going to point out that the pundits’ predictions may not be accurate for your properties. Not all US real estate investors will receive this Brexit windfall. Let’s take a closer look at how the Brexit vote might actually affect your portfolio.

  1. Lower Mortgage Rates

With the surprising Brexit vote people got nervous. Suddenly, the world seemed a little less stable. This type of fear and uncertainty tends to play out in the economy, often resulting in lower interest rates. US real estate investors may really benefit here. Interest rates were already historically low, but the new turmoil in Europe will likely hold down these low rates even longer. Given the Fed’s recent tendency to wait and see, it’s seems likely rates will be kept low for a while as they see how Brexit plays out in the world economy.

So what does this mean for your US real estate portfolio? First, look at your properties that currently have good equity and consider pulling the cash out with a refinance. You should be able to lock in a nice low rate. I just had an offer accepted on two different duplexes and the interest rate I received on those properties was a mere 3.5%, which is terrific for non-owner occupied property.

With lower interest rates we may also see an increase in property values. When prospective buyers do the math on how much house they can afford every month, they’ll see they can afford to pay a higher price for the home because of historically low interest rates. This will likely increase property values in a lot of markets throughout the US. However, be careful not to rely on this Brexit appreciation—it may never come to your market. (*** editorial comment by David Campbell  … “In my research, income producing commercial real estate values and interest rates are directly correlated, but historical data has shown us – almost counterintuitively –  that there is no correlation between the price of owner occupied residential real estate and mortgage interest rates .”)

  1. Foreign Real Estate Investors Will Flock to (SOME) US Markets

The majority of pundits told us that US real estate prices would increase because foreign investors who once invested heavily in the UK housing market will start to put their money in the US housing market. Since all real estate is local, it’s a little bit more complicated than that.

For years, London and other major UK cities were a go to place for foreign investors—particularly for Chinese and Middle Eastern investors. And there is no doubt Brexit has had, and will continue to have, a negative effect on UK real estate values—but, that does not mean these foreign investors will start buying property in your market. Typically, these foreign investors buy high end luxury properties in top markets. They buy vacation homes on the beach and plush condos in the heart of major cities. So it is likely demand will go up as foreign investors look to buy property in the US, but it’s likely to be in markets like Manhattan, San Francisco, and Miami. I own rental properties in the rural Midwest. They are great properties that generate solid cash flow, but I don’t expect the value of those properties to increase due to foreign investor interest. These properties are over an hour away from any major airport. I just cannot imagine a wealthy Chinese investor coming into my small rural town and purchasing a bunch of real estate.

As more high end properties in large markets are gobbled up by new foreign investors, we may see demand trickle down to other segments of the market. New foreign investors will drive up prices in larger markets, which will send US investors to middle and possibly low market properties. This could end up eventually causing values to increase in smaller markets.

  1. Frustrated Wall Street Investors will Look to Real Estate

In the wake of the Brexit vote the Dow lost over 270 points and the S&P 500 dropped over 1.5%. Many of the gains investors made in the stock market over 2016 were reversed in one week, and many indexes are now below their 2015 closing values. Frustrated and burned investors focused on the stock market will start to look for their gains elsewhere.

With this potentially new influx of US real estate investors it’s important to be careful where you purchase your properties. Beware of markets where yield is being compressed by foreign investors. Instead, stay in markets that are out of the spotlight, but have the right metrics where the numbers still work well. Also, consider selling your high priced properties in high end markets and exchange them for cash flow properties off the Brexit price increase radar.


            With the Brexit vote the pundits almost unanimously claimed that US real estate values would increase. We must keep in mind that all real estate is local. There is no single US real estate market. While Brexit may increase the value of a New York based investor’s portfolio, an Indianapolis based investor may not experience that same gain. We must continue to do our own due diligence on every deal.

All the best,

Nick Eddy – Esq.

How To Predict Real Estate Prices – Get Rich Education Podcast

Get Rich Education: How To Predict Real Estate Prices

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CLICK HERE  to listen to the latest recording “How to Predict Real Estate Prices” with professional investor David Campbell and  Keith Weinhold host of the Get Rich Education podcast.

Get Rich Education is a weekly podcast with an abundance mentality to create wealth through real estate investing for an outcome of lifestyle improvement. Robert Kiyosaki has appeared as a guest on the show. His Rich Dad Advisors and Hassle-Free Cashflow Investing’s David Campbell are regular contributors.

The show appears on iHeart Radio, iTunes, Android, and dozens of platforms.

Want to learn How To Predict Real Estate Prices ? Well, CLICK HERE  to listen in.

If you’re thinking of making an investment in a Seller’s market, read this first…

We are living through interesting times. If you’re thinking about investing in real estate (or anything for that matter) in a Seller’s market, it’s essential to change your investing strategy to respond to different investment cycles.

Amateur investors learn an investing trick that worked once and try using that same trick over and over in all market cycles. That’s like planting corn in your garden every single month of the year. Some months you’ll have a bumper crop and other months you’ll wonder why there is no corn growing in your frost-covered garden. Your mutual fund sales person will call that dollar cost averaging; I call it silly.

There are times for buying and there are times for selling and times for just holding on. Having invested through the last real estate cycle of boom and bust and boom again, I am currently investing a lot more conservatively than I was in 2003-2007. Although real estate is local and there will always be good deals to be found, in today’s market good deals are definitely getting harder and harder to find. That’s because we are in a Seller’s market. In a Seller’s market, amateur investors overpay for properties because they don’t see any other alternative.

Investing 101 – buy as much as you can during a BUYER’S market. My home building company was very aggressive about purchasing heavily discounted vacant lots during the down market. Now that the housing market is booming, we are building houses with the help of contractors like Ideal Construction LLC and selling more houses than ever.

Vacant lot prices have quadrupled from the market bottom making it extraordinarily difficult to find vacant lots to replenish our inventory for future development.

Investing 202 – don’t overpay for assets during a SELLER’S market. Most home builders are currently ‘overpaying’ for the small supply of lots on the market, because they only know one trick – building houses. They have to pay the high market prices for lots because that is the raw ingredient that makes their business run. Many home builders will ‘overpay’ for lots even if that means their profit margins virtually disappear. Because they only know one trick, it means ‘overpay’ for their raw ingredient of lots or go out of business because they have no more lots to develop.

If you’re thinking about buying real estate in a Seller’s market, think long and hard about that decision. Although I don’t think we are at the peak of the current real estate or stock uptrend, I do think we are currently well above where the next market bottom will be for both real estate and stocks. Of course, if you’re buying real estate for long term cashflow and positive arbitrage, it could still make sense to buy today because interest rates are still incredibly low. You could say that real estate is in a Seller’s market, but interest rates are still in a Buyer’s market. If you are buying ‘over priced’ real estate with ‘under priced’ financing and you are positively arbitraged you hold on for a very long time, you’ll probably do very well. (Positive arbitrage is when your CAP rate exceeds your interest rate)

Investing 303 – When equities are overpriced, sell equities and buy bonds. In most of today’s US real estate markets, real estate is now overpriced. Click here to read my blog article “How To Predict Real Estate Prices” to determine whether your real estate market is currently under or over priced. DON’T MISS THIS PROFESSIONAL INVESTOR HINT: I am currently selling most of my real estate portfolio, using the cash to buy mortgage notes, and will sit on the sideline collecting mortgage interest until the equity market / home prices crash. I plan to buy back into the real estate market at the next cycle low. I am currently buying precious metals as their price continues to drop, as well as farmland and timberland as an ultra-conservative hedge against hyper-inflation and a potential currency collapse. Market cycles are very long. It can be a decade or more from market bottom to market top and back down again. Amateur investors do not think far enough into the future. They plant corn seeds in summer expecting to harvest their corn crop in the middle of winter. Sometimes it just makes common sense to stop planting and wait for the proper season for planting to come along.

Investing 404 – Not all bonds are created equal.  Mortgage notes are my personal choice of bonds. The only thing I own in my IRA is mortgage notes. A mortgage note (bond) is a promise to pay secured by a piece of real estate. If the borrower pays me as agreed, I am happy because I have earned a 10% interest rate with no tenants, no toilets, and no vacancy. If my borrower pays late I earn late fees in addition to mortgage interest and my ROI goes even higher. If I buy a corporate or government bond and they don’t pay, I can pretty much write off that investment as a total loss. If I buy a real estate mortgage note (bond) and the borrower doesn’t pay as agreed, I will do the happy dance of joy because I get to foreclose upon the real estate for pennies on the dollar. By restricting my original loan amount to 75% of the property value, I should make a higher return on my money by foreclosing on the borrower’s equity rather than getting paid as agreed. That’s what I call a win-win! If the price of real estate drops and I have to foreclose, I at least have the borrower’s 25% down payment equity as protection from loss. I also have title insurance to help protect my investment from fraud and/or sloppy paperwork.

I am currently focused on buying income producing mortgage notes in Dallas, Fort Worth, and San Antonio Texas. These three cities have excellent population growth, economic diversity, very affordable and stable housing prices, and the foreclosure laws are extremely favorable to lenders. I’ve been buying and brokering mortgage notes in those cities for about five years and I’ve developed an extremely strong system in the process.

Using the strength of my investor network (the same network that brought you to be reading this blog post today), I have developed a steady supply of mortgage note investment opportunities. I promise you won’t find mortgage note investments like these anywhere else, because these notes are specifically created by my team to fit my personal investment philosophy.

All of our mortgage notes:

(1) are in the foreclosure friendly state of Texas and the rapidly growing markets of Dallas, Fort Worth, and San Antonio.

(2) are secured by recently renovated, highly affordable, single family homes in class B neighborhoods near major employment centers.

(3) have strong borrowers with less than 45% debt to income ratio.

(4) are 1st position deeds of trust at ~75% loan to value.

(5) have mortgage payment comparable to the cost of renting the same property. If it is the same monthly payment to rent or own, the borrower has little economic incentive to default. If you do foreclose on a non-performing note, you can resell the property for cash or rent out the foreclosed property and generate about the same net operating income as you were getting from your note.

(6) are supported by a conditional buy back guarantee from Hassle-Free Cashflow Investing giving our investors peace of mind and a secondary source of repayment for their mortgage investment.

(7) are professionally serviced by a licensed and bonded mortgage servicing company.

(8) are self-directed IRA friendly. Our team can handle all of the compliance paperwork for you.

(9) are turnkey and hassle-free.

(10) have lender title insurance in place issued by Chicago Title Company and paid for by the borrower.

(11) have zero investor closing costs associated with the purchase price.

(12) are able to be purchased at a nominal discount below the face value of the note – usually about 99 cents on the dollar and the 10% annualized ROI would be improved if the borrower paid their note off early.

(13) have complete due diligence files available on the property, the loan, and borrower.

(14) are professionally underwritten by a licensed and insured residential mortgage loan originator (RLMO) to be “Frank Dodd compliant”.

(15) are secured by houses who have a minimum value of $75,000.

(16) are fully amortized over 15 years but can be resold for the amount of the unpaid balance at any time.

(17) have a bite sized purchase price between $60,000 – $120,000

If you would like to purchase high-yielding real estate notes secured by 1st position deeds of trust recorded against quality real estate in Dallas-Fort Worth, TX send us an email – or call 866-931-9149 ext 1

To request general information about mortgage note investing, you can read my free white paper – “CLICK HERE for Secrets of Hassle-Free Cashflow Lending” as well as watch this video “CLICK HERE for Investing and Tax Strategies for Mortgage Note Investors” and this video “CLICK HERE for Nuts and Bolts of Being a Private Lender.”

Creating profits in a seller’s market

The feedback I get from investors across the country is that we are in a seller’s market.  Prices are up.  Inventory is low.  Properties in the hottest markets are selling over asking price with multiple offers.  Investors are paying “more than they want to” just to get a deal done.  The ratio between rents and purchase price is favoring sellers and squeezing investor buyers out of the market. Another way to describe this trend is that CAP rates are decreasing, or “compressing”.  We are approaching a delicate part of the market cycle where the flood of inexperienced investors is driving prices up to places where experienced investors shake their head and wonder, “How is the winning bidder ever going to make a profit?”

Wouldn’t life as an investor be easier if the market gave you clear signals about the future?  Interpreting investment signals is a mix of science, artistry, and luck with a bit of clairvoyant magic thrown in.  In today’s blog, I’ll share a few of the directional signals I use in making real estate investment decisions.   I will also talk about what investment strategies and buying opportunities I am excited about in today’s seller’s market.

A common mistake investors make in reading market signals is what I call, “You see what you look for and you look for what you know.”  If you are seeing prices going up all around you and all you are looking at is prices, it would be natural to assume that if you buy now the price will go up next month.  As sophisticated investors, we know this is not true and we need to learn to look beyond price and historical price trends.  Appraisers are trained to look at what price similar properties sold for in the past 3-6 months.   Appraisers are required to always look in the rear view mirror at prices in the past.  In an upwardly trending market, homes will be selling higher than appraised value.  It makes sense that if your home is in contract at a price higher than the previous sales comps, it won’t appraise at the contract price.  A low appraisal doesn’t mean a home isn’t worth the contract price.  A property is worth what a reasonably motivated buyer and seller agree to.  A maxim to remember in real estate: “You will overpay for every property you ever buy; if someone else is willing to pay more, they, not you, will become the property owner.”

Simple economics teaches us that as you lower the price of your property there are more buyers.  As you raise the price of your property there are fewer buyers.  However, if you only have one property to sell, you only need one willing buyer.  In a seller’s market, the seller of a performing income property is not typically in a rush to discount the price to find a buyer.

Hassle-Free ways to create profits in a seller’s marketThis graph illustrates the yin-yang relationship between pricing and quantity of buyers. The centerline represents market value.  As you move above this market value, you attract a smaller percentage of prospective buyers, reducing your chances of a sale which typically increases the time it will take to locate a buyer at that price. Conversely, as you move below market value, you attract a much larger percentage of potential buyers which typically shortens the time it will take to locate a buyer at that price. One of the important take aways from this illustration is that there is a range of market prices for every property. Take appraisals with a grain of salt.  Appraisers don’t provide a price range; they must isolate a single market value based on a subjective series of adjustments to historical prices.  The marketplace where investors compete represents all of the “bid” and “ask” prices of buyers and sellers in real time.  That’s why you will see buyers in a seller’s market paying higher than appraisal.  That’s also why you will see sellers in a buyer’s market selling for less than appraisal.

Appraisals are “lagging indicators” of value, not “leading indicators” of value.   A lagging indicator confirms a previous price trend but it does not predict the future.  A leading indicator helps you predict the future.   When you hear someone say, “You should buy in such and such hot market because prices appreciated XYZ percent in the past year,” remember that person is describing a lagging indicator of value not a leading indicator. If you would like to see into the future of real estate, look for leading indicators of value not lagging indicators.

You will have an economic advantage if you know how to evaluate the leading indicators of real estate demand, supply, and one of the most overlooked real estate signals – affordability ratio. To learn more about using leading indicators to predict the future of real estate prices use this link to my blog article Predicting Real Estate Prices.   If you enjoy the article, please leave a comment or question below.

While you can’t change the signals you are getting from the market, you CAN change your investment strategy depending on what signals you are getting.   We are currently blessed with incredibly low long-term fixed interest rates.  Low interest rates are a signal for how to invest.  While current prices are high relative to rents, interest rates remain low.  One of the best assets to acquire in this seller’s market is the ability to control long term fixed low interest rate debt and to use that debt to create positive cashflow now and in the future.

If you can borrower long term fix rate money at 4% and invest in a property or note that produces a profit of 6% or more, how much money would you like to borrow?   As much as you possibly can!! This strategy is called arbitrage.  Positive arbitrage means you are making money on the bank’s money.  You can’t do anything about today’s high prices, but you can focus on winning through positive arbitrage.   Over 30 years you will make more money paying a “seller’s market premium” for a property and financing it with today’s insanely low interest rates (4-5%), rather than buying cheaply at the bottom of a “buyer’s market” and financing it with traditionally historical interest rates (7-8%).

Here are two Hassle-Free ways to create positive arbitrage in today’s seller’s market.

Option one is for the long term investor (10 years or more) who is (a) targeting higher yields, (b) is willing to take on a little more risk to achieve higher yields, and (c) is looking for a blend of positive cashflow, tax benefits, equity build up, and shelter from inflation.  The formula is simple: buy a rental property whose CAP rate is greater than the interest rate on the financing used to acquire the property.   A good goal is to achieve at least a 2% spread between the long term fixed interest rate and the CAP rate. While you may be able to achieve a CAP rate to interest rate spread higher than 2%, you may not like the quality of property that comes with higher CAP rates.   Hassle-Free Cashflow Investors gravitate towards newer properties that are lower hassle to manage and have lower risks associated with property maintenance. Watch this video series to learn more about this investing strategy.

Option two is for the income investor who is looking for a combination of safety, semi-liquidity, and immediate cashflow. The formula is to borrow money at a low rate to be a lender at a higher rate.   You can borrow capital (aka equity stripping) at today’s long term fixed interest rates around 4-5% from a bank using equity in properties that you currently own.  You then use the proceeds of the loan to buy income producing notes (aka hard money lending) secured by quality real estate in first position at conservative LTVs that produce interest income of 8% or higher.   For example, if you borrowed $100,000 against your $125,000 free and clear rental property (80% LTV) and you make a $100,000 loan @ 10% secured in first position against a single family property valued at $133,333 (75% LTV) you would have two assets – a house and an income producing note  – and you would have one liability – the mortgage on your $125,000 rental property.  The income from the note @ 10% interest rate would produce $10,000 a year income and the cost of your rental property mortgage @ 4.5% interest rate would consume $4,500 of interest expense.   You can create a $5,500 annual profit out of thin air just by moving $100,000 equity from an existing property into equity in an income producing note.   Remember, you still own the rental property and the profit from the rental property is exactly the same.  The profit comes from putting your equity to work in two places at the same time your equity controls the property and the note at the same time.   Assuming the income producing note is in first position at 75% LTV, if the borrower stops paying you can foreclose on the asset and it’s like buying the property at a 25% discount.  In fact, some hard money lenders prefer making loans to borrowers who are unlikely to repay the loan.  They call it a “loan to own” investment strategy.  Making hard money loans in a seller’s market is a great way to produce income and potentially acquire real estate at steep discounts you are unlikely to find in the currently competitive seller’s market.

If you are looking to accelerate your wealth through income producing notes, please email to receive access to our current inventory of income producing notes  / private lending opportunities.

If you are looking to buy turnkey positive arbitrage rental properties, please click here to view our current inventory of hassle-free cashflow rental properties.

If you’d like help refining your personal investment philosophy, please click the link below to schedule a free consultation with professional investor David Campbell.

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To your success,

David Campbell
Professional Investor
866-931-9149 ext 1