How to Make $8,700 a Month Selling Grass
Issue #2043
- WEALTHY: The "pizza principle" of real estate (Justin Ford)
- HEALTHY: What Eliot ate to lose 35 pounds in less than 6 months (Craig Ballantyne)
- WISE: Will Rogers on real estate
ALSO IN THIS ISSUE:
- 9 types of "business fuel" to fire up your entrepreneurial engines (Michael Masterson)
- Eliminate "time stealers" in 20 minutes a day (Bob Cox)
- It’s Good to Know… if you’re caught in a rip current
- Add "portmanteau" words to your vocabulary
You Already Know Fortunes Are Made from Trading. The Question is: WHAT Are ‘They’ Trading Most? (And it’s not Shares or Commodities!)
… Thirty times more trading going on than the stock market and mostly investment banks doing it.Ummm… Maybe ‘they’ know something you don’t?
- Patrick Coffey
"Buy land. They ain’t making any more of the stuff."
Will Rogers
How to Make $8,700 a Month Selling Grass
By Justin Ford
One of the great things about rental property of any kind - apartments, office, industrial, or retail - is that, after you’ve built up your portfolio, there comes a point where you have thousands of dollars pouring into your mailbox each month. And it’s truly passive income. Management takes care of your properties and the net income takes care of you.
But the fact is, you can also generate real estate income without being a landlord. In fact, you can do it without owning a single building. You can do it with raw land.
I was first introduced to this idea on an investment tour in South America seven years ago. While touring vineyards, oceanfront condos, and cranberry bogs (yes, cranberry bogs… in Patagonia!), I met Hal, an 80-year-old Californian who had made a fortune subdividing timberland.
It was from Hal that I first learned the "pizza principle" of real estate.
A pizza generates more money when sold by the slice. Bubble markets notwithstanding, the same usually goes for selling individual condos as compared to selling an entire apartment building. And the same goes for subdividing land.
So how do you generate ongoing income from this? You sell on "terms" (meaning you provide the financing and hold the mortgages).
Let me explain…
Land by itself usually can’t generate enough rental income to pay for any significant mortgage - so you don’t get the benefit of leverage, the key wealth builder in real estate. Even if you have 100 acres of prime corn-growing land in Nebraska, you probably can’t rent it for more than a couple percent of what you’d pay for it - even in today’s corn-craving, ethanol-delirious market.
But when you buy right in the first place, then subdivide and sell your land with owner financing, you can create a big profit margin and a steady stream of income that lasts for decades. To see what I mean, consider the case of my friend Richard.
Richard is from New Jersey. About 20 years ago, he decided to try sunny Florida. So he moved there, and proceeded to build a successful business and a portfolio of investment properties. After a time, his properties were worth a lot more than he ever dreamed they would be. Meanwhile, he noticed that South Florida had become as crowded and expensive as the Northeast he’d left behind.
So he became a "halfback."
Halfbacks are people who moved from the Northeast to Florida 10, 20, or 30 years ago… and are now moving "halfway back" to the mid-Atlantic states. Once again, they’re finding places to live that are far less crowded and a lot less expensive, and where the pace is less hectic.
Richard sold a few of his properties in South Florida for a nice profit, and began to buy properties in an area of Tennessee he fell in love with. He also began to move his business there.
About three years ago, he bought a five-story 10,000-square-foot 1920s bank building on the main street of a small post-bellum city rife with neoclassical architecture. The building is large enough to house his business, and there is room left over for him to collect some rental income to boot. (He already has tenants.)
He bought the building for just $120,000. It’s worth at least three times that much today, though it’s become nearly impossible to find anything of that character and quality at any price.
And yet, perhaps his best buy was 85 acres of pastureland a few miles outside of town, which cost him just $2,000 an acre. These days, land like that is selling for $11,000 to $15,000 an acre - and the market is rising steadily as more halfbacks flee high-priced, high-tax, high-insurance Florida, California, and other pricey parts of the U.S.
If he so chooses, Richard can now turn his one-time investment into a steady stream of purely passive income of $8,700 a month for the next 20 years. And he can do it without dealing with toilets, trash, and tenants… or even taxes, for that matter.
Here’s how…
If Richard sells on terms, it’s likely he can get the higher range of the market, since, when you offer terms, you are usually able to command a higher price. That’s especially the case with raw land, because financing is not as readily available for raw land as it is for income-producing property.
What’s more, he could subdivide the land into smaller parcels of a half-acre, maybe even a quarter-acre. That could result in a higher average sales price per square foot and a greater sales price overall than even $15,000 an acre.
But let’s suppose he subdivides his 85 acres into 85 one-acre parcels at an average sales price of $14,000 apiece.
And let’s say he takes just $2,000 as a deposit from each buyer. With 85 acres, that’s $170,000 he gets upfront. That covers the initial investment he made in the land. And since Richard happens to have used an equity line of credit from another property to buy this land, he can now pay off that line in full. But he now also has 85 people who each owe him $12,000. That works out to $1,020,000. That’s his gross profit. And he’s going to take it - with a hefty interest rate - over the next 20 years.
Let’s say Richard lends the money to his buyers on a 20-year amortization schedule at an average rate of 8.25 percent. In today’s market, that rate would be quite reasonable for land. For each $12,000 borrowed, that works out to a monthly payment to Richard of $102.36. Multiply that by 85, and you have gross monthly inflow of $8,700!
And from that money, does he have to pay insurance? No…
Does he have to pay property tax? No…
Does he have to pay a property manager? No…
Does he have to repair roofs or sinks or toilets or windows? No, no, no, no…
It’s all his. What’s more, a portion of each monthly payment he receives qualifies as long-term capital gains. So, for someone in his income bracket, it will be taxed at a much lower rate. Only the interest portion would be taxed at his regular income tax rate.
Now, before you run out and buy your swath of paradise, a few points to keep in mind…
You always have to buy right first. You can overpay for raw land, just as you can overpay for any other kind of property. It’s even more of a concern with land, since your purchase price isn’t supported by rental income. And especially if you’re a lazy outsider, you’ll end up paying far more than the locals if you don’t do your research first.
You can also buy at the wrong part of a market cycle. What you want to look for is an area with growing jobs and employment, and where the fundamentals of the other local real estate sectors (single-family homes, apartments, offices, etc.) still make sense on a price-to-rent and price-to-household-income basis.
And remember that while this is a great strategy, the mortgages are wasting assets once you’ve sold the land. Richard might create over a million dollars in extremely passive income over the next 20 years - and with favorable tax treatment. But at the end of that 20 years, the party’s over.
With rental property, on the other hand, your income tends to grow over time. And so does your equity. Your tenants pay down your mortgage and give you net income each month, and every dollar of appreciation in the building and land is yours for as long as you own it.
Nonetheless, both of these strategies can fit into your real estate portfolio. The key is to learn the fundamentals of creative real estate investing - and to always apply them with a sharp eye toward value.
[Ed. Note: Justin Ford is an active investor in real estate and global stock markets and the author of Main Street Millionaire, a value-focused real estate investment program. To learn more about creating multiple streams of passive income through creative real estate investing, check out Justin’s just-released special report.]
Lower Prices… Better Service
Stop paying crazy high prices… and stop settling for puny profits, poor service and second-rate health care!
Suppose I told you three secrets that entitled you to…
- Triple your nest egg in just 11 months with complete safety.
- Block cancer and heart attacks for your whole life - at a cost of 15 cents.
- Laugh at high gas prices as you get $12 cash back every time you fill up your car.
- Patrick Coffey
How to Make a New Business Work
By Michael Masterson
Apart from starting off with (and sticking to) a good plan, there are nine secrets I’ve discovered to making a start-up business work:
- Business doesn’t happen until you’ve made the first sale.
- The most effective way of entering a new market is to offer a popular product at a much lower price.
- It’s ultimately about selling.
- When choosing a business, select one that can be grown without your personal involvement.
- Before you invest time and money in any business, know exactly how much you are willing to lose - and get out if you hit that point.
- First, improve your strengths. Then, eliminate your weaknesses.
- Focused effort is more effective than a diversified approach to business building.
- Let your winners run and cut your losses short.
- Pay attention to Pareto’s Law (the 80-20 rule): 80 percent of your success comes from 20 percent of your resources.
[Ed. Note: The above article was excerpted from Michael Masterson’s book Automatic Wealth for Grads… and Anyone Else Just Starting Out. Get the book to learn the details… plus much more.]
Don’t Let Unforeseen Events Trample Your Goals
By Bob Cox
The car battery is dead… the baby’s running a fever and needs to be taken to the doctor… the roof leak needs immediate attention. You can’t avoid emergencies like these, but you CAN minimize the amount of time they "steal" from you and the accomplishment of your goals.
By adding a buffer to your daily to-do list, you can deal with such unplanned events as part of your everyday schedule.
Let’s say you’ve set three major goals for yourself this year. You’ve allocated four hours each week to increasing your income, two hours a week to renovating your bathroom, and two hours a week to becoming more physically fit.
Now ADD two more hours to cover anything unforeseen that comes up.
Where do you get the extra two hours? As a regular reader of ETR, you already know the answer to that: Begin your day earlier by getting up earlier! Even getting up 20 minutes earlier each day for six days will do the trick.
Scheduling for those inevitable time-stealers allows you to handle most emergencies and other unexpected distractions… AND stay on track with your goals.
Sure, not every plumbing problem or spur-of-the-moment visit from your Aunt Moira will fall neatly into the two extra hours you’ve allotted. But having that time cushion will go a long way toward keeping you on schedule and making sure you don’t sacrifice your goals.
Not only that, it will make you feel in control of what you’re doing - a definite stress reducer.
[Ed. Note: Bob Cox is co-founder of the first TV shopping network and the author of The Billionaire Way. Join over 700 ambitious Early to Risers who receive his inspiring, motivating, and energizing advice every week as members of ETR’s Total Success Achievement Program.]
Reader Feedback: "The information on Bob Cox’s DVDs is insightful, entertaining, and something that I actually use."
"I’d like to thank Bob Cox for The Billionaire Way. I enjoyed it tremendously! The information on the DVDs is insightful, entertaining, and something that I actually use in both my personal and business life. In addition, the accompanying material written by Karin Cox was a great tool for the daily exercises.
"I look forward to great success with the wealth of information that I was privileged to learn from both Bob and Karin! Thank you for believing in me!"
- Denise
Albuquerque, NM
[Ed. Note: How has reading ETR helped you - maybe even changed your life? Send your comments to ReaderFeedback@gmail.com. Include your name and hometown… and we may print your e-mail in a future issue.]
Eliot’s 6 Diet Secrets
By Craig Ballantyne
Even people who work out consistently fail to achieve the changes they are looking for. What’s holding them back from losing fat and building their best body ever? Poor nutrition - and, as I’ve taught many of my clients, it’s much easier to eat healthfully when you plan ahead and prepare the food yourself.
Eliot, for example, was eating a lot of take-out fast food, drinking eight glasses of soda per day… and gaining body fat. I suggested that he switch to eating freshly prepared natural foods, but he was afraid it would take too much of his time. He continued to gain body fat until he finally decided to give my suggestion a try.
In less than six months, Eliot went from 210 pounds and 20 percent body fat to 175 pounds and 10 percent body fat. Plus… before he started on his new diet, he’d been sleeping about 10 hours a night, taking an hour-long nap each day after work, and still felt tired. Now, he is able to sleep seven to eight hours a night and has enough energy to last all day.
How did Eliot do it? How did he find the time? Here are his six diet secrets for success:
- He plans his meals for the week on the weekend, and buys a week’s worth of fresh produce in one visit. Then he cuts up a week’s worth of vegetables and stores them in the fridge.
- He starts his day with a high-protein meal by eating an easy-to-prepare omelet made with his pre-cut vegetables.
- He grills, bakes, or BBQs chicken, salmon, and other lean protein that he adds to gourmet salads prepared with fresh vegetables and spinach leaves. This makes his meals nutritionally dense, low in total calories, high in appetite-suppressing fiber, and full of protein to support muscle growth and a fast metabolism.
- He snacks on raw almonds - not those roasted in vegetable oils and smothered in salt. Research shows that almonds, which contain healthy fats, fiber, and protein, help you lose weight and control cholesterol.
- He drinks green tea and water instead of high-calorie soda.
- By planning ahead, he finds that he eats right 90 percent of the time. He doesn’t worry about the 10 percent of the time when he may enjoy a slice of pizza or another food that would otherwise get in the way of his fat-loss efforts.
[Ed. Note: Craig Ballantyne is a world-renowned Certified Strength and Conditioning Specialist. Check out his Turbulence Training for Fat Loss system on his website.]
It’s Good to Know: If You’re Caught in a Rip Current
Rip currents (or rip tides) are powerful currents that flow away from the beach. They can occur wherever there are breaking waves. If you are caught in a rip current, stay calm and don’t try to swim against it. Instead, swim parallel to the shore until you’re out of it. If you can’t do that, tread water until it dissipates.
(Source: The National Weather Service)
Do You Need To Start Out Small?
If you don’t have an Internet business yet, or if your company is smaller than $1 million then you need something different… something that lets you start off small.
One man I know turned $10 into over $500,000. How’s that for starting small!
Let me show you how to get a similar Internet income stream running for almost nothing.
- Patrick Coffey
Word to the Wise: Portmanteau Words
A "portmanteau" (port-MANE-toh) - from the French for "to carry" - is a large suitcase.
A "portmanteau word" is a new word that is created by combining two other words and their meanings. Lewis Carroll coined the term for the sort of words he used in his poem "Jabberwocky." For example, he joined "slimy" and "lithe" to create the portmanteau word "slithy." Familiar portmanteau words include "smog" ("smoke" and "fog"), "brunch" ("breakfast" and "lunch"), and "motel" ("motor" and "hotel").
[Ed. Note: Become a more persuasive writer and speaker … build your self-confidence and intellect … increase your attractiveness to others … just by spending 10 VERY enjoyable minutes a day with ETR’s new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007