Issue #2186
- WEALTHY: How I dodged a $10,000-a-month bullet (Alan Cowgill)
- HEALTHY: A healthy reason to carve a pumpkin this season (Kelley Herring)
- WISE: Fred Adler on cash flow
ALSO IN THIS ISSUE:
- How can a writer turn a book into a Potter-style blockbuster? (Michael Masterson)
- What to say when you call someone again and again (Ilise Benun)
- It’s Fun to Know… about cellphone towers in disguise
- Add "tumult" 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? Click here to learn more…
"Happiness is a positive cash flow."
Fred Adler
How to Beat Real Estate Cash Flow Issues
By Alan Cowgill
Whether you’re an experienced real estate investor or just getting started, negative cash flow can cripple your business. I know this from some hard personal experiences early in my career – and I also know that there are many ways to bounce back.
In early 2002, I hit the wall. I had a negative cash flow of $10,000 a month. Worse, I had just quit my J-O-B of 17-1/2 years so I could achieve my dream of becoming a full-time real estate investor.
I thought I had planned for everything. I’d attended great seminars and studied at the feet of the masters. What I hadn’t foreseen was a downturn in the rental market in my city – and it reached up and bit me. Since I hadn’t done the job of finding private lenders, I couldn’t fund my business.
Fortunately, I got some good advice at the time, and it got me back on the right path. I went to work filling vacancies, cashing out lease-option tenants, and selling shaky properties… and narrowly dodged the bullet.
But after learning my lesson the hard way, I’d like to save you from having to deal with similar cash-flow problems. Here are a few ways to get out of trouble… or at least generate some near-term cash:
1. Refinance.
If you’re paying a private lender a high interest rate and you think you may end up holding a property longer than planned, you need to make sure you don’t get "upside down" on the loan (meaning you owe more than the property is worth). The key to knowing which way to jump is to watch your profit margin. If you need to buy some time, either bring in a private lender at a lower rate or find a lending institution that offers a lower rate if you refinance.
You’ll need to do the math and see where the breakeven point is. Let’s say you’re paying a private lender 15 percent, but can get 6 percent from a local bank. The breakdown looks like this:
- loan amount x 15 percent ÷ 12 = A interest per month
- loan amount x 6 percent ÷12 = B interest per month
- A interest minus B interest = amount saved per month if you refinance
- closing cost ÷ amount saved per month = breakeven point (in months)
Let’s say your breakeven point comes out to six months. In that case, if you’re going to hold the property longer than six months, it makes sense to refinance.
2. Find at least three mortgage brokers and let them vie for your business.
3. If you have a bunch of equity in the property, you can:
- Sell the property at full price. If you need cash, you can carry back a second mortgage and then sell it. You can often find a buyer for the second mortgage by running an ad in the local paper.
- Wholesale the property to a real estate investor.
- Cut your price and look for a cash buyer.
4. Look at your "model."
Take a hard, unbiased look at the structure of your business. Is it making you money? Do you know your real numbers? If you discover that it’s not profitable, it’s time to make some changes.
For example, when I got into the real estate business, I was investing in low-end rental properties using a buy-and-hold strategy. That worked up to a point, but I wanted to generate more cash flow without having to wait years to pay off my loans.
So I decided to buy, fix, and sell the same kind of low-end houses with a lease-option exit strategy. Because I was fixing up the properties to sell, not to rent, that meant I was putting more money into them.
Unfortunately, this strategy didn’t work, because my would-be tenant-buyers still had a "renter’s" mentality. They would live in the property for a few months to a year and then quit paying. I’d evict, put $3,000 back into the property to get it up to speed, and then go through the same process all over again.
When I did the math, I realized that I wasn’t making the profit I had expected. To top it off, when I did get one of these low-end properties closed, I’d end up carrying back a second mortgage. That just added insult to injury.
Here’s a different business model that might be more successful for you:
- Target a medium-priced (or higher) property.
- Purchase the property for all cash using private money. Let the money accrue.
- Fix up the property and sell it at retail.
- If the property doesn’t sell in six months, refinance at 6 to 7 percent interest. This frees up the private lender’s money so you can use it again.
- Put a lease-option tenant or land contract (sometimes called a contract for deed) buyer in the property. This covers your monthly expenses.
Unlike my original strategy, this model has a lot of upside. You buy a property for all cash and have zero holding costs. If you can sell it at retail, you’ll get some quick cash. Otherwise, you go for soft terms, free up the private lender’s money so you can use it again, and get a cash-flow property by refinancing at a lower interest rate.
5. Work with tenant-buyers who have credit challenges.
- If your tenant-buyer will need to open up a credit line to get financed, hand him the form when you do the lease option or land contract/contract for deed.
- Put an escalation clause in the contract, both on the price of the property and on the monthly rent or mortgage.
Some of the above solutions might not sound very appealing, but they can save your dreams of real estate wealth when you’re against a wall and strapped for cash. The key to getting out of a money jam is to take action… and then return to invest from a stronger position another day.
[Ed. Note: Alan Cowgill is the president of Integrity Home Buyers Inc., and is the nation's leading speaker on private-money financing. Alan will reveal his secrets for finding all the cash you'll ever need to do your real estate deals, even if you have no money or bad credit, at an exclusive gathering of self-made millionaire investors to be held at one of Florida's most luxurious resorts November 16-18. To learn more about this extraordinary event before it sells out, click here.]
Let the Demise of the Dollar Lead You to 1,000% Gains
As the dollar continues to erode, so will the accounts of those who rely solely on the usual stocks and bonds. But the demise of the dollar won’t be a calamity for everyone…
Click here if you want to learn how to protect your wealth… AND make the kind of gains that most people could never dream of… returns like 5,131% in just 30 months!
Dear Michael Masterson: "What is your opinion of J.K. Rowling’s marketing efforts?"
"I am curious… how and why do you think J. K. Rowling’s had so much success with her Harry Potter books? What is your opinion of her marketing efforts? What should a writer keep in mind to make his/her book a best-seller?
"Expecting success… always."
- Murtaza Ali
Cairo, Egypt
Dear Murtaza,
I don’t know much about J.K. Rowling. But what little I do know suggests that the success of her books has not been due to some ingenious, international marketing scheme but to a natural, spontaneous proliferation of interest that derived from word of mouth and good reviews. She did not set out to write the biggest best-seller of all time. She set out to write a good book for children. Sometimes great things can come from modest ambitions.
As for your question on how one can make a book a best-seller, I have a few ideas about that.
If it’s a work of fiction, plot is the most important thing. It must have a compelling story with a sympathetic main character who is – from the very beginning of the book – involved in a challenge or conflict that is resolved satisfactorily at the end of the book.
If it is a work of non-fiction, the most important thing is the idea. The book should be about one Big Idea – a "tipping point" idea in the sense Malcolm Gladwell meant when he wrote The Tipping Point. It must be about a subject or problem that many people are thinking about – but present a particular proposition or solution that takes their thoughts one step farther.
If you want to write a best-seller, start by writing a great book. To write a great book, choose a plot or an idea that is really, really great and stick with it.
If the book is good, the marketing will be easy.
- Michael Masterson
[Ed. Note: Have a question for Michael Masterson? Write to him at AskMichael@ETRfeedback.com.]
Make Persistence Pay Off
By Ilise Benun
Sometimes, just by making a few cold calls, you can reach your prospective client, employer, or partner on the phone and make a stronger impression than any e-mail message will ever make.
However, because cold calling isn’t always immediately rewarding, many people give up on making follow-up calls when the prospect doesn’t respond right away. But if this is someone you really want to work with, and for whom you feel you are the perfect fit, it’s your responsibility to be persistent.
Don’t give up. You will certainly fail if you stop trying. So what should you say when you call again and again? Try a version of this:
"Hi John, it’s [your name] calling again. You probably remember a few of my other messages, but I’m being persistent because I really want to work with you and your company. I think it’s a good fit for both of us, and I’d love an opportunity to help you. So I hope we can chat soon. Here’s my number, and you can be sure that I’ll keep in touch."
[Ed. Note: Networking expert Ilise Benun is the author of Stop Pushing Me Around. Get more networking strategies with Ilise's free e-newsletter, Quick Tips from Marketing Mentor.]
Pepitas Provide a Powerful Prostate-Protecting Punch
If you’re concerned about prostate health, carve a pumpkin. Or at least make sure you eat those seeds.
Pumpkin seeds, or pepitas, have been used to treat benign prostatic hypertrophy (BPH) in Europe for centuries. And modern science can now explain why.
The shelled seeds are a rich source of phytonutrients called curcurbitacins. (The outer shell is mainly fiber.) Not only do these nutrients help reduce inflammation in the body, they also reduce the conversion of testosterone to a byproduct called DHT (dihydrotestosterone), which contributes to prostate gland enlargement.
But that’s only one part of pepitas’ prostate-protecting punch. These little seeds are also one of the best sources of zinc – a mineral that helps prevent healthy prostate cells from transforming into cancerous ones.
You can get the prostate-protecting benefits of pumpkin seeds in any season. They make a great snack, and they’re available year round in the produce section of your grocery. You can also find them in some new and delicious products like Nature’s Path Flax Plus Granola Cereal with pumpkin seeds. And try substituting pepitas for the pine nuts in your favorite pesto recipe for a healthy twist.
[Ed. Note: Kelley Herring is the founder and CEO of Healing Gourmet (www.healinggourmet.com ) and editor-in-chief of the Healing Gourmet book series, including Eat to Fight Cancer. Learn more about how simple lifestyle choices can improve your health by reading ETR's ETR's free natural health e-letter.]
It’s Fun to Know: Spot the Cellphone Tower
Cellphone towers are the backbone of modern communication. After all, where would we be without our cellphones? But that doesn’t mean the towers are pleasant to look at. And, in fact, many companies have run into zoning problems and have had to camouflage these eyesores in a variety of ways to minimize their intrusion on the landscape.
On your travels, see if you can spot them masquerading as flagpoles, cactus, water towers, pine trees, palm trees, billboards, and fake boulders. They are also showing up as church crosses, and are actually being built into church spires. Some companies are even building "free" spires for churches if they are allowed to put their cell towers there.
(Source: National Geographic)
Start Making Money Today
Interested in getting a nice little side-business going on the Internet? Or maybe even from your living-room table?
But you don’t have too much money, you don’t have too much time, and you’re not exactly Bill Gates when it comes to technology. Sound familiar?
A lot of people are in the same boat. The good news is that ETR has heard you. And now we’ve done something about it…
We’ve asked our colleague Marc Charles to be on the lookout for profit opportunities that can be run from a kitchen table, your desktop or out on the road.
Criteria? They’ve got to be inexpensive, easy to start, and still have great income potential, but without a lot of red tape.
They say when you’re first getting your feet wet with a side-business, the most important dollar to make is the first one. Well, Marc is an expert at taking beginning entrepreneurs and showing you how to make that first buck. He knows, because he’s done it dozens of times for himself, his family and his friends.
If you’ve been dreaming about starting your own business… now you can get started for about the price of 2 lattes.
And get this – you could be making money literally just hours from now. Imagine the feeling of finally getting a side business launched – TODAY!
- Patrick Coffey
Word to the Wise: Tumult
"Tumult" (TOO-mult) – from the Latin for "to swell with anger or excitement" – is violent commotion, uproar, or agitation.
Example (as used by Joaquim Maria Machado De Assis in The Posthumous Memoirs of Bras Cubas, translated by Gregory Rabassa): "Just imagine, reader, a reduction of the centuries and a parade of all of them, all races, all passions, the tumult of empires, the war of appetites and hates, the reciprocal destruction of creatures and things."
[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
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