Add a Couple of Zeros to Your Profits
Issue #2192
- WEALTHY: How I boosted my equity an extra $1.8 million by repositioning a single property (Toby Unwin)
- HEALTHY: Slim down with this satisfying, high-fat snack (Kelley Herring)
- WISE: Groucho Marx on money
ALSO IN THIS ISSUE:
- How to survive the hectic life of a business traveler (Michael Masterson)
- A key to helping your child be successful in life (Bob Bly)
- It’s Fun to Know… why things are heating up in Japanese offices
- Add "condign" to your vocabulary
Welcome to the Turning Point in Your Life
How can it be a group of people in the same city, with the same education, upbringing, bank balance and opportunity make riches beyond their dreams, and others don’t??
Answer: They used a system… a set "proven" process which set them apart.
Want to know what this system is?
They followed a set of simple instructions which made money automatically come their way… money was attracted to them like metal to a magnet long BEFORE they became wealthy.
It was following these simple instructions I now call "The Billionaire Way" which gave ME an unbelievable ‘piggy-back ride’ from a simple insurance sales guy to founder of the world’s first TV shopping network.
"Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy."
Groucho Marx
Add a Couple of Zeros to the Profits on Your Next Real Estate Deal
By Toby Unwin
One of the great things about commercial properties is that you can find under-market value deals just as you can in residential property investing. And you can also use strategies to quickly "add value" to the properties after you acquire them. But when you do it in commercial, the paydays are much bigger and you have more opportunities to jack up your profits. Let me use one of my very first deals as an example to show you what I mean…
I found the property on LoopNet.com. It was a 22,000-square-foot office building in Kissimmee, FL. It looked like a reasonably decent deal, so I sent the seller an e-mail. I didn’t hear back from him, so I chased him again, and again, and again.
This went on for a few weeks until he finally wrote back and said he was going on a trip, but would send me some information when he returned. Now I was really interested. Most people would have given up after the first e-mail went unanswered, so I knew that 99 percent of his potential buyers had probably dropped out by now.
A few more weeks of chasing later, the numbers finally arrived - and I went to see the property the next day. I was the only person who’d seen it…
The seller showed me around. It was a nice property, class B - which generally means over 10 years old, but nicely kept. (Class B properties are often good buys.) It had a dozen or so tenants (I like to see five or more, so you’re not reliant on just one person paying rent), and the price was right. Plus, it had a 9 percent CAP Rate. (The CAP Rate is basically the yield of the property; the higher the better. If it’s comfortably higher than your loan cost, you should get a good, positive cash flow.)
The deal looked good, so I wanted to try to get the right terms.
"Will you hold paper if I give you a good price?" I asked. By that, I meant would he loan me all or most of my down payment and closing costs - that is, would he carry a "second mortgage"?
"Sure," he said. We signed an agreement within a week.
He ended up carrying a good size second mortgage. Meanwhile, the first mortgage I got from a bank ended up being for five percent more money than I had expected them to lend me. Suddenly, the deal was over-funded. I walked out of the closing with a check for $235,000. Not too bad…
I hired a management company to run the place, and went looking for my next deal.
A couple of months later, I was looking through a local business paper. Medical office condos were selling for $188 per square foot. I had paid $104 per square foot for the Kissimmee property. What’s the difference between an office building, like mine, and an office condo building? Nothing. Just some paperwork. It’s pretty much just splitting the title deed down into smaller lots so they can be sold individually - so the pieces are worth more than the whole.
To turn my office building into office condos, I first had to get approval from my lenders - the bank and the seller. "What’s in it for us?" they asked when I asked them to move their mortgage liens over from the building as a whole to individual units. "The property is worth more that way," I explained, "which means your lifetime value figures will decrease, making the loan safer for you. I also have the ability to sell off units individually, paying you back faster."
The lenders agreed that changing the property’s use was a good idea, so the attorney did the paperwork. And I was suddenly the owner of about 20 office condominiums, worth about 80 percent more than I’d paid for a plain old office building a couple of months before. It was an instant equity gain of $1,848,000. Again, not a bad result, and everyone else did the hard work.
Let’s compare this commercial deal to a residential deal…
Price: The office property was offered at a price where it would make money - because if it hadn’t been, no one would have been interested in buying it. But residential deals are sold as places to live, so they often sell for prices much higher than they are actually worth.
Financing: Financing was easy to get for the commercial deal, because I didn’t have some nervous lender worried about underwriting a sub-prime deal.
Sellers: The commercial property seller was willing to hold a second mortgage. Unlike a nervous homeowner, he was a savvy businessman who knew that would close the deal.
Possibilities for more money: Changing the use of the commercial property to increase its value was a snap, but a house is always just a house.
This all goes to show what I’ve been saying for a while: Commercial property is not that difficult to do. In many ways, it’s easier than residential deals. Plus, the market is a lot more stable, because investors are buying income streams (rents) rather than speculating on single-family homes and hoping for an ever-rising market.
Here are a few things you can do to prepare yourself for your first commercial property deal:
- Start educating yourself about key terms and concepts in commercial real estate. That includes Net Operating Income or NOI (what’s left over after expenses and vacancy but before debt service), "CAP Rate" (NOI divided by sales price), and Debt Service Coverage Ratio (how much of the monthly mortgage payment the NOI covers).
- Surf Loopnet and other commercial sites to get an idea of what commercial properties are selling for in your area, and how CAP Rates vary depending on the location and type of property.
- Surf Loopnet to also see what commercial properties are leasing for in your area so you can start to gauge the income you might bring in if you bought one.
- Seek out and talk to other commercial real estate investors. It could be the landlord of the building where you work or members of local investor real estate groups who specialize in commercial property.
Last, but not least, start thinking big. Once you’ve made profits on a single deal that are equal to what you might make on five, 10, or even 20 residential deals… with a lot less hassle… you’ll be very glad you did.
[Ed. Note: Toby Unwin is an active real estate investor who has made millions of dollars investing in income-producing commercial real estate, including office buildings, apartment houses, and shopping malls. Tomorrow, Toby will share his investment secrets on a limited-access, reservations-only teleconference call. To reserve your spot, click here.]
Are YOU Ready to Snatch YOUR Share From This $300 BILLION Cash-Pile Looking for a Home?
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Traveling Too Much
I’ve been spending half my time traveling lately. That’s more than I’d like to. A week a month is perfect for me. But since my biggest client is an international company, I can’t avoid some amount of international travel.
I was in France for 10 days in September. I spent a week in Nicaragua in October. This month, I’ll be in India for two weeks. And then I’ll spend the first two weeks of December on a world tour, stopping - among other places - in South Africa and Australia.
Traveling this much is tough, but it has certain rewards. Between seminars or consulting sessions, for example, I often have hours or days to catch up on e-mail, write, and - most important - sit back and get a big-picture perspective of my clients’ businesses.
But I’ve noticed that when I try to jam in a business trip when too many other things are going on at work, I can lose many of those benefits. I’ve also noticed that if I have the time to reflect on a trip when it’s over, I’m able to mentally "bring home" some of the insights I’ve gained along the way, rather than leave them on the road and allow them to quickly fade away. So I always try to schedule some buffer time between the end of a trip and the return to the quotidian turmoil.
If you don’t normally travel for business, you may not have experienced how valuable it can be to remove yourself from your regular routine. A good minimum business travel program might include two events per year: (1) a trade show to meet colleagues, vendors, and the competition and to keep up with trends, and (2) a seminar where you can develop the knowledge and/or skills you need to get your business to the next level.
[Ed. Note: Get Michael Masterson’s insights into becoming successful in your business and personal life, achieving financial independence, and accomplishing all your goals on his new website. You’ll find updates on all of Michael’s books, news on upcoming ETR events, Michael’s blog, and room to send in your comments and questions. Check it out today.]
Is the College You Go to Important?
By Bob Bly
Couples we know here in Bergen County, NJ are absolutely frantic about getting their kids into a "good school" - i.e., an Ivy League college. I’m not, because I’m convinced that where you graduate from college and the grades you get don’t play much of a role in determining your success in life.
"One tragic misconception is that you have to go to a prestigious, big-name academic institution to really get ahead," writes Thomas Sowell in his New York Post column. He notes that the academic prestige of places like Harvard is based mostly on the research achievements, not the teaching skills, of its faculty.
Worse, unless your kids go on to postgraduate study, these big names may not be teaching them anything at all, since lower-level courses are usually taught by junior faculty members or even grad students.
Sowell concludes: "Getting into Prestige U. isn’t the life-or-death thing that some students or their parents think it is."
So if the college your kids go to isn’t that important, what is the key to helping them be successful in life? I am convinced it is largely one thing: encouraging them to discover their true calling - the one thing that totally engages their interest and passion. If you can help them do that, their natural curiosity, intelligence, and drive will take them the rest of the way.
[Ed. Note: Master copywriter and best-selling author Bob Bly is a contributor to ETR’s new business-building program, The Internet Money Club. Not only will this program teach you techniques that copywriting experts use to write sales-boosting copy, it will also show you how to pick a product, set up a website, and pull in targeted, qualified traffic from all over the Web. And that’s just for starters… Click here to learn more about this breakthrough program.
Sign up for Bob’s free monthly e-zine, The Direct Response Letter, and get more than $100 in free bonuses.]
A Grab-and-Go Snack to Whittle Your Middle
If you’re trying to trim your tummy, don’t let this advice go to waste.
New research shows that adding almonds to your diet may not only aid your weight-loss efforts, but also reduce your body fat and significantly cinch your midsection.
The 24-week study, published in the International Journal of Obesity and Related Metabolic Disorders, included 65 adults who were either overweight or obese. Half of the participants ate a low-calorie diet plus 84 grams (about three ounces) per day of almonds. The other half ate a low-calorie diet plus their choice of complex carbohydrates. Both groups consumed the same amount of calories and protein.
At the end of the study, the almond-eaters enjoyed a 62 percent greater reduction in weight, a 50 percent greater reduction in waist circumference, and a 56 percent greater reduction in fat mass as compared with the other group.
To target your tummy and boost your weight-loss efforts, trade in your "energy" bar for perfectly portable, nutrient-dense, raw, organic almonds. A one-ounce serving is about a third of a cup or a small handful.
[Ed. Note: Kelley Herring is the founder and CEO of Healing Gourmet (www.healinggourmet.com) and the creator of Healing Gourmet’s Personalized Nutrition Software. Learn more about how simple lifestyle choices can improve your health by reading ETR’s free natural health e-letter.]
It’s Fun to Know: Why Things Are Heating Up in Japanese Offices
Here at ETR (as in offices around the world), control of the AC is a constant battle between the "It’s too hot in here" and "I’m freezing!" factions. The thermostat in our office goes up and down throughout the day, leaving grumbling, harsh looks, and snappish comments in its wake.
The prime minister of Japan has ventured into his country’s office-temperature conflict by mandating that all thermostats in government buildings be set at 82 degrees. However, his motivation isn’t to end intra-office clashes, but rather to reduce the amount of ozone-depleting gases being emitted by air conditioners. Along with the higher temperatures comes a more relaxed dress code. Employees are free to leave jackets and ties at home, which is a big adjustment for a country that never even embraced casual Fridays.
(Source: The Times)
You CAN learn to become wealthy!
Success is not encoded in an individual’s DNA and does not transfer from father to son or mother to daughter. It is a process - and learning the process is a major KEY to setting up for success.
Today I’d like to offer you two complimentary reports to help you get started: "How To Get What You Need To Succeed In Life" and "Simple Guidelines for Creating Abundance In Your Life."
There will be many steps you take towards your goals where it will feel like you’re taking two steps forward and one step back. You will have breakthroughs, triumphs, and opportunities to overcome adversity.
But to keep moving forward, you just might need a friendly kick-in-the-pants every once in a while. Here’s how to stay energized towards action and success every day of the year.
- Charlie Byrne
Word to the Wise: Condign
"Condign" (kun-DINE) - from the Latin for "very worthy" - means suitable, deserved, or adequate.
Example (as used by Kwasi Kwarteng in the Daily Telegraph): "He is a violent criminal and, like other criminals, he should be brought to condign punishment."
[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