Issue #2294
- WEALTHY: Bad financial advice from the government (Rick Pendergraft)
- HEALTHY: Reduce the sugar in your diet, help prevent diabetes (Dr. Jonny Bowden)
- WISE: William Arthur Ward on opportunity
ALSO IN THIS ISSUE:
- Investing in real estate off the beaten path (Marc Charles)
- To brush up on your language skills, pick up some Bach (Bonnie Caton)
- It’s Fun to Know… about stripes
- Add "misanthrope" to your vocabulary
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Your Government Is Being Irresponsible… Again
Are you looking forward to getting your rebate check from the government? Have you decided how you are going to spend it? That’s what the government wants you and your fellow consumers to do with that money. They think it will help revive the economy.
Let me be the voice of reason here.
We are seeing record-high home foreclosures, credit card delinquencies, and auto loan delinquencies. Over the long run, having people pay down their debt or build their savings will benefit the overall economy more than having them rush out to spend. Federal officials are reckless to encourage such behavior. And you don’t have to listen to them.
Use your rebate money to pay down credit. If you don’t have any outstanding debt, good for you. Put the money into savings or invest it.
[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he reveals how you can make hundreds - even thousands - of dollars just by playing a simple game of "guess the pattern." Learn more here.]
" Opportunity is often difficult to recognize; we usually expect it to beckon us with beepers and billboards."
William Arthur Ward
A Unique Real Estate Formula
By Marc Charles
Many real estate developers and investors use a simple formula to calculate net income when evaluating the viability of an investment property. And there’s nothing wrong with that formula.
Example: Let’s say you are going to purchase a single-family home for $250,000 with the intention of making it a rental property. The monthly costs to maintain the property are $800 (principal, interest, taxes, insurance, and maintenance). The property rents for $1,500. This leaves you with a net income of $700 ($1,500 – $800).
But my friend and mentor PS taught me another way to analyze a real estate investment. The best part of his formula is that it can open up your eyes to possibilities you never even considered.
PS made two fortunes in real estate. He made his first fortune the way many others did – by acquiring homes, medical office buildings, strip malls, and apartment buildings at deep discounts and then selling them for a profit. He made his second fortune in a more unusual real estate market: self-storage.
Now many investors discount offbeat real estate investments like self-storage. But when you apply PS’s formula, you can see how much money you can stand to make from them.
His formula figures out the actual revenue per square foot of an investment property. It doesn’t sound particularly special. But when he showed me how to apply it to a variety of real estate investments, I was shocked when I saw the numbers.
The Actual-Revenue-Per-Square-Foot Formula is calculated as follows:
(A) The total revenue of a real estate investment divided by (B) the total square footage of the investment equals (C) the actual revenue per square foot that is generated.
For example, a typical 1,500-square-foot single-family home in Chicago, IL generates $2,000 per month in rental revenue.
Doesn’t sound too shabby. But once you apply PS’s formula, you find that you’re making only $1.33 per square foot. ($2,000 divided by 1,500 square feet).
A typical 10-unit medical/professional office building in Cambridge, MA rents for $1,200 per unit (725 square feet each). Ten office units x $1,200 per unit equals $12,000 per month in rental revenue. $12,000 divided by 7,250 square feet (10 units x 725 sq ft) = $1.65 actual revenue per square foot.
Of course, this example assumes 100 percent occupancy, which is rarely the case. Lower occupancy would reduce the actual revenue per square foot. Still, you get the idea.
Let’s do some more calculations using the Actual-Revenue-Per-Square-Foot Formula:
Strip Mall (10 units)
$15,000 in total rental revenues per month. $15,000 divided by 12,500 total square feet = $1.20 actual revenue per square foot.
Apartment Building (8 units)
$7,800 in total rental revenues per month. $7,800 divided by 6,600 total square feet = $1.18 actual revenue per square foot.
Duplex (2 rental units)
$2,500 in total rental revenues per month. $2,500 divided by 1,900 total square feet = $1.31 actual revenue per square foot.
Marina (35 boat slips)
$22,750 in total boat slip rental revenues per month. $22,750 divided by 19,000 total square feet (the entire property) = $1.20 actual revenue per square foot.
Vacation Home
$2,500 in total rental revenues per month. $2,500 per month divided by 2,100 total square feet = $1.19 actual revenue per square foot.
Multi-Use Building (4 residential apartments/ 3 retail spaces)
$9,500 in total rental revenues per month. $9,500 per month divided by 6,500 total square feet = $1.46 actual revenue per square foot.
Mobile Home Park (45 spaces)
$32,625 in total space rental revenues per month. $32,625 divided by 87,120 total square feet (the entire property) = $.38 actual revenue per square foot.
As you can see, the Actual-Revenue-Per-Square-Foot Formula paints an interesting picture for just about any real estate investment.
Depending on the property, there could be variables that will affect the formula – like occupancy rates and revenues in addition to rentals that the property might bring in. For example, in my Marina and Mobile Home Park examples, there could be additional revenues from selling supplies, gas, and so on.
But, generally speaking, the Actual-Revenue-Per-Square-Foot Formula will tell you how much money you are receiving per square foot. And that will help you maximize the money-making potential of any real estate investment.
As I said earlier, this formula can also help you take a fresh look at some types of real estate that you might not have considered before. For instance, let’s look at private mailbox rental services. Pak Mail and The UPS Store are two of the most popular names here.
A typical Pak Mail location has about 650 total square feet of space and about 175 private mailbox units measuring 6" wide by 12" deep (about half a square foot). The average monthly rental fee for one of those mailboxes is about $25. Here’s the calculation:
$4,375 in total mailbox rental revenues per month (175 units x $25 each) divided by 650 square feet = $6.73 actual revenue per square foot! Far more profitable than any of my other examples. And this doesn’t even include revenue from packing supplies and other products that these stores sell.
Of course, you have to consider more than just actual revenue per square foot. On a financial spreadsheet, you would want to figure in not only additional revenues that a property might bring in, but also such things as operating expenses, property taxes, maintenance, and payroll (including employee benefits). And in the case of mailbox rental services, you have to consider the fact that these places are franchise operations. Maybe not the kind of investment you want to be involved in.
An unconventional real estate investment that I like better than mailbox rental services is self-storage. Not only are operating costs practically nil, but you don’t have to deal with tenants or customers. Plus, the typical 225-unit self-storage operation comes out ahead of many conventional real estate investments in terms of revenue per square foot. Here’s the math:
$33,750 in total rental revenues per month (225 units x an average of $150 per unit). $33,750 divided by 23,500 total square feet = $1.44 actual revenue per square foot.
Test the Average-Cost-Per-Square-Foot Formula on any real estate investment you’re considering – especially if you’re trying to decide between two likely opportunities. It will help you decide which one is the better candidate.
It can also help you make sense out of possibilities for increasing the actual revenue per square foot of properties you already own or are thinking of buying. For example – if zoning ordinances allow it – you might be able to add self-storage units to an office building, multi-use building, or strip mall.
[Ed. Note: Marc Charles, "The King of Business Opportunities," has launched more than 40 profitable businesses in the last 25 years. To learn more about how Marc is tapping into the multibillion-dollar self-storage industry, click here.
For more wealth-building strategies - including investing advice, entrepreneurship opportunities, and real estate investing techniques - check out ETR's "Profits in Paradise " Wealth Building Summit this April. For more information, click here.]
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Baroque Music Can Help You Learn
By Bonnie Caton
"Le chat est sur la table."
If you’re like most people, impractical phrases like the above are about all that’s left of your high school French. But studies by Bulgarian psychologist Georgi Lozanov showed that if you’d been listening to Baroque music while you hit the books, you could now remember a whole lot more.
Dr. Lozanov called it Superlearning. In the 1960s, he found that learning and memorization techniques – particularly concerning language – were 50 percent more effective when paired with calming Baroque music. By 1966, students in his classes could learn – and retain – 1,800 words per day. And they left the classroom invigorated, alert, and stress-free.
If you’d like to try it for yourself, pick up some Baroque music – music from the 16th to 18th centuries. Try composers like Bach, Vivaldi, and Handel.
[Ed. Note: Bonnie Caton is a staff writer for the AWAI Travel Division. To find out how to learn Spanish using a similar technique called SuperThinking, click here. For more tips, sign up for AWAI Travel's free e-letter, The Right Way to Travel.]
Another Reason to Lower Your Glycemic Load
Instead of worrying so much about the amount of fat you’re eating, start keeping track of your diet’s glycemic load. Doing so will not only keep you trim, it may help prevent diabetes.
A new study has found that high-glycemic-load diets are strongly associated with an increased risk for diabetes. This comes on the heels of previous research showing that high-glycemic-load diets increase the risk for cardiovascular disease.
The glycemic load is simply a measure of the impact food has on your blood sugar. It’s a better measure than the better-known glycemic index, which doesn’t take portion size into account.
Carrots have a high glycemic index. But because the amount of carbs in a carrot is so small – typically three to four grams – the effect on blood sugar is negligible. Pasta, on the other hand, has a moderate glycemic index. But the amount of carbs in a typical portion – at least 50 to 100 grams – means its glycemic load is off the charts… and so is its effect on your blood sugar.
This study once again shows the dangers of a high-glycemic-load diet. High-carbohydrate diets typically have high glycemic loads, which may be why the study found that lower-carb diets reduced the risk for diabetes.
So stop worrying about the total amount of fat in your diet. Instead, keep an eye on the amount of sugar (or foods that convert quickly to sugar in your system) that you’re eating.
An easy way to lower glycemic load in your diet is simply to cut out all the white stuff. That includes cereals (except the really high-fiber kind), pasta, rice, potatoes, and anything obviously loaded with sugar. You can find a complete listing of glycemic loads at mendosa.com/gilists.htm.
[Ed. Note: Dr. Jonny Bowden is a nationally known expert on weight loss, nutrition, and health. He's the author of the new book The Most Effective Natural Cures on Earth. For more information, go to www.jonnybowden.com. To read more of his articles on healthy living in ETR's natural health e-letter, click here.]
It’s Fun to Know: Stripes
Tigers have striped skin under their fur. Zebras don’t.
(Source: That’s a Fact Jack! )
They’ll Wonder How You Got So Much Time And Money On Your Hands
If an immigrant can start a business with less than $100 and almost no effort…start making a great deal of money by the end of the week…then turn around and sell it for a massive profit within the year… surely you can, too.
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They’re living the American Dream! Now it’s time for you to start living it too.
- Charlie Byrne
Word to the Wise: Misanthropy
"Misanthropy" (mis-AN-thruh-pee) is the dislike or distrust of people in general. The word is derived from the Greek for "hating mankind."
Example (as used by Josh Tyrangiel in a Time.com article): " No one would choose pain, misanthropy, and terrible luck as the recurring themes of a life, but [Stephin] Merritt has at least put his misery to excellent use. "
[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.]
Copyright ETR, LLC, 2008
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