*
Highly Recommended *
The
Billionaire Way
I
would recommend "The
Billionaire Way" program to anyone who is
contemplating a new enterprise or business start-up, or is
already in business for themselves. It enabled me to look at
my life, attributes, and habits in a refreshing new way. I
was delighted to discover that I too have a number of the traits
and qualities that many who are successful in business possess,
which I hadn't realized. I am very excited to apply the principles
that were presented in the program to my new business ventures.
A
tremendous benefit was to be able to talk with the author of
the program, Bob Cox, about my own business strategies and
ideas. Bob spent an hour on the phone with me after I finished
the program, and his personal insights and suggestions were
very helpful and inspiring.
I
know that I will often refer back to the information provided
in "The
Billionaire Way" to enhance my chances for
success!
-
Catherine McNeil, Monte Vista, Colorado
"It's
tangible, it's solid, it's beautiful. It's artistic, from
my standpoint, and I just love real estate."
-
Donald Trump
An
Unexpected Way to Profit During the Real Estate Bubble
Bust
By
Toby Unwin
I
just sold my last residential investment property. That's it,
I'm done. That's because bubbles are bursting in previously "hot" markets
all across the country.
For
example, last year when I was in Fort Lauderdale, a friend
took me around on his boat and explained that he was pre-selling
condo tower blocks. He asked me if I wanted to invest. "No
way," I told him. "It's way too frothy down here."
Today,
those blocks aren't getting built, because building costs have
gone through the roof and potential buyers are walking away
from contracts. Meanwhile, condos down in Miami have fallen
over 30 percent, and "vulture" funds are being formed
with the intention of buying units for less than 60 cents on
the dollar.
According
to Business Week, if you are selling a home in a softening
market, you're better off taking the hit up front - lowering
your price now and avoiding the holding costs. I dropped the
price on my last residential investment property from $727,000
to $699,000 ("priced to sell"), and sold it within
two days.
I
left about $20,000 on the table, but I don't care. The truth
is, I would have lost more than $20,000 by holding out for
a "deal" on the sale. That's because I can leverage
up the $300,000 or so profit I'm getting out of this sale to
buy at least a $6 million commercial property. You heard me
right: I'm taking my profits from the residential bubble and
rolling them into commercial real estate.
Why
Commercial Real Estate Isn't in the Same "Bubble Boat"
Why
would I buy a commercial property if the market is topping
out for real estate? Because commercial and residential properties
don't move in lockstep.
Commercial
income properties are generally valued depending on the amount
of income they bring in. If the income doesn't rise, the price
of the property doesn't go up much. The flip side is also true.
If the income doesn't fall, the value of the property can't
fall much either.
The
seller of a commercial income property knows you're buying
it as an investment, not because it's pretty, in a good school
district, or near your friend's house. It has to be a deal,
or you won't be interested. So the seller tells you right up
front how much the property makes in gross rent (total cash
coming in) and Net Operating Income (NOI), the profit you're
left with after expenses.
Essentially, buying
a commercial property is buying an income stream. So
it makes sense that the gyrations of the residential
market have little effect on it.
Valuing
Commercial Real Estate
How
can you work out the income you'll receive from a commercial
property?
When
you look at a property on a website like Loopnet, you'll see
a number called a "CAP rate." This is short for capitalization
rate, or yield. If it's not mentioned, you can work it out
yourself by dividing the Net Operating Income of the property
by the purchase price.
The
higher the CAP rate the better, because a higher yield means
more income produced in proportion to the purchase price ...
which means more profit for you. A good CAP rate for me is
over 8 percent. That gives me enough spread over the 6.5 percent
current interest rates to make
a profit.
CAP
rates change, depending on the type of property and its condition.
A high-end apartment complex being sold as a condo conversion,
for example, might be offered at a 5 percent CAP. (Don't buy
it. You can't make any money.). At the same time, a small complex
in a working-class neighborhood might go for a 12 percent CAP.
And a well-maintained retirement mobile-home park might go
for a 7 percent CAP, while a low-income mobile home park could
go for a 20 percent CAP.
If
you can put up with the aggravation of running it (or know
someone capable of managing it for you), the low-income property
could be a good deal. Otherwise, you'd want to set your sights
on a nicer property, even though it would not be as profitable.
Understanding
a property's expected income is also necessary
when it's time to finance it. You work out the Debt Service Coverage
Ratio (DSCR), which shows how much money is left after paying
the mortgage. There are computer programs that can work this
out for you automatically, or you can simply work out your expected
Net Operating Income and divide it by the estimated cost of your
monthly mortgage. If the DSCR number is good (over 1.25), the
bank knows the property is a good deal and you should have no
trouble getting a financing commitment from them.
Financing
Commercial Real Estate Is Quick and Easy
Just
one solid commercial real estate deal can realistically provide
you with enough
cash income to comfortably retire. And getting
financing for that deal can be much easier than trying to finance
a residential property.
I
recently bought a shopping center in Pompano Beach, Florida.
To get the down payment, I refinanced one of my other properties.
It was an interesting opportunity to compare the residential
and commercial loan processes, back to back. It illustrated
what I have always told my investing students: It is actually easier to
get financing for good, income-producing commercial real estate
deals than it is to finance your own home!
When
securing financing for a residential property, you - personally
- must qualify. You have to wade through tons of paperwork
about your job history, credit, bank accounts, and more. If
your financial records aren't "up to par," you simply
will not get approved - or perhaps you'll only be approved
for a small loan that doesn't cover the price of the property
you're interested in buying.
Commercial
lenders, in contrast, don't qualify you, they qualify the property. Is
this a good deal? Is the property in good shape? Does it have
good tenants? Will it produce surplus income to cover unexpected
costs? If so, the loan can be approved - even if it's a $5
million property and you work at the local car wash part-time.
It's
also easy to find a lender that's ready and eager to loan you
the money for your commercial property.
I
have a spreadsheet of lender contacts that I add to continually.
Currently, it has about 220 names and e-mail addresses. When
I was looking for financing for my last deal, I loaded the
names into an e-mail program and contacted them all. I soon
wished I hadn't done that, because the phone rang off the hook
for the next two weeks. Every time I put it down, I had two
voice-mails waiting. Next time, I'm only doing my top 20!
Most
people simply don't realize that
it's not only possible for them to qualify to buy a multimillion-dollar
commercial property ... it may actually be easier than
qualifying to buy a $100,000 home. And I guarantee that house
will never provide them with the same level of income as a
good commercial property.
[Ed.
Note: Toby Unwin is the author of the best-selling "One
Deal From Retirement" commercial property
investment home-study program, which outlines how
a single deal can provide you with enough cash flow to retire.]
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Burn
More Calories Going Uphill
By
Jon Herring
If
you like to exercise on a treadmill, be sure to set the machine
on an incline. This is a great way to burn more calories in
less time. In fact, just a small incline can increase the energy
used by 150 percent. For example, a 160-pound man walking on
a treadmill at 2.5 miles per hour uses four calories per minute.
But if that same man walks up a 20 percent grade, his energy
output is 10 calories per minute.
You'll
hardly notice the extra effort - but this small change can
either cut your workout time in half or more than double the
calories you burn in the same amount of time.
Notes
From Michael Masterson's Journal: Bad Ideas About Making
Money
I
agree wholeheartedly with Alexandra Dimitroff of Shorewood,
Wisconsin. She recently wrote to Newsweek, criticizing "parents
who think, 'if you can learn Chinese, you'll be rich.'"
Dimitroff
says, "I want my daughter to understand that learning
about the culture and language of another country will give
her far more than a means of securing some economic gain for
herself."
My
take on learning Chinese: It won't get you rich any faster
than learning English would make a Chinese person rich. To
get rich, you have to learn how to sell things. If you know
how to do that, you can hire translators.
I
do not, however, agree with Dimitroff's attitude about making
money - that it is, in some way, less important than learning
other things (whatever those things might be). Learning how
to support yourself and your family is the first and most important
requirement of good parenting. Without doing that, a parent
gives the world another body that must be supported by other
people.
[Ed.
Note: One of the best ways to ensure a secure financial future
for yourself and your family is to develop your own home-based
business - something you can start "on the side" and
grow as big as you want it to be.
Not
sure how to do it? Join Michael Masterson in Delray Beach for ETR's
Info Marketing Bootcamp: "Making a Fast Fortune on the
Information Revolution." Bring an idea
- anything you're interested in - and we'll set you up with
a rock-solid blueprint for transforming that idea into a home-based
business that could make millions.]
It's
Good to Know: Lorem Ipsum
By
Suzanne Richardson
Publishers,
graphic designers, and typesetters have been using lorem ipsum
for decades - or possibly centuries - as placeholder text.
Inserting large chunks of this Latin-esque lingo into a document
has two basic purposes: (1) It allows designers to look at
graphic elements like layout, font, and typography without
being distracted by the text. And (2) it helps approximate
the document's finished appearance before the final text is
ready.
Type "lorem
ipsum" into your search engine, and you're sure to find
unfinished webpages using it as filler.
Although
lorem ipsum resembles Latin, it is a non-language meant to
mimic the typical distribution of letters in English. But while
it isn't intended to have any meaning at all, lorem ipsum has
roots in classical Latin. Latin professor Richard McClintock
discovered bits and pieces of lorem ipsum in the body of "On
the Ends of Good and Evil," written by Cicero in 45 BCE.
If
you want to flesh out an incomplete website, see how your finished
e-newsletter will look, or just get a sense of what this strange
non-language is, go to the Lipsum website, which has a free
lorem ipsum generator.
(Source: Wikipedia)
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Word
to the Wise: Insuperable
Something
that's "insuperable" (in-SOO-pur-uh-bul)
is incapable of being passed over, surmounted, or overcome.
Example
(as used in To
the Pole: The Diary and Notebook of Richard E. Byrd, 1925-1927, edited
by Raimund E. Goerler): "They have overcome almost insuperable
odds that the poor facilities and elements have brought about."
