I just read Cash Flow Quadrant...NO LONGER WANT TO BE IN REAL ESTATE - Posted by THS

Ok, here’s what happened! - Posted by George (NoVa)

Posted by George (NoVa) on June 17, 1999 at 17:54:46:

AJ,

The tapes and books help adjust thinking. I could write a book on what has happened in the last six weeks, but I don’t think there is room on this server for it. Let’s suffice to say that all the little bits and pieces of information in the Kiyosaki colloction started falling in place. I will only hit the highlights.

One of the Kiyosaki tapes is about raising money. I listened to it, talked to my accountant, and decided on a plan of action (should something come along). I talked with a couple of different people and have found a partner (with some money).

There is also a tape on REI. He talks about multi’s and why they are good investments. He makes sense in his approach. Another tape is on the mindset of traders. He discusses mind sets (don’t get emotional about money - winning or losing) and always know where you are.

All of these tapes helped to open my mind to the possibilities. I had been doing some L/O’s (which are profitable) but realized that I was an “S” and it wasn’t taking me where I wanted. I decided to keep an open mind and look for opportunity, not properties. I answered an ad that read: 10 units, fully rented, positive cashflow. $550,000 with $100,000 down.

As it turned out that property was a strip mall, and it had sold. The person I was talking to said he was a developer, and he came across these all the time. He asked me what type of property I wanted. I told him, I wasn’t real fussy about the property, I was looking for cashflow!

He hesitated for a moment and then asked, does it have to be real property? Without hesitating, I said no!

It seems that this developer had been building and setting up shopping centers for 30 years. He was skilled in finding anchor stores and then finding ancillary stores to backfill the rest of the center.

One of the trends that he noticed was that most food stores are either upscale, or wharehouse type stores and didn’t cater to the local markets they were in. He developed an idea for creating a chain of food stores that had a flexible model. His goal was to develop or renovate 50 shopping centers with his new model.

Here is how the deal works. He needs some cash to get these stores up and running. Aproximately half a mil each. He is selling 10% interest in each store for $50,000 and sells up to 70% of each store.

The investment breaks down like this.

$15,000 that is used to do a market study of a particular store location. That study takes 45 days. At the end of the study, a final go/no go decision is made on the location. On a go, we provide the additional funds and start the build out which takes 90 to 120 days.

Once the store is open, rebates from the food industry then are used to refund the investor’s money. Each store should produce $300,000 to $500,000 in profits each year. Or $30,000 to $50,000 for my partner and myself.

I have spent 6 weeks checking this guy out(his accountants, lawyers and management team). He has the backing (financial and otherwise) of a nationally know wholesale food distributor, and has some very creative support from other industry sources. During that 6 weeks, I also watched 9 of the 14 stores he’s planning on for this year, sell out. I have seen some of the heavy hitters in the area jump in, and I now see that he might not need investors after the fourth store opens on July 10.

In the analysis, it seems that the only thing that really is at risk is the study money. Everything else is secured.

My accountant (he’s also buying into a store) helped my partner and I finance our part (two stores). And the best part is the positive cashflow from my L/O’s is paying the debt service. Also because we are using corporations and LLC’s to transact this deal, there is no record on my credit report. So, I’m still looking for that positive cashflowing apartment building!

Robert Kiyosaki opened my eyes to the possibilities through his books and games.

These are the kinds of deals that he discusses in his books and tapes. And I realize that I have stumbled into something that was out of my league just a few weeks ago, except that I kept my mind open and listened to what was being offered and how I would make my money. I have fallen into the midst of some “dealmakers”, and if I keep quiet and listen, I just might learn something.

And yes, they all think like Kiyosaki.

Re: Great post, George. Plus… - Posted by WilliamGA

Posted by WilliamGA on June 17, 1999 at 09:41:33:

Guys,

I am new to this so I am still not “up” on all the terms used here, most, but not all. Could someone please tell me what all of the “e”'s and “s”'s are about? I have been following this thread for the last couple of days and the suspense is killing me!!

In anticipation,

WilliamGA

Re: Now read the E-Myth Revisited - and LEARN TO LOVE REAL ESTATE! - Posted by Carmen

Posted by Carmen on June 18, 1999 at 19:26:24:

Buy low. That’s it. If you purchase a property for enough under value (60-65% max FMV), a hard money lender will be comfortable lending you the full purchase price, and mine roll the closing costs into the deal. I don’t get much back, mind you - about $70-$100 - but it beats putting money in!

Only one time was I asked to put in cash - $1,000 to “prove” that I was serious - and I don’t expect to have to do this the second time around. But, in the end, it washes out - I also got a $3K roof “hold-back” which I get back once the roof is fixed (and it will probably cost $1500-$2000)

Examples: Purchased a home for $52K, appraised(!) at $88K = 59% FMV. Purchased a home for $45K, FMV $75k = 60% FMV. And the one I made a mistake on (purchased at $42K, FMV $55-60) I got through a bank loan at 75% FMV.

Re: Now read the E-Myth Revisited - and LEARN TO LOVE REAL ESTATE! - Posted by Carmen

Posted by Carmen on June 18, 1999 at 19:34:24:

My husband is actually the “doer” in this equation - he’s the runner-arounder. We started by making a million and one mistakes - but worked our way through them and learned every step of the way! I know that doesn’t help you, but it would take a book to explain all that we’ve been through (or a business plan!) and we’re not even 1/4 of the way to where I want to be.

The best advice - read everything and everybody, listen to everyone, and pick out all the things that make sense to you. Then break everything down to its simplest steps - E.g.

I. Finding a house to Buy and Rehab
A. Call “motivated seller” ads in the newspaper
B. Call realtor ads with foreclosures, handyman, etc. and get them to send you lists
C. Find a good realtor and have them pull information from MLS, and comps on the areas you are interested in
D. Place an ad in the paper - “I Buy Homes”
E. Distribute flyers/doorhangers in “target” neighborhoods

Etc., etc., etc.

Each one of those steps is then broken down into their smaller steps (e.g. "Design flyers/doorhanges, call printer for pricing, hire neighborhood kids to distribute, etc.)

It’s time consuming, and may seem like a waste of time, but in the end, if it frees you from the day-to-day drudgery, to me it’s worth it!

Government guarantees nothing! - Posted by Ben

Posted by Ben on June 17, 1999 at 16:00:59:

This was a myth perpetuated by TV infomercials. Tax liens are not government guaranteed in the sense that the government will step up and pay your lien off if the property owner cannot. What they may have meant
is that the law mandates that you get paid 18%. The word “guarantee” is misleading.

Re: Tax Lien question… - Posted by Rob FL

Posted by Rob FL on June 17, 1999 at 13:09:59:

In Florida anyway, the 18% max rate is simply a lien on the property. Say I buy a tax certificate for $1000. At the end of year 1 I have $1180. At the end of year 2 I have $1360. Etc.

The interest accrues until the lien is paid off. The state or government does not pay the interest. It will be paid when the owner redeems the tax certificate. Most of the time this occurs when the proeprty is sold or refinanced.

If the owner doesn’t pay, the tax lien owner can have the property auctioned to recoop his investment.

I disagree…( long) - Posted by Ben

Posted by Ben on June 17, 1999 at 15:56:40:

I do have a tremendous amount of control over the properties in my portfolio. I happen to be an attorney
so if I feel the money has been tied up long enough I can begin pressuring the property owner to pay up by threatening foreclosure, (at no cost to me). If he cannot pay, I turn to the bank who holds the mortgage and pressure them, (since my lien has priority over the mortgage). On the other hand, if I am earning top rates and am secured by a great property, I don’t say a word. I stretch out the investment as long as possible. A third option, if I have a lien on an unusually nice property which I may like to own,and the numbers make sense I may offer to buy out the mortgage holder at a discount, taking out the bank who is the party most likely to pay me off. Then I can do an expedited foreclosure.I can continue to pay subsequent taxes making it more difficult for the owner to redeem, or I can choose not to, keeping the amount low enough for him to be able to pay it off easier. My policy has always been to invest in situations where I can influence the outcome. (Try that with the stock market, you would have to threaten a hostile takeover to get your stock price up!) As far as initial investment, tax liens range from $15.00 sewer liens to million dollar liens. Obviously the competition is more fierce the higher the amounts and the better the properties but it is a multi-tiered industry. Ben

Re: “Insurance won’t let me!!” - Posted by Mark R in KCMO

Posted by Mark R in KCMO on June 16, 1999 at 17:42:32:

John,

I glad that you liked that one, LOL, the best part is it is true!!

My contractor is glad that I don’t work on the houses either LOL

Mark R in KCMO