At the beginning of 2009 I had the opportunity through some close contacts of mine to go in on a large bulk purchase of residential foreclosures owned by three banks (these are called REOs). The group of investors that asked me to join them had purchased in 2008 close to $100Millions worth of these homes in 2008 but were running out of money!

How could that be?

Well they did not want to sell the homes to other wholesalers. They sold them retail by carrying a note and made a killer cash flow. They put a For sale sign out side each home (almost all homes are east of Colorado) and they placed two things on it: Dow Payment $500 and monthly payment $350 or something of that sort.
They made sure the monthly payment was less than neighborhood rent, so they sold the homes on a land contract (whereby the buyers can qualify immediately- no bank is involved and they make monthly payments to these investors including interest, property taxes and insurance) This is just like a NNN deal but it is on residential real estate!

I thought to myself, this is so powerful! Imagine buying a home at less than $20K and reselling it within a few weeks on a land contract for $40K and receiving income of $350 plus a month on each one!

They did not want to sell the home to wholesalers because they were selling them retail at good prices and discounting the price for buyers to buy each home “as is where is” no matter the condition. They are making between 20 to 30% cash on cash.

I took my inventory of these single family homes and hired people to help me coordinate the process of selling these REOs at retail to end users on a land contract for my own account. I had to find quickly some good professionals that can understand the process and can quickly execute it. I have a team now that coordinates putting the For Sale signs outside the homes, take the in coming calls from potential buyers, qualifying them and doing the contract etc. It has been an awesome venture so far and the cash flow has been terrific.

When I started talking about this with some members, they asked me to sell them some butto also have my support team help them resell the properties the same way on a land contract so they could also benefit from the high cash flow returns.

During the last two months, the success of the members that bought these REOs from me has been phenomenal. So I will open the opportunity for any one interested in buying directly from me as many REOs as he/she wants at $15,000 only each home. I will include the service of reselling them to end users on a land contract. This price and offer shall be good for just a few days and then the price will definitely move up because the banks are not selling them that cheap to me any more as their inventories have dwindled down.

This is not a training event or a product or a dream. This is the real thing. These are bank owned homes that I personally hold in my account and I will give you the opportunity to buy as many from me as you wish plus I will give you a service package to make it a hassle free turn key money machine for you.

If interested and have the money in your bank account or IRA etc you can see more detail on the website I created for you www.minibulkreos.com . Please email me cherifmedawar@yahoo.com by September 4, 2009 telling me how many you want to purchase and let me know if you have any questions. The terms of the offer will change on September 5, 2009.

Cherif Medawar
Founder

Should I pay cash or finance my next property acquisition?

There seem to be such confusion in the mind of many investors regarding de-leveraging and eliminating debt.

It goes without saying that one of the biggest advantages of doing deals in the US is dealing with banks and getting loans to acquire properties. But many investors argue today that one maybe better off buying properties all cash. I will discuss this issue in this blog hoping to clarify the difference and how to calculate it. Here is a simple example to illustrate the impact on your financial well being both in the short and long term:

Say there are a few properties for sale at one million dollar each. The properties have absolute NNN leases (meaning the Tenants pay all expenses) and each property is producing a 10% cap rate (meaning 10 percent return on capital. In this case $100,000 a year in income for each one million dollar property)

Scenario one:

You pay one million dollar in cash to acquire one of these properties producing a nice $100,000/yr. in income. No debt and no expenses, so you net $100,000/year.

This is again without calculating closing costs, depreciation and other expenses, (because it is an absolute NNN lease). You would be netting 10% cash on cash return and have no cash reserve left.

Now it would also be wise to get a credit line of 50% (that’s the maximum banks are willing to give out nowadays for credit lines against a solid commercial property with good income). This credit line will help as your cash reserve and would also help you access cash quickly in case of last minute opportunities in the market place.

Scenario two:

a) You put a 30% down payment to acquire one of these properties and obtain a loan at 7% interest for 30 years.

Without calculating closing costs, depreciation and other expenses, you would be getting $100,000/yr. income. Your payments would be apx. $56,000/yr. And you would net apx. $44,000/yr. or 14.6% cash on cash and still have $700,000 in cash reserve.

b) Now it would be wiser to acquire two properties in the same way using the leverage and getting a $200,000/yr. income. Payments apx. $112,000/yr. And you would net apx. $88,000/yr. or 14.6% cash on cash return with a $400,000 in cash reserve.

c) What would really be wisest is to acquire three properties in the same way using bigger leverage and getting $300,000/yr. income. Payments apx. $168,000/yr. And you net apx. $132,000/yr. or 14.6% cash on cash return with $100,000 in cash reserve.

So let’s numerate the advantages of having a loan instead of paying cash:

1)      Your return is higher based on a on cash invested

2)      Your safety margin and peace of mind is enhanced because you would still have some cash reserves to use as you wish

3)      Your risk would be spread out over more properties

4)      Your growth is exponential over a the same period of time

5)      You have more ways to transact (sell one-keep two or sell two and exchange for bigger and better) etc.

This will work if:

1)      You have a strong tenant with a corporate guarantee and absolute NNN

2)      You have a loan interest rate fixed for 10 years minimum

3)      You have a loan interest rate at least 2 points below your cap rate

4)      Your bank would require a reasonable down payment (30%) with reasonable terms (interest rate fixed for 10 yrs)

5)      You have the willingness, patience and ability to keep the properties for a long term over 10 years and the longer the better in this scenario.

Please understand that if I would have chosen properties with upside potential (such as apartment buildings that you could acquire to improve, or buildings that you could separate to sell or rent as condos or houses you could buy fix up and resell etc.) the impact on returns with a loan would have been extremely more powerful as the cash on cash would have been dramatically magnified.

Instead, I used an example of a simple formula of properties with existing long term NNN leases and strong Tenants to minimize any variables in the calculations and to clarify my point.

And the point is:

The most valuable element in leverage using the bank loans is time value over money. Time becomes your friend three times more in the last example because if the properties double in value (say 30 years later the properties double in value to $2,000, 0000 dollars) in scenario one, your net worth would only be $2,000,000 but in scenario 2 (c) your net worth becomes $6,000,000.

And the best news is the loans got paid off by your Tenants. 

This combination is the best illustration of the power of compounding with leverage.

You do the math, slowly, calmly and let the numbers speak for themselves.

The irony of this is most conservative people would argue with you along the way that you are paying a lot of interest, but truly you are netting more every single year for a better life style and you are getting a bigger bang in value at the end of the loans.

To be conservative is okay but to miss such an elementary but powerful advantage in commercial/income producing real estate is a shame.     

So is there a time one should pay all cash?

The only time I believe it would make sense to purchase real estate using all cash is if most of these elements exit simultaneously:

1)      You are buying the property in a hurry

2)      There is huge competition

3)      You have no other deals in the short term (or none as good as the one you are acquiring at least)

4)      You will not be holding it for a long term (low price in and re-sell fast is the plan)

5)      You may get a loan or a credit line after you acquire it

6)      You don’t need much in cash reserve (or will still have some cash reserve after your cash purchase)

7)      The property brings no income so you want the least expense in holding it (usually temporarily until you reposition it and sell it or rent it then get a loan)

8)      The interest rates are way higher than the income generated by the property at this time but you are acquiring it for its upside in the shot term.

9)      You simply have no credit to get a loan (and the property produces no or low income but is ready for repositioning).

10)  You do not know what else to do with your cash at this time

Whether cash or credit you can’t just have your style dictate what’s right and wrong. Investing is a skill based on numbers. You must do the math and let the numbers show you what makes sense. Buying a property all cash and keeping it for the long term robs you of the additional income and long term value multiplier. Buying all cash makes sense only when very specific circumstances are involved and it is rather a short term transaction.

 Realistically, if you are of a short term mentality and the market is competitive and aggressive, you probably will have to move quickly and pay all cash for your acquisitions if the property price is dramatically below market comparable sales, your goal would be to get the property as cheap as possible (and maybe turn around to re-sell them as fast as you can at a higher price if you do not care about the tax consequences). To get such great a deal cash would be king. 

Ideally, if you are of a long term mentality, no matter the market you probably will be moving a bit slower looking for properties with long term streams of income that you can acquire with the proper leverage because your goal would be to enjoy, perhaps right away or down the road, the positive cash flow and higher long term value. To get such income producing deals proper leverage against safe income would be king.

That is the power of compounding with leverage over time that very few people truly understand and even fewer people dare to apply.

Sincerely,

Cherif Medawar

ICRE, Founder

The five statements that hold people back from success:

“I am doing the best I can”.  This statement does not mean much unless:

1)      You are doing the right thing (that have the biggest return on your time and effort)

2)      You are doing it the right way (there are right ways and wrong ways to get things done)

3)      You are doing it at the right time (timing is everything)

“I have been doing it for over 10 years”. This statement does not mean much unless:

1)      You are learning new and better ways to improve on what you have been doing   

2)      You are expanding (whether market share or bottom line profit)

3)      You are building a brand that can eventually be sold for a lot of money (because of name recognition) and/or you are working on building a residual income for the future

 “I know this business and it cannot be done that way” This statement does not mean much unless:

1)      You don’t understand that markets evolve and you need to stay up-to-date on better and newer methods, features and benefits that are offered in your industry because your competition maybe more open minded and they can gain an edge over you

2)      You have actually tried that new and improved method and it did not work for you for very specific and unchangeable reasons

3)      You know someone who tried the new method and failed and you truly understand why it did not work for them and would not work for you 

“I need a lot of money to do that” This statement does not mean much even if you substitute the word “money”, for “credit”, “contacts”, “effort”, “time” etc. unless:

1)      You understand that it is not lack of resources but lack of resourcefulness that makes people fail

2)      You understand that the most powerful resource of all is the strong and meaningful relationships that you establish and nurture with the right people

3)      You stay focused on asking the right questions of yourself to feel more empowered such as: How can I do it creatively? How can I find a way?

“I have never done this before, so I have to learn it first and I am not sure if I want to spend the time, effort and money because I may not succeed” This statement does not mean much unless:

1)      You realize no matter what it is, somebody must have done it in the past and succeeded

2)      Some of these successful people maybe willing and able to share their knowledge, experience and ways to get things done successfully  

3)      It may still cost money, time and effort to get them to share, mentor or guide you along the way but your chances of success are higher when you get mentored

Once you realize that the road to success is full of challenges and opportunities you will understand why many people start and very few continue or get to the proverbial finish line.

Success is not about working hard (doing the best you can) or working long (10 years plus) and it is not about doing it only one way (the only way you think it could be done) or about the resources you have (money, time, effort). Success is truly about establishing and nurturing strong relationships over time with the right people, who have succeeded in your field of endeavor, and are willing to share their wisdom and knowledge openly.   

It may still cost you lots of money, time and effort to succeed, but having a mentor along the way makes your success trip safer, shorter and a lot more profitable. 

Wishing you much success,

Cherif Medawar

Founder, ICRE      

Syndicating is the new game in commercial real estate

I finished teaching the syndication training in California last month and am so excited about the great response and positive energy it created. Not only have I taught the program personally, which I do not do that often but also it helped me launch the new Masters Program series of advanced trainings for all members interested in increasing their depth of knowledge and real estate activities.

Syndicating is simply getting a qualified group of investors to pool their money together and give it to you, the syndicator, to acquire, manage and resell the property at a later date profitably, ethically and legally.

You, as the syndicator do not need to be licensed, do not need to have money and do not even need to have all the pieces together when you start. You do however have to follow certain legal steps to be in compliance with Securities and Exchange Commission.

I made a tremendous effort in that training to demonstrate the detailed step by step method to syndicate. From how to advertise and solicit qualified investors to selecting the property and the legal paper entities and paper work needed. I explained how to work with attorney to draft the private placement memorandum and the operating agreement. These documents allow you the full disclosure to the investors and the total power in the deal to operate the asset profitably.  

Syndicating is truly investing at its finest. If you are starting in the commercial real estate investing or you are an expert broker or even a seasoned developer, let me tell you that the game has changed, just in case you haven’t noticed. While there are better deals out there, most Buyers are unable to complete their transactions. Banks want more down payments, higher property income, more credit and guarantees from the buyers, more data from the sellers etc. making the commercial real estate transaction a headaches if not a nightmare.

If you start syndicating and getting the people that have small down payments together, the overall purchase power becomes stronger, the risk is reduced and the group gets a competitive advantage.

If you want to learn more about how you can syndicate your next deal, I may hold just one or two of these weekend training events. The investment is $1,495 for the members and there may be a discount fo those who book in advance. If interested please email my Business Manager Ms. Ashlee Jones at: AJones@Dynetech.com

Let the syndications begin…

Sincerely,

Cherif Medawar

Founder, ICRE

“The confusing real estate news going into 2009”

It’s amusing to read in the newspaper and on the internet that some people think while the US economy is down the world will just start buying US assets at deep discounts. Here is a wake up call: if US economy is down so is the world’s economy. Recently as one advanced nation after another has been fighting recession, globally they dumped the Euro in favor of the U.S. currency. You can read on CNN how the US Dollar got a nice boost against the 15-nation euro on bets that the European Central Bank will have to cut rates to decrease the impact of the recession in Europe. So the facts and figures are a bit different than what some of these confused journalists would want us to believe. Currently as the global recession continues, the US Dollar has become again the safe haven for cash reserves.

I have also noticed that recently most amateur, broke speculators are becoming experts at blaming others for their current failure and residential losses. These people are forgetting about the average American who would actually like to buy a home to live in it and is rejoicing at the fact that they can finally get a realistic chance at acquiring a decent home at an affordable price with low interest rate financing.
According to the latest affordability index; we are back to 1973 ratios. (The affordability index is the relationship between a median home price and a median income in the US).

The bad news is most people are financially uneducated so instead of moving forward and acquiring assets and leveraging in a smart way with income producing properties, they listen to the confusing news and end up either waiting or speculating in more residential homes at a discount!
The ones waiting with money are so scared that in the last quarter of 2008 billions of dollars went to purchase Treasury bills that pay .20 of 1%. How about that for uneducated investing?

The financially educated people like the members of the Institute of Commercial Real Estate, will find the best opportunities in the next 18 months as we go through 2009 and all the way till summer 2010. There is practically very little competition for quality commercial properties. Most speculators are stuck with some of their past residential real estate purchases unable to re-sell or rent at decent prices. I believe by the summer of 2010 the consumer confidence will have risen again as it always does in these beautiful and prosperous United States.

In 2009 I will add some valuable special courses and events to assist the members on capitalizing on the great opportunities that exist in today’s market and I will offer additional trainings such as:
A Syndication training: Teaching members how to raise money and do group investing legally, ethically and profitably.
Private Equity Lending: Teaching members how to loan their own money or the money they raise from Investors for large mortgage pools to receive high safe returns secured by the right commercial properties.
I will also personally, for the first time ever, conduct Field Retreat Trainings to show a limited number of select members how to make huge profits safely and tax free in commercial real estate. I will take these members on location and walk them through dozens of my own commercial properties to show them in details how I made a fortune in each one using my “highest and best use” methods.
Members will experience the commercial real estate principles that can apply anywhere in the world and I will even show them how I’ve done it using the best tax advantages that allowed me tax free profits and income for life.
The special field retreat that I will personally conduct will be offered starting at the end of the first quarter. These will be limited to groups of 20 members only each time and I will hold every limited number of these events through 2009 due to the limited time I have since I am also setting up a new Syndication organization under the Institute of Commercial Real Estate for members who wish to participate in my group investing and the large deal opportunities.

We will make 2009 the best year ever!

Sincerely,

Cherif Medawar
Founder, ICRE
www.MyICRE.com

“The good news in a terrible economy”

This is the best economic climate a true investor could hope for:  

Interest rates are lower than in the past 50 years.

Property values have declined to an affordable level.

The US Dollar has gone up in value.

Banks are dumping their assets and are not as loose with their lending practices as they used to be.

Sellers are dropping prices and willing to work creatively and flexibly with serious qualified Buyers to dispose even of quality properties.

The competition of Investors is scarce since are mostly either Buyers looking for a home or amateur Speculators who are focusing on residential real estate virtually eliminating any competition in commercial real estate. (Read my Blog called “The problems with the residential investing in today’s market”)

The above combination has created some of the best opportunities for the educated investors that know how to select quality commercial properties and work creatively with others.

True Investors do not buy assets because they think they are under priced (like real estate homes and/or stocks) to re-sell them fast for a quick buck. (A condition called “flipping” for residential homes and “trading” in the stock market) This is not investing. It is speculating. True investors look for assets that produce income today and in the future and based on that stream of income they calculate a present value.

Think of assets as entities that produce income so you can figure out their value. Looking at assets and comparing them to other assets trying to buy a one price and sell at a higher one is s form of gambling that sooner or later will catch up with the speculator who will end up getting stuck at some point when other amateurs get into the game of price differences with no regard to value based on income.

Today you can borrow at a very low rate around 6% and you can make more than that safely and hassle free by buying a commercial property with a NNN lease. Many of these properties are selling now at 8% Cap with great wealthy and large Tenants doing direct deposits into your bank accounts on a monthly basis.

You get 8% and you pay 6% you will be making money on banks borrowed funds.

Today you can also buy some of the biggest name brand company stocks to hold them long term for some future streams of income paid through dividends. (This is not as lucrative as commercial real estate investing because of leverage and tax advantages). But still, it’s a better and safer way to make a long term profitable investment to take advantage of today’s depressed values. .

People that complained in the past continue to complain and blame others today. Take full responsibility and gain control of the outcome of your investments. Stop relying on government plans and company policies for your future financial well being or you will have a life time of problems and obstacles.

Hope this helps you stay focused in the next 18 months on finding the right opportunities for true investing. There will be plenty of money to be made for the well trained Investor who has the right access to the information, the expert support and the large network provided by the Institute of Commercial Real Estate.

Sincerely,

Cherif Medawar

ICRE, Founder

www.MYICRE.com

“The problem with residential “investing” in today’s market”

The problem with residential investing in today’s market is it’s not investing it is still speculating and it’s done by amateurs who continue to make huge mistakes in a still declining market full of inventory of unsold homes:

1) Mistakes they make when they want to sell their residential property: 

a) They list it with a local real estate agent and think that this should be enough to make a sale happen.

This listing gets lost within an ocean of other listed properties in the same neighborhood or community. So much inventory of homes for sale is on the market today by banks, developers, individuals in pre-foreclosures working short sales, other sellers willing to accept deep discounts to avoid foreclosure etc. that it’s almost impossible to get an offer.

b) They also often negotiate with the realtor to pay a reduced commission.

This is another mistake because it gives the realtors no incentive to push this property over any other in the area.

Instead they should:

a)      List the residential property with the local agent AND offer the highest possible commission.

b)      Also offer the easiest and most flexible financing terms such as seller carry back a portion of the down-payment, a wrap around mortgage, a lease with option to buy, a partnership, a take over payments “subject to existing loan” and/or anything else creative enough to attract buyers.

c)      Finally, promote their property on the internet locally, nationally and internationally for maximum exposure.

2) Mistakes they make when they want to buy a property:

a)      They go the banks and ask for a list of the foreclosures and then try to negotiate the best prices.

b)      They find desperate sellers in pre-foreclosures and try to get their approval to negotiate a short sale directly with their bank.

The problem with the above two strategies is banks do not do creative financing and certainly will not accept any creative loan structuring for their inventory of foreclosed homes or soon to be foreclosed ones. So they demand that the buyer gets a new loan and cash them out at a discount price.

The amateur speculators/Buyers focus on the price and get a conventional loan. Then they quickly realize they are unable to get rid of the property at a profit because of the number of unsold homes sitting on the market, so they end up renting the property often at an income lower than the monthly expenses. Many end up being stuck with the residential homes they bought at a discount in an over saturated neighborhood.

Getting a low priced home is not enough (unless you intend to live in it and not re-sell it quickly for a profit).

Instead these home Buyers should:

1)      Negotiate with sellers directly on creative financing and financing “subject to” existing loans or lease with an option to purchase etc.

2)      Be willing to buy less property due to the time it will take to re-sell.

3)      Chose a quality property with a great location keeping in mind again the time it would take to re-sell it at a substantial profit.

4)      If they insist on speculating and selling as fast as possible, they should also follow the steps mentioned above regarding internet exposure and creative financing.

Commercial real estate investors like the members of the Institute of Commercial Real Estate invest in themselves first to learn how to Find and Analyze income producing properties. They seek support from experts and they do understand how to use creative financing to Control the right properties with future streams of income. And if they want to take advantage of the residential mess they look for homes that can be rezoned into office space to lease long term per square foot to businesses and franchises that give rent guarantees and escalations instead of renting homes individuals who are financially weak and want short term leases.

True Investors are few and far in between as evidenced by the lack of competition in today’s commercial real estate market and the flock of more amateur/speculators into the residential pre-foreclosures, short sales and foreclosures disaster.

Hope this helps you focus on true investing and cot speculating any more as 2009 will be the year the market weeds out the pros from the remaining amateurs.

Sincerely,

Cherif Medawar

Founder, ICRE

www.MyICRE.com

Should I focus on buying a residential foreclosures right now?

Short term residential profit is made when an investor is able to do two things:

1) Buys a property below market value

2) Sells the property fast at market value.

Two elements must exist in a particular area for someone to make a good profit:

1) Properties must sell below market:

A seller must be willing and able to sell the property substantially below market comparable sales:

a) This would be either a distressed seller. Someone who lost his/her job, is going through divorce, has some illness, there is a death in the family, a financial duress etc.

b) This could also be a distressed property in poor condition and in need of rehabbing and improvement and the seller does not want to deal with it.

2) The inventory of unsold homes must be scarce:

The inventory of unsold supply of residential homes in that area must be a lot lower than demand.

a) Few properties are listed by real estate agents, banks, for sale by owners etc.

b) Whatever is listed in this market is going under a sales contract in 30 to 45 days ( A measure we refer to as DOM days on market).

What is happening now is the first element certainly exists in today’s market. We have plenty of distressed sales for residential homes all over the Unites States and these properties are selling constantly below the previous comparable sales making the down trend one of the bleakest in the history of the housing market since the depression in the 1930’s.

The second element is NOT anywhere in today’s market. There is plenty of inventory of unsold homes sitting on the market. Prices have dropped to unprecedented levels yet still

Neither bankers, nor developers, nor realtors can sell.

It is not a gamble today to buy a home at a distressed sale it is simply a losing proposition. The best time to “flip” homes is when the market is on fire and lending is loose. Not when plenty of homes are selling below their historic highs.

Buying a residential real estate asset to sell it and pay closing costs twice (in and out) plus repair costs, property taxes, insurance fees, and ordinary taxes on the gains. I am buying a commercial real estate asset for its future streams of income. So if you truly want to invest learn how to get NNN long term income with escalations, guarantees and hassle free maintenance or repairs.

Wishing you the best as always,

Cherif Medawar

Founder, ICRE
www.MyICRE.com

Is this a good time to buy a commercial real estate property?

Many people ask me this question and the answer is always the same: “You are not buying the whole market. You are buying a specific property in a specific market”. And no matter the market, the most important factors for success remain the same. The correct reasons for buying a commercial income producing property have nothing to do with the local comparable sales like residential real estate investing; they have everything to do with the size of the income and quality of the Tenant along with the lease and terms that go along with the deal.

In commercial investing you are the buying future streams of income that will be produced by the asset. So your success is almost guaranteed if you focus on answering the following questions during your due diligence:

1) How much is the property producing in net income?

2) How safe is the income? (Based on the Tenant)

3) For how long should I expect to receive that income? (Based on the Lease)

4) How much will the financing cost me? (Based on the Bank)

5) How easy will it be for me to keep the property? (Is the lease NNN- do I have deferred maintenance to deal with?)

6) How much positive cash flow will I make?

7) What is the potential for a higher and better use for the property? (Now and in the future?)

8) What other deals are out there? (To have an alternative option for the use of my resources)

9) Will I still have some money left over for cash reserves?

If you know how to go through these questions and based on your training can answer them with a high degree of certainty, then the market in general is absolutely irrelevant.

An untrained person looks at general data like “office space” occupancy levels in a city, and he/she sees that the number of vacancies have increased statistically so he/she panics before even looking at a specific property and who is renting, what is the asking price, what is the potential is etc.

I always say news is how you perceive it based on your mental models.

I find it a lot more predictable and accurate to forecast long streams of income on a commercial property with a quality Tenant who signed a long term lease with specific escalations than trying to speculate on a stock market fundamentals or futures, commodities, currencies, or residential cyclical investing.

What never ceases to amaze me is how little competition there is in commercial real estate worldwide. Most people are untrained and have no business model for this type of safe investing so they lose money in so many other ventures that are unpredictable or cyclical based on general market and political events.

On August 8, 2008, I bought a mix use property. It has 6 vacant apartments on the top levels and a leased space on the ground floor. I bought it because the leased space pays for the entire property. 

I looked at the income first versus the asking price, it looked great. I immediately checked the background of the existing Tenant and reviewed the lease. It all looked great and I couldn’t wait to close on the deal.

The Tenant leasing the space downstairs is a Korean company with millions of dollars in import export transactions yearly. Very solid balance sheet and they paid one full year to the previous owner as a deposit.

I bought the property for $1,900,000.

The Korean company pays $16,000 a month rent NNN (with 3% yearly escalations) and my payment is $13,000. I net $3,000 but I have to pay for the insurance portion and tax portion on the 6 apartments upstairs and they add up to approximately an additional monthly expense including cash reserves $2,000/mo.

I placed no money down, because I got a loan at 85% LTV and gave the bank extra collateral of another property I own with equity. The seller carried 15% note with 7% interest payments and he paid closing costs.

Some of you maybe thinking: All this hassle for just $1,000 a month in income?

There is no hassle whatsoever, this is a NNN lease. Every month I receive the rent directly deposited into my bank account. This reduces my debt, so I am building equity. I have 6 apartments that I can rent approximately $600 a month each (they are rather small but in good condition) if I furnish them I can collect even more. But I prefer to do what the city planning and zoning department has already approved, which is split them into separate units to sell them for approximately $250,000 each.

You probably wonder, is the seller crazy? No. He wanted to sell asap to get into a great mall with his family members. The mall is a $12,000,0000 and has only two Tenants:

Walmart and Walgreens. How about that for solid companies and long term steady increasing income? The cap rate, he said was fantastic and he wanted to go into his deal with the family as quickly as possible so he was extra flexible on our deal.

How do good deals like this happen? It is a matter of training and exposure. The question is: Are you trained? Are you making offers? Are you looking or posting deals on line?

Many people are scared to start their first deal because they want the economy to turn around first! They want everything to be 100% clear before moving forward. That is almost impossible. The picture gets clearer as you advance not the other way around. . Success comes when you start making offers, talking to sellers, looking at incomes, verifying the Tenants capacities and prices of assets.

Let the numbers speak for themselves, and am not talking about the numbers of the whole market or economy in general. That will confuse you and paralyze you. Only amateurs get lost in the generality and the chaos of big numbers. I am talking about a specific property, in a specific market. So be specific, be bold, be good, be rich and be free….

Wishing you the best all the time in any market

Cherif Medawar

ICRE, Founder

An entrepreneur is someone who can start and grow a business or an endeavor to a highly profitable level. The goal is to eventually sell it or pass it along to others as a successful business model that can keep growing and producing more profits and better results.

When an individual starts a business for himself or herself, the three things that could happen are:

1)      They fail and lose the money.

2)      They break even and just survive.

3)      They succeed and make good profits.

In business like it is in life, one needs skill, judgment and luck. No matter the business an entrepreneur starts; the preliminary outcome of failure, breakeven or success is not what determines the ultimate success or failure. It is how that entrepreneur reacts to the business changes and challenges that make all the difference.

Successful entrepreneurs almost always thrive on the challenges they’ve got to face. They have the spirit, the mind, and the energy to keep fighting and adjusting till they reach the level of success needed to stabilize the business and grow it to a higher more productive and profitable level.

Unsuccessful entrepreneurs feel defeated and exhausted when they realize that the challenges will keep coming and the obstacles are often overwhelming. They fail to keep the right attitude to confront and handle the problems of the endeavor they’ve undertaken.

I want to dissect this a bit further based on the initial three outcomes I mentioned above:    

If the business fails:

Successful entrepreneurs take full responsibility for the loss. They study what went wrong and with that valuable information they restart the business maybe in a different location, with better people, better product, different positioning etc. The lessons learned usually add to their arsenal of experience and wisdom to avoid similar failures and they become more cautious and careful in their next endeavors.

Unsuccessful entrepreneurs blame everyone and everything around them. They go out of their way to avoid any other business opportunities because the damage is usually overwhelming. They continue being affected by their loss so long as they refuse to take full responsibility for the failed outcome they experienced.

If the business breaks even and they just survive:

Successful entrepreneurs find a way to take the parts that work and grow them and eliminate the parts that don’t work to be able to take the business to the next level.

Unsuccessful entrepreneurs feel drained because of the daily business routine. They avoid taking any new risk or trying anything different methods out of fear of failure and potential loss. Eventually market will change some more and they get wiped out.

If the business succeeds:

The successful entrepreneur grows the business and expands using the same sound proven principles. He/She realizes that the growth must be monitored and nurtured. Preparing for the worst he/she will economize, keep cash reserves and will be careful not to over extend beyond the market needs.

The unsuccessful entrepreneurs will think good times will last. He/She will spend recklessly and may even make unnecessary changes to the business models that already work. They will not economize and will spend money expanding outside their area of influence and expertise leading to their eventual demise. 

Think of the above scenarios with different businesses. Take investing in real estate for instance. The first deal may be a failure or a break even at best or maybe the person got lucky and made a killer profit. What’s most important however is not the initial outcome but who the investor is and what they will do after the first, second and third deal. Do they have what it takes to really build a successful business out of what they are doing or will they ultimately fail because they don’t have what it takes to succeed.

No matter the endeavor; it is not what you know that determines your success or failure it’s who you are that will dictate your ultimate outcome.

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Sincerely,

Cherif Medawar

ICRE, Founder