Key Updates

How do you compare investments?

I'm in the middle of final push to raise funds to purchase a large commercial office/industrial campus in Colorado.

One of the things I am seeing is that most people haven't been given the tools to accurately identify what is their personal investing criteria and from that criteria how to compare options as to which investment is best.

Over the next month I'll be coming back to this key theme.

Today I just wanted to start with the key lesson: You have to compare within RISK CLASSES or your comparison is meaningless.

There are three main risk classes:

Low risk: this ranges from very low risk money market funds/accounts (earning 1-2%) to CD's (earning 3-5%) to high grade commercial real estate with GREAT tenants in place, ideally on triple net leases, or high quality apartment complexes in strong areas (if no leverage over long term they return at 6-8%, if purchased well, they can generateMUCH higher returns). Also at this end of hte low risk spectrum is high quality bonds from AAA rated companies.

Medium Risk: ranges from low end things like blue chip stocks to higher end of aggressive growth stocks. I would also put in this catagory many real estate deals where the property isn't on autopilot. For example, I'm working with a group of investors to purchase a large commercial complex (office and industrial space) outside of Denver. The property is currently empty, hence it puts the deal into the medium risk catagory, in my opinion in teh range of an aggressive growth mutual fund. However, once the deal progresses and we lease up the property, it progressively moves further and further DOWN the risk scale and becomes safer and safer of an investment.

High Risk: Range from raw land development deals to gas and oil leases . These types of investments offer HIGH returns, but with a lot of risk.

Remember, when you look at investment options you have to choose within risk catagories. Otherwise you are comparing apples to oranges.

I'll come back to this topic again and again this month and build on this theme.

Good investing to you!
David

The Myth of "Location, Location, Location"

Great Email I got this mornging!

Hi everyone,
I just got an inspirational email this morning from Steve, a client and investor in Arizona.

Three years ago he bought a nothing down house near Phoenix subjec to the existing financing.

Well yesterday he GAVE it to his church--including the over $155,000 of equity!

What a great thing to do, to share his abundance.

What charities or causes do you believe in?

Maybe you can set aside 10% of your next deal's profits to share with them?

Just a thought.

I'm working with a group of investors on a large commercial project in Denver.

We have written into our LLC agreement to donate 10% of our share of profits with charity.

Have a great weekend ahead of you!

David

Quick Negotiating Tips

Hi everyone.

I hope you had a great weekend. I was talking with a friend of mine about a deal he was negotiating and I had a couple of "aha's" about negotiating deals that I wanted to share:

1) consider shifting the discussion from "Price" as a dollar amount to the indirect ways you can talk about price:

• "I'm not sure what a fair discount percentage is off the full amount we've been talking through" (where "full amount" was already a lower number you had negotiated down to.)
  
  
• "What do you think that the cap rate for a property like this should really be?" (cap rate affects price, the higher it is, the lower the price, the lower it it the higher the price)

The point is that by talking about money in non money, indirect terms you lower the resistance to getting the number lower.

I hope this helps and make sure to check back later this week for more updates.

David

P.S. Thanks to those of you who have made the release of my new book such a success, "The Real Estate Fast Track: How to Create a $5,000 to $50,000 Real Estate Cash Flow".

If you have a moment, could you post a review up on AMazon? Share whatever you really think about the book and the bonus website that comes with it. Thank you!