Financial Freedom Group Blog

I am back

The last couple of weeks I have been on vacation.  Add that into us working on a few deals and I haven't spent much time on my blog.  Please forgive me.

I am going to be adding some posts on how to think big, a review or two of some books that I have read lately and a how to article on laying the foundation of your investing.

Investment Opportunity

We have an opportunity for someone to invest with us as an equity partner.  Here are the deal particulars.

• Purchase Price: $6.8 Million
• Underwritten Value by Lender: $9 Million
• Total Down Payment needed: $950,000
• Our Contribution: $400,000
• Amount still needed: $550,000

The upside to the deal:  The property needs some rehab work (about $200,000).  One of our partners currently owns 1100 units and he specializes in rehab of apartment buildings.  The property will be managed by Centra Asset Partners who specializes in rehab and turn around projects.  Julie and I currently have an interest in 680+ apartment units as well.  When we got it under contract when the occupancy was around 60%.  Now it is close to 85% occupancy.  Our target occupancy is 93% because this is where the rest of the market is operating.  This property is located about 10 minutes outside of Fort Worth, TX in Haltom City.  The market in Texas is very strong because of the oil economy and job growth around that.  This is a B class property and is suitable for blue collar workers.

The potential downside: The economy could change directions and rental rates could drop.  The later is unlikely because of the renters that are coming back into the market because of the housing market softening.

Our strategy is to refinance the property in 9-12 months after the rehab is completed and the rents are stabilized.  We have already been approved for the financing by Prudential once we have 3 months of occupancy above 85%.  Once we refinance the property you would receive your initial investment back and retain your ownership.  You would also receive cash flow as it becomes available and as an investor you would get a preferred return (meaning that you would get paid before we get paid).  If you invest the entire $550,000 you will get 25% of the equity ownership in the deal.  If you invest less ($110,000 minimum) you will receive a prorated amount of ownership.

If you have more questions please let me know.  I would be happy to discuss them with you via e-mail or over the telephone.

This can be a great deal to park your money for a little while and then get it returned to you but you will still keep all the benefits of owning the property.

The Deferred Life Plan

I have read the book the Monk and the Riddle by Randy Komisar and more recently read the 4 Hour Work Week by Tim Ferriss and both talk about avoiding the deferred life plan.

The deferred life plan is working for 35-45 years doing something you don't like so you can spend the next 10-15 years doing something you enjoy (retirement).  Personally being a slave to a job when I don't have to be does not sound appealing and I imagine avoiding the deferred life plan is one reason why you are reading this blog.

When I was working a corporate job, I saw people that were in high positions working themselves into the ground to one day live their dreams.  At the time I wasn't aware of the term the "deferred life plan" but I it seemed obvious to me that a lot of money wasn't worth what these people were doing to their health, relationships, and families.  I didn't want to get myself into that same position and that is when I started buying real estate.

Another problem about the deferred life plan is that people are looking forward to retirement because they dislike what they are doing but dread the thought of retirement because they don't know what to do with their time.  This becomes evident by the chart from this site.  I reposted it here for your convenience

Age at Retirement	Average Age At Death
49.9	86.0
51.2	85.3
52.5	84.6
53.8	83.9
55.1	83.2
56.4	82.5
57.2	81.4
58.3	80.0
59.2	78.5
60.1	76.8
61.0	74.5
62.1	71.8
63.1	69.3
64.1	67.9
65.2	66.8

It is unfortunate that people have gotten so wrapped up in their job that they have forgotten what they love to do.  The author of the study concludes that people put tremendous amounts of stress on themselves while working and that stress leads to poor health which leads to people dying less than 2 years after they retire.

Right now we have an incredible opportunity to live the life that we desire now, not 45 years from now.  Real estate investing has allowed us tremendous opportunities and I am going to share with you shortly some steps that you can take right now to live the life that you desire in the near future, not 45 years from now.

We are going to be introducing some new and exciting learning opportunities for you to take your investing to a new level and avoid living a deferred life and get into the life that you desire now!

Learning to Invest

Learning how to be a good real estate investor is like Emmy (she is my adorable little niece) learning how to ride her bike.  You are going to have some bumps and bruises along the way but you need to do like Emmy.  When she falls down, she gets up and brushes herself off and gets back on her bike. 

When you are investing your are going to get some bumps and bruises.  These are going to be some of the best times for you to grow in your investing.  If you fall once, get a scrape and vow never to invest again you are missing out on some awesome opportunity.  The same would be true for Emmy if she wiped out on her bike once and gave up.

Emmy has guidance.  She has her parents making sure she has a helmet on her head and that she gets out of the street when a car is coming.   They are also giving her tips on how to ride successfully and holding her up to make sure she succeeds.  I doubt it would have been good for Emmy to find a bike and get on it and ride it without someone giving her guidance or anything to protect herself.  With guidance she is limited to scrapes and bruises, not major accidents.

The same is true for you as an investor.  It is possible to learn on your own, you just hope you don't get into an accident that is fatal to your investing career.  With someone guiding you along, the journey will be much safer and you will have success much quicker.   

Find some resources like this blog to get started.  Then when you want to take things to the next level find a mentor to help you formulate a game plan to take things to new levels

Cool Tool: Rentometer

I found this tool to help you determine the rent for a property.  The rents for an area could be off because it takes into consideration what units are being advertised for, not what they actually rented for, but over all it proved to be fairly accurate for determining the rent for an area when I tested it out for some of my properties.

Check it out here.

A quick $10,000

I could have made a quick $10,000 today.  It would have been easy.  All I would have had to do was a double closing where the buyer was committing mortgage fraud and I was to be helping by distributing funds that were not listed on the settlement statement.  I passed.

Money is too easy to make legally to have to do it illegally.  There are going to be opportunities where you can be lazy and do something that is in the gray area or even black and it will be quick money.  Take a little time, hone your skills and you can make more money legally than you ever thought imaginable.  You will also sleep well at night too. 

Headlights

The headlights on a car can only illuminate the path in front of your car for about 200 feet.  With that light you can travel all the way across the country safely.

When you are getting started in your investing you don't have to be able to see the path from LA to New York.  You just have to know enough to take action.  That allows you to move along the path safely.  When you get an unknown area of the path you get more education and the path will again be clear.