Archive for August 2019
The Terry Hale Show Episode 28
The Coolest Strategy Ever
TRANSCRIPTION
Hey, this is Terry Hale. I want to talk here about a really cool strategy
On a deal that we just completed. This deal was a apartment building
That had some serious vacancy, and the apartment building needed
To be completely repositioned with some light rehab.
We used a technique. It’s a lease option technique. It’s a super slick way
To move forward on these projects. Very, very low risk at all whatsoever.
The difference between doing a lease option and regular seller finance deal
Is in a seller finance deal, you need to put down a deposit.
And that deposit could range anywhere from, I would say,
Typically 10% to 20% of the purchase price. Well, if you’re dealing
With a million dollar project, you’re talking the difference
Between 50,000 $100,000 down for down payment, right?
The way that this strategy works is a lease option
With the right to sublease the vacancies. So what we do is
We get in there with just a simple deposit. Now the difference between
A deposit and a down payment is the secret sauce.
Keep it to yourself, the deposit can be as low as 10,000, or even 5000.
It’s a fraction of what a actual downpayment is.
So with that deposit amount, what we can do is
We can actually get in on these deals with very little out of pocket,
Allocate the capital for repositioning for rehab, or management,
Marketing, tightening up any collections. And obviously, if there’s vacancy,
Then, we would want to continue with our marketing efforts to sell it.
Because that’s where the cash flow is. So with that said, we could get in
On these projects, they’re all non-recourse.
And non-recourse means that you’re not personally signing.
That’s another little secret that I want to teach you about here
Is most folks think that in commercial real estate, you have to get in
On these recourse loans, you have to have perfect credit.
That’s not the case at all. I’ve only personally guaranteed one project
In my entire career. It was very early, very early on in my career.
And I decided never ever would I go ahead and personally guarantee again,
When you personally guarantee a lot of times,
What you’re doing is you’re putting up your your personal credit,
Sometimes even doing something called cross-collateralization,
Where you’re putting up other assets. And it just – you can’t feel good about it,
You don’t sleep good at night, knowing that you’re on the hook
For some million dollar plus project. Let somebody else,
Hold that bag of risk. Why should it be on your shoulders,
That’s not the way you create and build wealth.
We create and build wealth by holding on to our assets,
Not losing them to one risky project.
So, the master lease option technique that I’m discussing with you
Gives us the right to become a master tenant with the right to sell
These – any vacancies. And this gives us the ability to get in,
As I said, really be able to reposition these properties very, very quickly,
And be able to capitalize on the upcoming income.
Alright, meaning the upcoming future value of the deal.
It’s a great technique, this one is going to increase its value
Exactly how to take things to the next level and speak with you real soon.
All right, thanks for listening. Take care. Bye.
To learn more strategies and techniques, visit https://terryhale.com/
Or go ahead and click the link in this video description.
And I look forward to engaging with you real soon.
By more than double more than double the value.
And we got in for 15,000 and we had to allocate 250,000
On a single asset fund for the project.
But it’s in a great location here in California, and wonderful opportunity
For anyone to jump in and get done. And I want to teach you more
About these techniques and strategies. I do have an upcoming event,
You can go ahead and click the link below.
And join me at the next upcoming event where I’ll be speaking about
This strategy plus, a lot of other things that’s going to help you
Move forward to build wealth.
Okay, in commercial real estate, go ahead and click that link.
Join me the date of the event is December 1st, 2nd and 3rd.
And it’s going to be here in Los Angeles not too far away
From where that one project is. So get registered and
I look forward to teaching and training and showing you
The Terry Hale Show Episode 27
Subordination Clause
TRANSCRIPTION
Hey, this is Terry Hale touching base here with you real quick.
I’m here renovating this 45-unit apartment, I wanted to talk about strategy
That was used for this deal. It’s called a subordination clause. Now what is
Subordination clause is when the seller has a seller finance note,
And they drop it to a junior-lien position. Now in this case they own
This property free and clear. So it’s very easy for them to strike one note, right?
That’s the seller finance note. And it drops off the subordination clause
In the second position. This allows us now to negotiate to take out a new first,
Then the new first obviously is kept. We kept that new first at 390,000.
That’ll take care of the renovation for this project.
And it’s very easy to get money in first position. Once we go ahead and finish up
And get the drywall here back up on the walls in.
Place looks great and it’s all rented up and it’s pulling positive cash flow.
We’ll be able to go after a non-recourse meaning, no personal guarantee,
Non-recourse structure on a SBA loan, and be able to get real attractive rates.
And it’s all on the merit of the project because the project at now
Went from rough to finish with people paying money. And that’s the power
Of moving forward on these kind of distressed projects. We purchased this one
With only 5% down and the purchase price on was 2.350
And it got a real attractive interest rate at 4% interest for the seller finance note
That’ll carry us through before we stabilize and refinance.
But the subordination clause is awesome. It gives you an opportunity
To go after money that will be locked in on first position
And motivated seller to get the deal done. They got their asking price and
They picked this thing up at an auction for basically pennies on the dollar.
They’re making money, we’re making money and
When we eventually have it for cash flow or sell it. Regardless, there is
An opportunity to build exponential wealth, I can show you exactly how to do it as well.
So if you liked this segment, go ahead and click the link in the description or better yet,
Let’s go to my website, https://terryhale.com/
That’s T-E-R-Y H-A-L-E https://terryhale.com/
And I look forward to engaging again with you real soon. Take care.
To learn more strategies and techniques,
Visit https://terryhale.com/ or go ahead and
Click the link in this video description
And I look forward to engaging with you real soon.
The Terry Hale Show Episode 26
Raising Capital
TRANSCRIPTION
Hey, this is Terry Hale commercial real estate wealth builder.
I want to talk with you here about a topic that came up a couple times
Over this last week with a few clients of mine. And it’s about basically bringing in
Capital on a deal. And they have this kind of misconception in their mind that
It’s going to be difficult to raise money, but you got like this apartment buildingBehind me, you got something that’s got cash flow coming in,
And it’s got more potential even bringing more cash flow. Raising rents,
Adding profit centers, doing some light rehab, cosmetic fix. You can, just as raising rents,
And doing it with a house, it’s the same thing except, apartment buildings,
They’re basically a bunch of houses inside a larger box, more income.
But these properties are based on a different value add,
They’re based on upping the net income. And if you do a rental increase,
You’re not adding any expense by just increasing rent. So what happens is
The NOI goes up just a little bit, but the value of the property goes up a lot.
I mean, you can raise rents, and if you bump just several thousands of dollars,
You know, you’re talking about adding tens of thousands in value. So it’s a real,
Great business to be in and raising capital is not as difficult as it seems.
There’s different types of money. One type of money that
You can go after is private funds. Obviously, they have to be accredited investors,
Accredited investors, you can look that up and see that they have to meet a 3 rule.
And accredited investors, these are people that will go ahead and fund your projects.
Just be careful though, because you want to give up too much equity.
You can give up an equity piece, or you can just give a return on their investment.
And then obviously, that comes with a balloon date when you give them
Their money back, plus all of the earnings. Another way to do it is a syndication.
That’s a different model its for bigger projects. There’s also PPMs,
Which their Private Placement Memorandums. There’s a lot of different ways
That you can raise capital, but make sure that you have the right deal.Make sure that the numbers work. Make sure that there’s upside potential in the project.
Make sure that it’s actually a project that someone would want to invest in.
Stop chasing the deals. Stop trying to make these deals that don’t make sense
Come to fruition because it’s basically be like hitting your head
Against this garage door here. Right? What you want to do is
You want to make sure that the numbers work. You want to make sure that
There’s tremendous upside, you still want to get great terms
And you also want to buy it right. And if you can do that dynamic,
And do those three things, as I just mentioned, buy it right, have creative terms
And have huge upside. I’m telling you, it attracts money like a magnet.
All right, if you did this session, go ahead and click the link below.
And or better yet, just go to https://terryhale.com/
And I look forward to engaging with you here real soon. All right, take care.
To learn more strategies and techniques, visit https://terryhale.com/ or
Go ahead and click the link in this video description.
And I look forward to engaging with you real soon.
The Terry Hale Show Episode 25
Option vs Seller Financing
TRANSCRIPTION
Hey, this is Terry Hale, I just want to take a few minutes and chat with you
About a project, a client of mine, we’re pursuing this – this project is really great.
It’s a 54-unit apartment. And it’s got tremendous upside couple million dollars
And upside on this one. It’s in a key area. And what’s wild is my strategies and techniques
Actually, they work in this scenario but not as we planned.
We originally were going to go in for seller financing, and the guy just didn’t want
To do a seller carry. So what we ended up pursuing was an option.
Now that option, the way it worked is we have a management operating agreement,
And then we executed an option to purchase the property. So we set a price today,
And the price that we set was $2,250,000. You might think to yourself, well,
“Terry, I don’t have $2,250,000 to do this deal.” So, don’t worry about it.
The way the strategy came about, we put down $50,000. The 50,000 down
Is non-refundable, but it gave us that that lock-in. So we control the property.
We have exactly 60 months, five years to pursue the property and close on it
With a formal closing. And we also have that option agreement assignable.
So, we technically don’t have to close on it with our personal names or anything like that,
We can sell the option. There’s a couple million bucks in the table will be worth like
Four and a half and change. When it’s all said and done because the area is so hot.
And we got in, like I said for 50,000. That’s the difference between a deposit
And a down payment. If it would have been a seller finance note, they probably
Would have wanted like anywhere from 10% to 20% down. But we ended up
Getting in really light because it’s not considered a down payment,
It’s a non-refundable deposit. Alright. So for this segment,
Non-refundable deposit option agreement. Management agreement to let us control
And have operations of the property with a $2 million upside.
Congratulations, Leslie. Whoo! I know she’s happy. All right. So if you like this,
Go ahead and click the segment or better yet, just go over to https://terryhale.com/.
That’s T-E-R-R-YH-A-L-E https://terryhale.com/
And I look forward to engaging with you guys here real soon. Take care.
The Terry Hale Show Episode 24
Negotiations are with Sellers
TRANSCRIPTION
Hey, guys! This is Terry Hale, just wanted to get a quick minute and just tell something
To you here because I just got off a call and it was with a broker. This guy’s name is Stu.
And Stu sat there and tried to negotiate the deal with me. And I told him I said,
“Stu, with all due respect, Sir, look, negotiations are not with brokers. They’re with sellers.”
And I want you guys to understand this, when you’re on the phone, although we love brokers,
We want to make sure that we’re doing business with brokers. It’s great to use brokers
In these transactions because they, first off, have a fiduciary duty to present all offers.
So we can make lowball offers. We can make offers that are creative with seller financing,
Great terms, lease options, all different types of ways to pursue these properties.
And get super creative. And remember the type of projects that we’re looking at –
Brokers, they’re super eager to sell because they’re not cash flowing at their highest and best use.
But just remember not to negotiate out there with these actual brokers, save it for the sellers.
Put yourself in a key position to warm up to the brokers let them know that
After you reposition the property, you’d love to give the business back to them
And have them service you and sell it at a better Cap Rate, meaning at its highest and best use.
So now they’re going to make money twice. They’re going to make money once,
When they sell it to you creatively. And then after you reposition it and you’re making all your money,
You give it back to them. They make you more money, but in turn, now they’re being fed.
And it’s a great way to dangle a carrot. Get brokers comfortable with you. Remember,
We respect these people, and they guard their time so don’t get frustrated
If they’re not giving you the time of day they guard their time from tire kickers.
So do yourself a favor, keep the negotiations for the sellers. I hope you enjoyed this segment.
If you dig it, great! Cick it. Click the link or just visit https://terryhale.com/
And I look forward to engaging with you guys real soon. Take care
The Terry Hale Show Episode 23
Channel Featured Video
TRANSCRIPTION
Hey, this is Terry Hale commercial real estate trainer. If you’re looking to make
Exceptional wealth, monthly passive income. You should really check out
My strategies and techniques. I have a new show here called
The Terry Hale Show, right here on YouTube. Why don’t you go ahead
And click the link and check it out. Go ahead and subscribe.
And I look forward to engaging with you here real soon. Take care.
The Terry Hale Show Episode 22
Cash Out Refinance
TRANSCRIPTION
Hey, this is Terry Hale, commercial real estate trainer wealth builder out here in beautiful
West Palm Beach just got through locking down yet another apartment building.
It’s kind of crazy, my social media platforms, people are saying things like
“Hey, where can you possibly find a seller that’s going to carry -? Do these really exist?
Or, “Yeah, sure. Show me.” And what they don’t understand, what they they fail to understand,
Also, is that we’re working with a different type of product. We’re not working
With property that is operating in it’s highest and best use. We’re not working with property
Where the sellers are jumping up and down because of the income that they’re receiving every month.
These properties are distressed, I mean, they’re not environmentally challenged.
These are not dilapidated. They’re not structurally-challenged, by any means.
They’re good looking property, typically, C and B Class. We rarely roll out on
A class property, that’s newly built in in super hot areas. These are B and C. This one’s a 50-unit,
In a great area right outside of West Palm Beach. And the backstory is that the seller
Has neglected the property, they basically take anyone that can fill out an application.
There’s no background check. So the tenants can be a little problematic,
Because they’re not bringing in quality tenants that pay their bills.
And the place needs a little bit of rehab, some fix up. And it is what it is the thing’s underperforming.
It doesn’t qualify for bank financing. So in that regard, there’s two ways to buy it two ways.
One way is an all cash. That’s a lowball offer. And the second way is to have the seller carry paper.
So it wasn’t advertised, it was offering seller financing. It was my strategy,
And part of my negotiation tactics to point out for mutual benefit, that the seller becomes the bank,
They carry the paper, we go in and fix the rehab issue. We fill it. Stabilize it with good strong
P and LS Profit Loss Statements. At that point, its operating in its highest and best use
And we pull a cash out refinance. We actually increase the value. We buy it down here,
We increase it to up here. And then, when we actually trigger a refinance, is a cash out.
So we actually get cash at closing with that cash at closing that goes into our pocket.
We don’t pay taxes on that money until we sell the project. And then we refi
It with low-interest permanent debt. And then, from that low interest permanent debt,
We carry it for cash flow, and that cash flow comes into our bank account, every single month.
Financial security creating generational wealth, and we never sell the property
So we’re not paying tax on that cash out. Now, if we do decide to sell the property,
We still don’t pay taxes on the cash out money. Because we’ll roll it into a 1031 exchange.
And that’s building wealth, taking it from a C class and moving it to a B class in a better area.
Something that’s got more meat on the bone. So I hope you dig this segment justifying
That there are deals out there. Again, I’m doing my final site visit on this one
And got a lot in the pipeline, I can show you how to do it. It’s just a matter of
Understanding the key identifiers and being open-minded and getting creative.
And that’s exactly how people are building exponential wealth and creating generational wealth.
Alright, so if you dig it, click the link below. I appreciate it. Or better yet,
Just go to https://terryhale.com/.
All right. Take care and talk to you real soon. Bye.
To learn more strategies and techniques, visit https://terryhale.com/ or go ahead
And click the link in this video description. And I look forward to engaging with you real soon.
The Terry Hale Show Episode 21
Cap Rate Formula
TRANSCRIPTION
Hey, this is Terry Hale give you a little wisdom for wealth here.
10 Cap properties, people say, “You can’t buy a 10 Cap.” All the time I hear this.
And what does Cap mean? Let me explain. cap is a capitalization rate. The way it works
Is you have all your gross income and you have your itemized expenses.
And then, once you minus out your expenses, you end up with your net, also known
As net operating income. And that NOI, the simple mathematical formula for this
Cap Rate is NOI divided by purchase price, which equals your capitalization rate.
Now, the cap rate can be a single digit or a double digit number. Always remember that
When you buy, you want to buy at a high cap rate. When you sell you want to sell at a low cap rate.
So, the lower the cap rate, the more retail the deal. That’s the way it works.
Sometimes people get that backwards. So what I do is I look for property, and I follow
A 10 Cap type of approach. And with the 10 Cap approach, if you buy on a 10 Cap,
You have an opportunity to purchase the property right, be able to get in there,
Raise rents, fill vacancies, add profit centers, do any capital improvements,
And you will come out with an amazing return on investment. And that’s what this is all about
Return on investment, I can show you exactly how to do it. And finding these 10 Cap properties.
People say it’s hard and you know what, if you’re looking at retail deals,
And you’re just scouring through websites like Loopnet, or CityFeet, or one of these
Websites that just has a bunch of retail property on it. Of course, it’s going to be difficult.
You’re looking for a needle in a haystack, right? I mean, you’re mining for diamonds.
But if you use some simple key identifiers, like days on market, or look at property that’s out there
That’s got a lot of vacancy, then maybe what they’re doing is they’re just on a fishing expedition.
Meaning that they’re just going to put something out there in the marketplace and see who bites.
Because something’s worth what someone’s willing to pay, right? And for that reason,
They’ll go ahead and test the water, throw a ridiculous number out there,
Which is called proforma that’s future value. We’re not talking about buying on proforma.
We talk about buy ads is whereas in its current state and its current condition,
And if you follow my rule of buying “as is,” and looking at value and place meaning huge upside.
Then, you can also justify seller financing. You can justify seller financing
Because the deal does not qualify for bank financing. If it’s gotten a lot of vacancy,
If the rents aren’t raised and it’s not at its highest and best use. So it’ll truly give you
An opportunity to create massive amounts of wealth, be able to create monthly passive income
For financial security. And I’d love to show you how to do it. If you liked this segment,
Go ahead and click the little link in the description
Or better yet just visit my website at https://terryhale.com/
https://terryhale.com/ and I look forward to engaging with you again real soon.
All right, take care.
To learn more strategies and techniques, visit https://terryhale.com/
Or go ahead and click the link in this video description.
And I look forward to engaging with you real soon.