The Terry Hale Show Episode 10

Avoid Break-Even Deals

TRANSCRIPTION

Hey, this is Terry Hale.
I just wanted to chat with you here real quick
about avoiding the break-even projects.
Who wants to get into a breakeven project?
I mean, think about it, the average person
that gets into commercial real estate,
what they do is they go after bank loans.
So they personally guarantee it, or they’ll cross collateralized.
And they’ll put up other assets that they have equity in
to offset the risk for the bank.
Now, not only that, what happens is they get into it
with 20 to 30% down payment,
that’s a big old chunk of money that they put in the deal,
that money sits in there. And it just accumulates, no interest.
It really doesn’t. I mean, all you’re playing is appreciation,
when you’re getting into these commercial real estate deals
buying with conventional wisdom.
So stay away from the conventional wisdom,
stay away from breakeven deals stay away from
personally guaranteeing loans. I mean, the way to do this business,
if you truly want to be successful and create cash flow,
is to get into deals that are better than breakeven.
How can you get into a deal that’s better than breakeven,
you have to have some way to increase the value.
That’s the upside. We look at two things. 
Primarily two. One is the current occupancy.
We want to see projects that are built good locations, rock solid,
no environmental challenges, maybe their mismanagement,
that’s fine, maybe they’re mismanaged, that’s okay.
But we’re looking for the projects that actually have vacancies,
when you have a project that’s built,
a lot of times we can buy these projects,
negotiate these deals less than replacement cost.
Now replacement cost means that if the whole thing
were to fall to the ground, what would it cost to replace it,
that dollar per square foot value of what it’s worth,
we’re buying these properties for less than what it costs to build them,
and they had vacant See, that’s number one.
The second thing is any existing tenants are low rent,
low rent tenants, we can raise the rents as well,
I call that icing on the cake. It’s never a true reason to buy property,
just to buy it and have the exit strategy to raise rents.
But if you take a project that’s got very low occupancy,
raise that and raise the rents, replace management,
a lot of times we can do away with management,
we can automate the process. At that point in time,
once you take away all of these expenses,
what’s happening is you’re increasing the net income and that day,
that net income is your cash flow. That is something that’s so powerful 
and stay away from the breakeven deals.
All right, look for cash flow opportunities,
deals that make sense, and deals that have
a tremendous amount of upside and profit.
And you will be cash flowing very quickly,
monthly passive income financial security for your family.
Sounds great, right? It’s an opportunity that’s existing today.
In the right deals if you can locate the right projects.
If you dig this segment, great!
Go ahead and click the link in the description.
Or go to treryhale.com and see some more.
I appreciate it. We’ll get together again real soon. Take care.
To learn more strategies and techniques,
visit terryhale.com or go ahead and click the link
in this video description.
I look forward to engaging with you real soon.

KNOWLEDGE IS POWER

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