The Terry Hale Show Episode 9

Ten CAP for Cashflow

TRANSCRIPTION

Hey, this is Terry.
I hope all’s well I wanted to touch base
here with you and talk about cash flow.
It’s early in the morning here I just got through dropping my son off.
He’s six years old His name’s Cash. Of course, his name is Cash.
What else would I have named my son?
And it’s a wonderful thing to be able to have continuously engaged,
be actually present and have a business that is around
and supports my family versus me just being so
inundated in business that I forget about my family.
So I drop my son off at school every single morning
unless I’m out of town, of course.
The beautiful thing is it gives me the ability to live my life
and I have to thank cash flow for that.
So let’s talk about cash flow and what that is.
When analyzing a commercial real estate project,
we have our gross income, that’s all the income
at the property makes right?
Then what we have our itemized expenses,
those itemized expenses will list exactly
what the properties expenses are kicking off
referred to as the net income.
Now I use a formula when I look at net income
and my net operating income,
I purchase property. So I have room for you know,
Murphy’s our partners.
So you need room right, we can’t crunch the numbers
down to internal rate of return,
we must understand that we can pencil in the deals,
want to say room for error, but there really is no room for error.
What I’m saying is that we have room to negotiate better terms.
But a good starting point is to purchase property on a 10 cap formula.
That 10 California formula is very basic.
If the property like one we’re working on right now.
It’s got 100 and roughly 110,000 net income.
That property on a 10 cap is worth 1.1 million. Another one
We’re working on it’s a 58-inch chain. So call it 58,000, the 10 cat formula,
the properties were 580,000. If you can purchase with that rule of thumb,
and look at these properties on the 10 cap purchase,
it’s going to help you evaluate these properties very quickly.
Understand that we want to get value to add plays from vacancy,
meaning we can fill them and create upside. And the more units you fill,
the more cash flow we have.
And it’s a beautiful thing to be able to look at these properties quickly
and identify a prospect from a suspect.
As I say, you know, differentiate that, you know,
the deals from the duds understand that we’re looking at
the right projects that have a huge amount of upside.
I like double and even triple value players.
So if I’m going to be getting into a property,
what I like to see is that the seller carries
at least 90% of the paper at a minimum
and we can get in with 10% down plus a few cash reserves
and we can operate the property at its highest and best double our money.
That means that that’s going to be monthly passive income for you
for the rest of your life, or until you saw the project move on to something
a little bigger and better. So remember, cash flow is king. 
If you liked this segment, go ahead and click the link in the description,
or visit my site at terryhale.com
and I look forward to engaging with you real soon.
All right, I’m off to the office and then the beach.
Take care. We’ll see you soon. Bye.
To learn more strategies and techniques,
visit terryhale.com or go ahead and click the link in this video description
and I look forward to engaging with you real soon.

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