What does that even mean?

P=Passive Income

E=Earned Income

You want your P greater than your E, right?

But most people want their passive income so they can forget about their earned income—I’d suggest you need both!

And that means you need to start finding a great deal even as you continue to work.

The problem is, deals that are easy to buy are hard to sell.

So, when you go looking for a real estate deal, you need to look for the right kind of deal.

But what happens when you find that diamond in the rough? What happens when you find that GREAT deal you know is going to make you a ton of money?

You need to write an offer.

The mistake most rookies make is they start negotiating over price before they even get to the write up.

Don’t negotiate price before the write up.

Here are 3 quick tips to keep in mind:

#1 Ask: Simply ask the seller if they are willing to sell. Of course if a property is on the market you know they’re willing to sell—but I’m talking right now about hard to get deals, the kind of deals that aren’t on loopnet.com or on sale at your local broker’s list. If you see a property you want, ASK the owner if they’re willing to sell even if it’s not on the market!

#2 Price and Terms: Find out what are the acceptable price and terms. Why, because you can’t get anywhere without a starting point! Plus, you need to know what kind of numbers you’re going to be dealing with.

#3 Confidence: You must express to them that you’re the buyer. You need to have confidence in YOU. The more confidence you have in yourself as the buyer, the more confidence the seller will have that he or she will close the deal with you!

Be great,

GC

But a single-family home is usually not a good investment—it’s a liability.

Here’s the true cost of buying a home:

Down payment + size of mortgage + all the interest payments + all the taxes + all maintenance + opportunity cost of time

The opportunity cost is the biggest cost of owning a single-family home.

It doesn’t cash flow if you live in it, but if you do rent it out for cash flow and that person leaves, you’re back to being 100% vacant!

You want to have multiple doors to rent, that way even if 5 or 6 people leave you’re still 85% full.

You don’t want just one McDonald’s—you want 50 of them.

Why does network marketing work? Because you’re not dependent upon one person, you got hundreds and thousands of people.

With single family homes, even if you rent them out, you just can’t scale. You can’t have the economies of scale unless you buy the whole neighborhood, but then you have the whole neighborhood calling you.

And what happens to single-family homes if interest rates go up?

The 10-year treasury rate is currently 2.69%

I’m borrowing money right now at 4.29%

That’s a 1.60 spread.

Let’s say interest rates go to 6%.

There will be 4 areas off the top of my head affected by this:

#4 Credit Cards 

Will have a minor effect.18% will still be 18%.

#3 Federal Government  

How much money do they owe? If their rate goes from 2.69% to 6%, this country is over. And if we’re over, China is over.

#2 Auto Industry   

Autos will get crushed if interest rates go up. Interest rates are not paid by consumers, interest is paid by the manufacturers to subsidize the rate. Have you ever seen commercials like “0% interest for 72 months!”?  That’s auto subsidizing.  They might borrow money at 2.69%, but it’s not free!

#1 Homes   

Single-family homes will be first to be hit when interest rates spike. Homes won’t sell anymore. Homes will literally stop.

So, the bottom line is I’d rather be 90% occupied in multifamily than 100% occupied in single family.

Many doors are better than one door.

And that’s why we do multi-family here at Cardone Capital.

Learn more about how you can get involved in our funds HERE.

Be Great,

GC

Leveraging money in real estate makes you extreme money.

Time is either going to kill you or get you where you want to go—and time gives you leverage.

Great assets can always be leveraged.

And since leverage is the ultimate multiplier—you can use one dollar to buy four dollars.

What investment allows you to invest $1 million and own $4 million in assets? Real estate.

Add to that these are real assets that can’t be easily replaced or lost, they cash flow, meaning we are paid to wait for appreciation (leveraging time)…

That’s what we do at Cardone Capital, we receive cash flow on the down payment, and wait for the entire $4 million to appreciate; this is the ultimate multiplier combining leverage and appreciation with cash flow.

Ask yourself this:

Will a property still be there in 10 years? 99.99% chance it will and insurance covers the .01%.

Can it be easily replaced? It can’t be destroyed and it will cost more to build in 2029.

If we pay $15 million for an asset worth $50 million, and it only goes up in value by $15 million, selling for $65 million (easy to imagine), then we’ve made 100% on our money.

Our capital invested doubled without the asset doubling. Get it?

Leverage Explained

Riddle: If you and I buy a $20 million property with $5 million down and it cash flows at 10% a year, what did the property cost us?

Answer: The $20 million property cost us nothing.

The $5 million less the cash flow of the 10% per year for 10 years ($500,000 a year) means our original investment is returned in 10 years. Now, we literally own the property with no cash.

Riddle: If we buy a $20 million property with $5 million down and it does not cash flow, what did it cost us?

Answer: $5 million.

This is leverage.

Because of leverage, I was able to buy a $1.95 million asset back in the 1990’s that produced $40,000 of positive cash flow a year while I waited for appreciation.

39 months later, I sold the property for $5.2 million resulting in a total profit before taxes of $3.7 million. That is a 10X return.

Leverage

I don’t speculate and I don’t gamble with my hard-earned money. I have worked very hard for my money, as you probably have, and I only invest in cash flow producing real estate.

This is an asset I can LEVERAGE with good debt, the property covers all operational expenses, improvements, insurance, taxes, and debt while I patiently wait for the rents to increase and the value of the property then appreciates at which point we sell or refinance and own the property with no money invested.

I never deviate from this criteria. I invest my surplus cash into income-producing machines, in great locations, where the rent is less than the cost of home ownership, and I am buying at or below replacement cost.

When I do invest, I buy very large deals, typically 200 to 1,000 units at a time, in markets with decades of projected job growth, and market demographics more likely to rent than own.

This is how I leverage my money, and how you can too.

Join me in our newest fund, it’s filling up fast!

Be Great,

GC

If you look at the top ten percent of the wealth in this country, over half of it is because of real estate. So why is real estate so lucrative for people? Why do people love investing in it?  Here’s eight quick reasons why.

The number-one reason you would want to invest in multifamily apartments or any kind of real estate, , is to provide cash flow. Again, this doesn’t pertain to owning a home. The dumbest move people make, by the way. Owning a home doesn’t make you any money. It doesn’t provide you with monthly cash flow. People would try and argue that you can have equity in a home, but that value is locked to your home. You can’t get it out and use it for yourself unless you sell your house.  Taking a home equity loan is just that, a loan. A scam by the banks to make more money off the dream of home ownership that they sold you in the first place!

2. Multiply Your Money

Number two, you want to multiply your money? Buy real estate. Investing in real estate is the only time that you can buy something of greater value without putting all your money down. For example, if you want to buy a million dollars in stocks, you have to have the entire million dollars to do that. Buying a million dollars of real estate, you only need four hundred thousand to do that – or less!

3. Low Cost to Debt

Commercial real estate, property owned to produce an income, has access to amazing funding opportunities. Many times, you can get interest only loans and other incentives that you can’t get when asking for a residential loan.  Your loan on multifamily is based on the income the property produces instead of the income you produce like what is used to qualify you for a primary residence mortgage.

4. A Hedge Against Inflation

Money sitting in a bank is basically decomposing. It’s not making you anything, and in fact is costing you. It costs you because the paltry amount that it earns in interest is far outpaced by the current rate of inflation which makes your money worth less than it is now. The goal of money is to get rid of it as soon as possible. Convert it to something that is a real asset and can appreciate in value.

5. Physical Asset

Real estate is real. It’s not a piece of paper. It’s not gambling on something that may or may not happen. It won’t disappear or be destroyed. It’s tangible.  Even if the property on top of the land is gone, the land will be worth something.

6. Tax Benefits

There are so many benefits. When you sell your property and reinvest the proceeds your tax is deferred. You can keep doing this for all time.  The amount of deductions and depreciation you can claim is also astronomical. The commercial real estate deductions are far superior to what you can deduct on your taxes for your one mortgage.

7. Asset Appreciation

There is a chance that these assets will go up in value. Now, the way, the reason I believe multifamily is the best investment in the world today is because I think rents will continue to appreciate and if they continue to appreciate what that means is the value of the property will go up.  Again, this is very different from a home appreciating in value because that is dependent on neighboring homes, not the income the property produces.

8. Ownership

You actual own something. It is yours to control. When you buy stock in the company,  you don’t control how they run the company, what they set their pricing at, how they market it – you are at the mercy of the board of directors and the CEO. When you buy real estate, you run the show. You decide the rental price, you decide on what improvements you want, you decide all of it.

You should be investing in real estate. Everybody should be doing this thing. It’s going to be the best investment in the next 25 years. Everybody should be in the game. Take the time to do it. Set your money aside. Don’t give that money to the bank. Prepare for that money to grow.

Cash is not king. Cash gets destroyed in value. A bank loans it out as fast as they take it in, because cash doesn’t retain its value.

If you have a little bit of money left over after your expenses, get rid of it. Invest it, otherwise the value will go down.

Investing can be simple. Real estate doesn’t require a college education or website, this business can’t be taken over, can’t be destroyed and will only increase in value.

You must remember scale when investing in multifamily. The most important number in real estate is the number of units. That’s the multiplier. Good number of units for your deals is 32 units, if that’s not possible, go to 16. Don’t try four. Four doesn’t give you enough scale If the market pulls back and it doesn’t provide enough rent, then that’s an issue… The more units, the lower my fees and expenses spread out.

Why invest?

1. Can’t lose money. As long as the property is not overleveraged you won’t lose money.

2. Cash flow. As it multiplies, it will generate wealth. Cash flow is king.

3. The possibility of appreciation in the future, based on the city, location, jobs and more will increase the rent rates and the value of the property will go up.

Since World War II ended, rents have gone up, so did the stock market, so did house values… The difference: apartments provide monthly cash flow, they are not speculation and they don’t trap your equity.

Real estate is a full-time game. Knowing everything in the market, the industry and what’s happening plus the terms, strategies and methods along with the talent and skill to make the most of this knowledge to create the best deals is not something that happens overnight and is not something that is easy to come by.