Leverage your real estate, bank the cash-flow!

One of the strategies I feel is most important for up and coming real estate investors is what I refer to as leverage your real estate and bank your cash-flow. Many famous books have been written over the years (The Richest Man in Babylon & The Wealthy Barber come first to mind) talking about the concept of paying yourself first. I feel as though real estate investing should be no different, let me explain.

I am a firm believer in using other people’s money (mainly banks) to buy more and more real estate. There is no shortage of available cash out there to fund profitable real estate deals. For clarification sake please notice that I did use the word PROFITABLE as it is key here. You can be leveraged to the hilt but as long as you remain profitable more money is always available to you.

Now, since your deals are profitable there is an excess cash-flow coming off of your properties each and every month. The key to long term wealth and risk mitigation here is to bank (or invest in stocks, bonds, mutual fund, gold etc.) a portion of that money each and EVERY month. The second and perhaps most important part of this strategy is to NEVER use any of that money in any future real estate deal. Once the cash comes home it should stay there. There will be plenty of money, aka equity, being freed up for future real estate deals. This approach helps you diversify your portfolio and ensures you always have cash in the bank. Having all of your money tied up in real estate is not a fun place to be.

Now back to mitigating your risk; interest rates are currently at all time lows. Variable rates in Canada are around 2.2% and 5 year fixed rates are around 3.69%. They are however not going to be this low forever. There is a temptation to get in on deals that seem profitable now but should rates rise by even 1% the profit would evaporate and it would become an anchor. So what you want to do is calculate your profitability on a high rate ( I would recommend 5-6%) thus ensuring you have a good buffer. Secondly I would recommend you take the variable rate but make the payment of the fixed rate.

This approach does several things for you:

  1. It takes away the temptation of getting in over your head by paying only the minimum of the current ultra low variable rate.

  2. Prepares you and takes the shock out of interest rates rising as your payment now wont change for years.

  3. Dramatically reduces your amortization period and thus supercharges the speed at which you are building equity which can be utilize in your next deal.

Let me create a realistic example of how this type of scenario could play out for you using real numbers.

Your purchase a triplex for $650,000, your put 20% down ($130,000) thus leaving you with $520,000 left to be mortgaged. Each suite is rented for $1200 a month thus giving you a monthly income of $3600. The monthly expenses (taxes, utilities, insurance etc.) for the building are say $500. You have a net income of $3100.

At the current variable rate of 2.2% you could be tempted by the low monthly mortgage payment of $1971 (30 year amortization) but avoid temptation. Take the variable rate mortgage but increase your payment to what it would be at 3.69% ( $2382 per month thus paying an additional $411 directly to the principle each and every month). Also note that the payment at 6% APR would be $3093 per month thus making this a safe deal for you (again looking to mitigate risk).

You now are left with $718 of cash-flow each and every month. Going back to what I was saying earlier make sure you bank a portion of this monthly cash-flow (10% minimum but more is always better) and never allow it to find its way back into the real estate market. Take another portion of it and set it aside in your emergency fund as unexpected expenses will always come up. Now you are left with a portion to do with as you please and for the most part your risk has been mitigated, your cash (or investment accounts) accounts are growing as is your equity.

I read once that money in real estate is made when you buy, not when you sell. I whole heartedly believe this to be the case, if you follow the steps I outlined above and buy only profitable properties it really is tough to lose money.

World's Largest Yoga Class

Just a reminder that this event is in Vancouver next weekend being put on by a good friend of mine Ryan Cogswell. The details are as follows:

Come be a part of a World Record. In a fundraising effort to help keep kids active, the Vancouver Fitness Guide is sponsoring an event attempting to enter Vancouver into the Guiness Book of Worlds Records for having the most people doing yoga in one place at the same time. Included with each ticket will be an event beach towel and swag bag filled with event give aways. Proceeds from the event will be donated to Athletics 4 Kids www.a4k.ca.

Sunday, Aug 23, 2009 11:00 AM PDT (10:00 AM Doors)
at Thunderbird Stadium, UBC tickets are available at www.a4k.ca

Cheers,

Chuck

Crafting your marketing message

In sales and marketing one of the most important elements is the message you put forth to your perspective clients. The key component often over looked by many professionals when it comes to message is the only thing that matters is your prospects perception of your message. You must make your prospect crystal clear about the benefits of using your product or service or you will never make a sale.

Let me give you a very simple example using the sentence

“I didn’t know he stole the car.”

The meaning of this sentence can change dramatically with emphasis being placed on any one of the words, let me explain.

Supposed I put an emphasis on the first word and say “I didn’t know he stole the car” which can be taken to mean my friend may have known but I did not know personally.

Or I could put emphasis on the word know and say “I didn’t know he stole the car” which can be taken to mean perhaps I assumed he stole it; however, I did not know for certain.

I could also put emphasis on the word car and say “ I didn’t know he stole the car” which can be taken to mean I knew the man was a thief I was just not aware he had stolen a car.

This example can be powerful if you really learn the lesson detailed in it. At no point did I change the words I was speaking, all I did was change how I emphasized the words. This change in emphasis managed to change the meaning of the entire sentence in each case.

So I ask you the question, how clear is your marketing message? Are your prospects lining up to buy from you or are they giving you a confused or indifferent look? Talk to a few trusted friends and ask for them to critique what you are saying. Is your message being received the way you would like it to be? A few minor tweaks can dramatically change your results.

Remember all that matters is the perception of your client, how they hear it is what matters. Show them a well defined, easy to understand benefit and they will buy. Confuse your client and they will do nothing.

The Network Insider: Fight or Flight – Battling it out in the travel industry

Below is the most recent email newsletter from a local company called Atomica Creative. http://www.atomicacreative.com/ In this edition Tatsuya Nakagawa of Atomica is interviewing a good friend of mine Ryan Phillips so I thought I would pass along the article in its entirety.

Enjoy:

Summer is travel season, so it makes sense for us to explore innovation in the travel industry. Hard hit by a variety of technological inventions that have transformed the way people book travel and whether they travel at all; an economy that discourages any type of expenditure and the miscellaneous impact of oil prices, terrorism and accidents, this is an industry that needs to innovate to survive.

Our guest this month, Ryan Phillips of Flight Centre Business Travel, brings not only his insights about the travel industry, but also some interesting observations about how marketing and sales have changed… and stayed the same – plus ça change, plus c’est la même chose. Even in this low touch era where deals are as likely to close over the web as they are in person, effective sales people understand that personal contact can make all the difference in whether the deal gets signed or not. The rise of social media sites have been a boon to those companies that recognize the consumer need for personal contact and travel industry companies have been some of the first to understand their value. JetBlue and Southwest Airlines have both harnessed the power of social networking on Twitter, Facebook and other social networking sites and brought a new level of transparency to the industry.

They have been some of the leaders in using social media and find new ways of using these technological innovations to increase customer satisfaction every day. As the hassle factor and the economy together strive to make leaving home an unpleasant experience, those who truly understand the nature of innovation stay one step ahead.

Our guest Ryan Phillips, when asked to name an innovative company, chose Nine Inch Nails and their strategic use of free distribution and selected copyrights. Of course, my immediate thought was, “wow what a leap from travel to music!”” But in reality, it’s often innovations in a field far removed from the one in which an individual works that drives creativity. The Post-it Note, famously it is said was inspired when the inventor was singing in the choir. Maybe it’s something about music. Whether or not music has anything to do with it, we all know that we live in an era when consumers’ access to information is unparalleled, so the old rules of first mover advantage are falling by the wayside. In a matter of moments any concept, promotion, advertisement or idea can be copied and disseminated to the target audience. Which make the ongoing relationship that much more important. Relationship is key in the low touch century. Ryan understands that and shares his ideas on how his company strives to develop strong ones with their customers.

Interview with Ryan Phillips
:

What is your role at Flight Centre?

Business Development Manager with Flight Centre Business Travel (FCBT) which specializes in corporate executive and employee travel. Essentially I work with companies to identify ways that FCBT Travel Consultants can help streamline processes while offering a personalized service, 24 hours a day. I frequently talk to my clients and the most common feedback regarding their experience with FCBT is how our travel consultants are very responsive, friendly and knowledgeable. I would love to take all the credit for that, but I really do owe it to the team I work with.

In your opinion what are the key trends affecting the travel industry?

The current economic climate is definitely affecting the travel industry both in terms of personal and business travel. On the leisure side, people are trying to get the most value for their travel dollar in terms of inclusions and options. In terms of corporate travel, a large majority of companies have much stricter travel policies, which is another reason we are seeing an increase in business. We have an excellent process in place which allows for simple, yet effective, ways of tracking company travel policies.

What is the greatest marketing or sales advice you’ve ever received?

As an extremely ambitious new young sales representative very early in my career, I can remember meeting with a client to do a sales pitch. After the pitch the client looked at me and told that he was interested and that I should call him back in two weeks. Feeling pretty proud of myself I sat back and waited and after two weeks made the call and asked him if he would like to go ahead. His response was “sorry we went with the competition.” My manager asked me why they decided that way and I couldn’t answer him so he asked me to call the client back and ask why. With a damaged ego I picked up the telephone and called the client and explained to him that I was new to sales and I wanted to learn what I could have done differently. The client explained to me that the competition had come in to talk to him on several occasions during the 2 week period and every time he met that person it made more sense to work with him. Approximately one year later that same client was looking to replace another piece of office equipment and I was given the opportunity to present a proposal. Recalling the conversation we had one year earlier, I followed all his rules and ended up winning him as a long standing client who still currently works with my previous employer and stays in touch with me.

If you could go back in time and change something, what would it be?

I have always been a true believer that all that has happened in my past has been a big contributing factor to my success today. Although we never want to forget our past, we never want to live in it. Live in the present with an eye on the future. The short answer to your question is nothing.

What is an example of an innovative company that people have never heard of?

This may seem like a strange answer, but Nine Inch Nails (NIN), yes the music group! Many people know of them but not many know them as an innovative company. Their marketing tactics have been a true inspiration for me in thinking outside the box. They are almost single handedly changing the music industry. Trent Reznor the mastermind and front man of NIN is paving the way for
new and old bands to connect with fans.


Taking tactics like this and applying it to a corporate business environment would allow us to connect with clients on a whole new level. Who in their right mind would think that by giving away an album for free would end up leading to it being the bestselling album on Amazon in 2008 and generate $750,000usd in three days? http://arstechnica.com/media/news/2009/01/free-nine-inch-nails-albums-top-2008-amazon-mp3-sales-charts.ars

List a few of your favourite business sites.

Stockhouse Is a great took for looking at market trends and learning about new and upcoming business. http://www.stockhouse.com/index.aspx

CNW Group is a good resource to find out what is happening in the Canadian business market. http://www.newswire.ca/en/

The Flight Centre blog always provides up to date travel information and advice. http://www.flightcentre.ca/blog/

iGoogle is an amazing tool which allows you to create your very own customized page with 100’s of different widget options. It’s the first place I start every morning! http://www.igoogle.com

Linked in has always been a great place to keep a database of contacts I have connected with along the way.http://www.linkedin.com/in/ryphillips

BIO: Ryan Phillips joined Flight Centre Business Travel as a Business Development Manager after more than 10 years of working in Business Development with a range of companies from those in its infant stages to Fortune 500. His extensive experience in all ranges of companies allows him to appreciate the importance of creating long lasting relationships while developing effective strategies for increasing profitability.

Ryan attributes his success as a Business Development Manager with Flight Centre to his passion for understanding that each of his client’s travel needs are different. As a frequent business and vacation traveler himself, Ryan strives to ensure that his clients are provided with the unbeatable service of Flight Centre’s Corporate Travel Consultants. Ryan is an avid supporter of the community and the people around him. Outside of work he enjoys volunteering for a local children’s charity, as well as being involved in regional and community projects.

Ryan Phillips
610 Robson St.
Vancouver BC
604-374-2200

Sincerely,

Tatsuya Nakagawa
Atomica Creative
Strategic Product Marketing

Online auction to help the kids

Hello everyone,

I wanted to share with you a charity auction being put on by Clearly Contacts www.clearlycontacts.ca to help support the Easter Seals 24 Hour Relay. There are many great items up for bids including a relaxing massage package from HOBN’s own Avery Yackel.
There is also a terrific prize pack from the Vancouver Whitecaps which is perfect for networkers.

The prize includes:

1) four grandstand tickets in the Platinum section for the Vancouver Whitecaps game against the Minnesota Thunder for Thursday, July 9 2009

2) four VIP passes which will entitle the holders to enter into a restricted area, the HUB Executive Club, where there will be complementary appetizers and beverages along with four BMO VIP passes entitling the holders to enter into a restricted area on the field where there will be appetizers and discounted beverages; and. VIP Parking Pass at Swanguard Stadium. This is worth $325!!

There are many other prizes up for grabs as well. To take a look at the items up for bid and offer your support please visit http://clearlycrusaders.weebly.com/silent-auction.html I know the kids will appreciate your support.

Cheers,

Chuck

Guiness World Record Event

This morning At the Yaletown chapter of High Output Business network where I am a member ,it was my pleasure to bring along a good friend of mine Ryan Thomas. Ryan is making history in Vancouver with the world’s largest Yoga event taking place at BC Place Stadium on July 12th, 2009. There was a large amount of buzz in the room this morning while Ryan told the group about what he is doing and many members were clambering to participate. The project started with a fitness guide but has morphed into an event that Guiness is going to be on hand to recognize as the largest of its kind ever to take place. All proceeds of the event will be going to local children’s charities. Stay tuned to www.fitguide.ca as details will be released shortly.

The guide itself is full of useful tips and tricks for a healthy lifestyle and lots of great offers from local health facilities. The book is available for $25 and it will also get you a free ticket to the record breaking event. In the short term feel free to contact me for more details. Neil Hamilton of Stay Positive BC and the facilitator of the Yaletown meeting was quick to offer the support of Stay Positive and I think the two organizations will be a great fit for one another. I look forward to seeing where this goes, stay tuned for more info soon.

Cheers,

Chuck
604-720-7563

Stay Positive BC

With all the negativity being reported in the news these days a whisper of optimism is a breath of fresh air. A group of local business people in Vancouver being lead by Neil Hamilton, Robert Arthurs, Tatsuya Nakagawa and Bonnie Sainsbury are leading the charge to keep the good news flowing.

One of the local newspapers published this article http://www.metronews.ca/vancouver/local/article/206172 in lead up to a big networking event being put on by the group. I would highly recommed anyone in the Vancovuer area to get more invovled and those who do not live in Vancouver to take some insipration by what these folks are doing and launch a similar initiative in your city. Perspective is everything and taking a possitive outlook can go a long way to bring each and every one of us great success.

Cheers,
Chuck

Brian Tracy-The new Mental Diet

The New Mental Diet
By: Brian Tracy

One of the most powerful personal programming activities you can engage in is positive self-talk. Be your own cheerleader and talk to yourself positively all of the time.Think About Your DreamsAs it happens, the average person talks to himself in a negative way. As much as 94 percent of your inner dialogue tends to be about the things you fear, your worries, the people you’re angry at, your problems, your concerns and so on. You have to consciously keep your words, your inner dialogue, consistent with what you wish to accomplish.

The Most Powerful AntidotePsychologists have proven that the words, “I can do it,” are the antidote to the fear of failure that often holds you back from trying. Repeat these words over and over to yourself whenever you feel fearful or doubtful about anything that you want to attempt. Say very enthusiastically to yourself, “I can do it, I can do it, I can do it!” When you start saying, “I can do it, I can do it,” you drive that message deep into your subconscious mind. This message lowers your fears and builds your self-confidence.

Another thing you can say to yourself is, “I make a million. I make a million.” Impress that message into your subconscious mind. Whenever you think about your work, say over and over again, “I’m the best, I’m the best, I’m the best.” Making any one of these three statements, or anything that is positive makes you feel good about yourself and causes you to be more motivated. You become more focused, more determined. Wealthy, successful people have a continuous inner dialogue that is positive and constructive and uplifting and consistent with their goals and objectives.Feed Your Mind ContinuallyFeed your mind from morning to night with words, pictures, information and ideas consistent with your goals for financial success.

Develop the habit of thinking positively and confidently about wealth accumulation. Read stories, books and articles about other successful people. Think about how you could be like them. Visualize yourself, imagine, fantasize, pretend in your mind that you are like the kind of people that you admire and respect and want to be like.Select A Role ModelPsychologists have proven that role models are essential for magnetizing your mind with the qualities and characteristics that you wish to develop in yourself. Pick a person that you admire. Whenever you face any kind of difficult situation, ask yourself, how would this person act in this situation? What would this person do? How would this person behave? You’ll find that when you think about how someone you admire might behave, your own thinking becomes better and you tend to act at your very best.

Become An ExpertRead everything you can find about your business. Become an expert in your field. The more you learn about your profession, your trade and your craft, the more confident you will become that you can do well in it.Action ExercisesHere are two things you can do to put yourself on the new mental diet for financial success:First, repeat to yourself, over and over again, the wonderful words “I can do it! I can do it! I can do it!” Whenever you are anticipating any new goal or opportunity. This affirmation builds your self-confidence and conditions you for success.Second, monitor your mental diet the way you would your physical diet.

Be sure that you feed yourself throughout the day with positive stories, words, pictures and conversations about the things you want to have in your life. Refuse to read, watch, listen to or discuss things that are negative or depressing. This will make a tremendous difference in how you feel and how you act.

Negotiation is Crap by Jeff Gitomer

HELP! I need to get better at negotiation!

by Jeff Gitomer

Eh, no Sparky, you need to get better at everything else so that you NEVER have to negotiate – or at least negotiate 90% less.Negotiation is for people who are lousy at selling, don’t understand buying motives, haven’t provided value, are unable to differentiate themselves from the competition, can’t build trust, and have utterly failed at building relationships.Maybe that’s why you have to “negotiate.”

Negotiation is not a problem. It’s a symptom.And negotiate is only one of three words that make up your reality, and the real definition. The other two words are: your price. Negotiations are all about “concessions” and back and forth bickering about what you provide and how much it will cost. Negotiation “experts” call it give-and-take or win-win. That’s a bunch of crap. It’s lower your price, and sacrifice your profit.

I’m in the airplane as many as 20 times a month. In every airline magazine, there’s a two-page pullout ad for “effective negotiation.” It’s been in the magazines for years. It must work. I mean… they must be successful in selling the course. Their latest ad campaign states in bold headlines, “It’s like steroids for your career!” Uh, correct me if I’m wrong, but aren’t steroids illegal? Hey, you too can gain an unfair advantage! All you have to do is break the law. Sounds great – where do I sign up?In the case of negotiation, it’s a violation of the law of fair play, manipulation, ethics, and relationship. Reason you have to “negotiate?” You were calling on the wrong person or people in the first place.

REALITY: People in the C-suite don’t negotiate. They discuss, discern, and decide. And they do it based on perceived value and trust, not price.REALITY: Here’s why you have to negotiate:• You failed to prove value beyond your competition.• You failed to prove you were different from others selling the same product.• You failed to gain enough trust to get a decision.• You didn’t win on the lowest price, and they called you in to “match the price of the lowest vendor” and potentially win the business.• You won the business at a low level, and were sent to procurement.

All upside down propositions (and you are at the bottom).And, once you’re “in negotiations to get the business,” you’re relegated to manipulating and groveling to get the business – at a lower price, and less (or no) profit. Great move. And you call that making the sale. I call it a pyrrhic victory.The whole concept of negotiation seems like a win-lose proposition. They win. You lose.And to make matters worse, at the end of a “successful” negotiation, you halfway hate the people you were negotiating with – especially if they were in purchasing or procurement with some big company. People who want to suck your blood, and then call you a partner, or worse, a valued profit partner.

If you want to know if it’s likely that you will have to negotiate in order to win the deal or the sale, answer these questions:How high up in the organization is the person you’re dealing are you?What is your value proposition?Do you know how the customer profits as a result of buying your product?What is the customer’s urgency to buy?How are you perceived?Do you have their trust?How strong is your relationship?What is your reputation in the marketplace?

MAJOR CLUE: CEOs tell procurement departments what to do. With one phone call, they can eliminate all negotiations and create a purchase order, from a now friendly, or even accommodating, purchasing agent.In my opinion, negotiation is nothing more than someone else trying to get in your wallet and lower your price. In my opinion, if you’re negotiating, it’s because you started too low on the sales food chain (because it was easier entry), and you’re now faced with a price war.

Departments like plant maintenance, IT, HR, office admin, and other low level (yes low level) branches of a business have budgets that they spend. Maybe you should be talking to the people that MAKE the budgets for greater success.And just so we’re clear, I’m not saying, “don’t take the negotiation course.” Any knowledge on how to win, and how to deal with customers could prove to be valuable. I AM saying if you have to use negotiation to win a sale, it’s likely you have given up your profit along the way. Not good.

Copyright © 2020 Chuck Brady.