Why A $200,000,000 REAL ESTATE PORTFOLIO SOUNDS BETTER THAN IT ACTUALLY IS – Low Cap Rates Are Killers

Learn why a $200,000,000 (Two Hundred Million) Real Estate Portfolio MAY (MAY) sound better than it actually is. HINT: CAP RATES ARE EXTREMELY IMPORTANT. IF YOU ARE BUYING 4 CAP RATES YOU MAY WANT TO READ THIS!

Everyone loves to brag. The guys in the local business journals. The guys in the Wall Street Journal. The guys on YOUTUBE. What do they say?

“I have a 200 Million real estate portfolio”

To the average neophyte, this sounds impressive. And it very well maybe. Especially if it was purchased during the previous recession – or possibly you are an OLD SCHOOL Billionaire like Donald Sterling with tens of thousands of units. Someone in either of those positions is DEFINITELY in a position to brag.

BUT WHAT ABOUT THE GUY THAT STARTED BUYING IN 2014 and brags about his 200 MILLION PORTFOLIO?

Lets consider the facts:

Cap Rates in most tier 1 and even popular tier 2 markets around high 4 cap rates or maybe low 5’s. Of course, everyone thinks that they are buying an 8…..until the numbers actually present themselves in the lack of distributions.

So here is some quick math:

  • $200,000,000 Million of real estate that was purchased on CAP RATES of 5% will yield a net operating income of $10,000,000 per year. 
  • Assuming an all debt transaction (No Equity) the annual (P&I) payments assuming a 4% Interest Rate over 30 years are $11.457,967.09
  • At the end of 12 months, you have lost $1,457,967.09

YOU READ THAT CORRECTLY

THE GUY BRAGGING ABOUT HIS $200,000,000 REAL ESTATE PORTFOLIO IS LOSING MONEY because he is buying stuff like this (and these advertised cap rates are way higher than actual)

http://www.loopnet.com/Listing/533-Evergreen-St-Inglewood-CA/11386063/

Can he make this up by selling if the property value goes to $250,000,000? Yes! But from a pure cashflow standpoint, it is risky.

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LETS TAKE THE RISK OUT OF THE CAP RATES AND INCREASE THEM A BIT. LETS ALSO PUT SOME EQUITY INTO THE TRANSACTION. 

OK, now lets assume that the 200M of real estate was bought on an average of 5.5 – basically cap rates that avg out to 5.5%. Lets also assume that the owner (owners) injected 20% equity into the project:

TOTAL DEBT: $160,000,000

Interest Rate: 4%

Cap Rates: 5.5%

NET OPERATING INCOME: $11,000,000

Monthly P&I payments: $763,864.47

Annual P&I Payment: $9,166,373.67

NET INCOME BEFORE DEPRECIATION ETC = $1,833,626

Look, this is BIG MONEY. And the guy pulled off about a 9.1% CASH ON CASH RETURN on his money when he bought the portfolio with a blended avg. of 5.5% CAP RATES…..

BUT HOW MANY PEOPLE ACTUALLY HAVE $20,000,000 to put down?

If they raised $20,000,000 what guaranteed return would they need to offer their investors? And what % of the deal would they get for themselves?

Obviously, people have gotten tremendously wealth with this formula. But for the avg individual, this is very HARD to pull off. Assuming no appreciation and assuming an 8% pref, there is roughly $18,336 left for the GP’s to divvy up with their LP’s…..hardly a feast for anyone – unless you live in Venezuela!

I show people a very simple formula that I have used to create monthly passive income. You won’t become a millionaire overnight. And quite frankly, this is not a formula for someone that already has 7 figures saved up. This is the exact formula that I used to retire by first creating a $3,000 passive income stream and then repeating the process 10X over. Just 2 little properties can get you to $6,000 per month which is enough for most people to live comfortably on…..ESPECIALLY IF THEY DONT HAVE TO WORK FOR IT!

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Group Homes Are Not Get Rich Quick. Group Homes Are Get Rich For Sure. But What About The Economy?

This Blog post will discuss the overall economy and the impact on Group Homes. Quick Tip: The Economy Doesn’t Matter when you own and operate Group Homes Like I Teach….However, If you own the real estate where your Group Home operates – interest rates and the economy may impact your overall wealth…..continue reading to learn why CASH FLOW is the name of the game in the Group Home Business

 

Where Are We in this 2018 business cycle? 

Honestly, I don’t know. Quite frankly, if you are running and operating group homes, it really does not matter. The care home, assisted living, sober home, retirement home and other group home type industries literally will not be affected by a downturn in the economy unless the USA turns into Venezuala.

Why?

Because the trend is your friend. Demographics are destiny in today’s assisted living and group home world. Whether you live in Atlanta, Dallas, Los Angeles, Nashville or Miami people are retiring, people are abusing substances and all these people need group homes and care homes where they can live CHEAPLY. Yes, $400 – $800 per month. They will continue paying whether or not the stock market falls. This is what I teach in my free, 10-part course

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group home business cycle

BUT WHAT IF I OWN MY REAL ESTATE AND MY WEALTH IS STORED IN REAL ESTATE?

Ok, great question. Look, I am not running a hedge fund or a PE Fund. I am a main street guy off wall street that shows individuals LIKE YOU how to do what I have done. That said, here are my thoughts:

In the later part of the business cycle when the demand from businesses and consumers is picking up at a fast clip – basically faster than businesses have the ability to produce the goods and services wanted or needed prices begin to climb.

EXAMPLE: Housing in a supply constrained area like Northern Ca. Consumers (i.e. tech workers) are making lots of money and builders cannot produce more houses due to land scarcity, lack of labor, material shortages and of course Government Bureaucracy. 

During phases like this, the profits become tremendous for builders or others that are producing what the end consumer wants. At that point, the government and the Fed will often get involved to slow down the increase in prices. They do this by increasing interest rates. In fed parlance, this is referred to as Monetary Tightening. This is the opposite of what we say during QE 1, QE2, QE 3 etc. When this happens, the stock values go down as do the value of other assets like real estate and entire businesses.

Remember, ALL ASSETS ARE PRICED AS THE PRESENT VALUE OF THEIR FUTURE CASH FLOWS AND INTEREST RATES ARE USED AS THE DISCOUNT RATE TO COMPUTE THESE CURRENT VALUES. 

In the last few weeks, Mr. Market has been teaching those who listen how this works. The economy (from the stats we are provided from the GOVT.) is apparently pretty darn good. So the fed comes in and says, OK, time to lift rates or TIGHTEN. Notice how the stock market has gone down a bit….. Eventually this will cause a downtrend in prices and eventually demand will fall which leads to the next phase:

DEMAND WILL BE SIGNIFICANTLY BELOW THE ABILITY TO PRODUCE (THE OPPOSITE OF THE EXAMPLE GIVEN ABOVE RE: NORTHERN CA. REAL ESTATE) 

EXAMPLE: How much can you afford per month if interest rates are 3% VS. 6%?

A million dollar home (give or take) would cost you $3,000 per month VS. $6,000 per month.

THIS IS WHY DEMAND FALLS WHEN INTEREST RATES RISE

At this point, the cycle would start all over again and the Fed would begin reducing rates making assets more affordable again.

This is why it is smart to pick up assets when the economy is weak. In essence, there is excess capacity on the end of the asset owners (think businesses, developers etc). Basically, they have employees to feed and not much demand so they lower prices. THAT IS WHEN YOU WANT TO BUY!

WHY 2018 IS AN INTERESTING TIME

The above is a very simple illustration of how things work. The reality is a bit different for a number of reasons. Here are a few:

  1. Lower Taxes. You all just saw what happened with the tax bill. AT&T and other large companies are giving out bonuses. This is HUGE
  2. Monetary repatriation. Trillions of overseas capital could come back to the Unites States
  3. Interest Rates Are Already SUPER DAMN LOW! Central Banks cannot really lower rates at the moment due to how low they currently are

Obviously, if you hold your wealth in real estate, own a large group home business or other means of production now MAYBE a great time to sell. Especially if you are nearing retirement.

But my method for how to operate Group Homes, Care Homes and other Assisted Living type properties focuses on producing CASH FLOW. Each and every month, my goal is to produce MONSTER TIDAL WAVES of recurring income from these group homes. Do I own real estate? Yes, lots of it. But the cash flow that comes in from the group homes is what allows me to live and be free.

THE END SUMMARY:

Don’t worry too much about the overall economy and the value of your assets. Focus TODAY on getting your group home up and going or expanding your group home empire.

I teach people how to do this in my FREE, 10-Part Course. If you haven’t signed up, I urge you to do this today.

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Want $3000? Check this out!

Give me only one month of your time and I will change your life! I made the Gold Course to guide all of you looking for financial freedom outside of your workplace. Here is why you should let me help you:

– No experience needed

– Results in one month

– At least $3000 monthly passive income

You’ve waited for too long. Now is the time to take an action and open your own business that can make at least $3000 a month. Group homes don’t require a big investment in advance. You could either rent or transform your property into a group home.

You can turn a house into a group home in just days. Go to few garage sales, get basic furniture and there you have it. Let’s say you start with only six people. Now let’s say you charge the minimum of $500 per month. You could make a monthly passive income of $3000.

My Gold course makes you skip the trial and error and jump right into making money.
You should never rely on one source of income. If you already do, this is your chance to change that ASAP.

How to Stop Worrying About Money?

Just get rich! Seriously, there is no better way!

First of all, I eat, sleep and live significantly better since I got rich. I also worry less, especially about small things that most people worry about every day.

About 11 years ago I stayed in an average hotel in Santa Barbara. During my checkout, the gentleman at the front desk informed me that I made a huge stain on the wall in my room and they will have to charge me for the damage.

I barely stayed in the room and I was pretty sure that I had nothing to do with the stain. Maybe the housekeeping lady accidentally stained the wall. Anyway, the guy insisted that I have to cover the damage.

This literally ruined my vacation. I was saving for so long to afford a decent family vacation and any unexpected expense was a reason to worry about.

On the other hand, If this happened today I wouldn’t bother at all. If I end up being charged I can easily afford it.

Now I earn money even while I am sleeping. I earn monthly passive income from my group home business and the money keeps rolling in no matter where I am or what I am doing.

Not to mention that something like this would never have happened at the expensive resorts I spend my vacations now.

That’s why I enjoy being rich. I don’t have to worry about irrelevant things such as where to dine in, where to park or when the flight tickets are the cheapest. Being rich saves a lot of time and effort.

Back in the days, I would spend hours reading reviews and thinking if a certain online course, program or book is worth the money. I just don’t care now. I will buy it and determine myself.

I transferred the formula that made me rich into an online course. I don’t want every single little problem to ruin your day. I want you to have more awesome days like I do!

I am so grateful for the amazing life I have now and I feel that is my obligation to make your days better.

I’ll do my best to make this happen, are you in?

Work Less, Succeed More!

HOW TO MAKE GROUP HOME RICHES THE RIGHT WAY BY WORKING LESS AND SUCCEEDING MORE. GROUP HOME RICHES IS NOT JUST FINANCIAL. IT IS GROUP HOME RICHES IN THE SPIRITUAL SENSE AS WELL

Most people tend to overwork when they want to make more money. That’s not a bad idea. But on a long-term basis, something will break if you work a lot. You may lose most of your friends, get divorced or put your health at risk. So, even if you feel that you can handle 55-60 or more hours per week now, that won’t last long.

And at the end of the day, you don’t want to miss living life because you were busy making money.

But how could you possibly afford more if your work less?

Hard work is simply not enough. It could help at some point, but you won’t be able to maintain the same energy and productivity after years and years of hard work.

The corporate world taught us that more work equals to more respect. I was personally happy 15 years ago when my boss gave me more responsibilities. So my promotion wasn’t a promotion at all. I wasn’t moving forward in life. I was working more and had less time for everything else that I love to do.

So, I figured out that I had to work hard but for myself. Only when you work hard for yourself you could succeed more.

I was able to grow my group home business and hire other people to work for me. I have a lot more free time now and a lot bigger monthly passive income. So hard work pays off, but only when you don’t have to work that hard anymore.

If you want to find out how to achieve more with less effort check my Gold Course. All I am asking is a bit of your time and determination. You’d be surprised how your life could change in just months.

How Much Money Can Be Made Starting A Group Home

Is there any money to be made with group homes, transitional homes, sober homes, halfway houses or MHMR homes? Don’t let them fool you!

Let’s get into the high-level details.  A 30,000-foot level – of the financials behind running group homes.

Businesses come in all shapes and sizes. Whether it is a developer of land who purchases large tracts of land, entitles it and sells it off piece by piece. Or an owner of a Thai restaurant who buys 1000 eggrolls and then sells them 1 at a time. or it is a local bar that purchases beer by the kegs and then sells them by the individual glass – they all have one thing in common. All these businesses are buying in bulk and selling in smaller pieces. Renting out an apartment is the same thing. And the more apartment units you have in a building, the more rent you will take in.

 

Understanding The Money

The group home, assisted living, halfway house or transitional home business is the same from a generic standpoint.  Let’s take a normal property, for example, a four bed, two bath home. In a typical Texas neighborhood, this property will rent for anywhere from $1000 – $1350 per month. Unfortunately, most properties of this nature will cost between $115,000 – $155,000. Without a substantial down payment, this property will eventually be a money loser on a monthly basis before any potential appreciation or capital gain. However, let’s assume that you decide to start up an assisted living company, group home company or something of that nature and rent out the property by the room? What if the rent you collect is $600 per month? BINGO – Hopefully you are getting the point. The property now brings in over $2400 per month.

 

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Understanding The Landlord

This type of landlord is not new. In fact, many refer to it as the second oldest profession in the world! Now, take a minute and think about some of the world’s greatest fortunes that initially started from this simple concept. Let me give you a hint; you probably have stayed at one of their hotels…and you may have seen one of their great grand-daughters acting as they worked in the world’s oldest profession. Conrad Hilton started out with a small rooming house in San Antonio, New Mexico and perfected his craft from there. The family has since built it into one of the largest hotel chains in the world because of his efforts.

But Hilton is just one example of how a small boarding home, rooming home or transitional house can give you the seed money you need to continue scaling up. There are tens of thousands of group homes throughout the country…and they wouldn’t be around if they weren’t profitable. And then there are the larger players…companies that are owned by private equity. Do you think Steven Schwarzman and Blackstone Group would have purchased Southern Cross, the biggest care home provider in Europe, of this was not a profitable industry? Remember, Private Equity’s job is to MAKE MONEY.

Jerry McGuire SHOW ME THE MONEY representing your need to make money.

 

The Opportunity is There for You to Take

Although we are only touching on the high-level financial aspects of care homes, nursing homes, group homes and MHMR homes; it should be fairly clear and obvious that even the owner of a small group home with six residents can make a lot of money with minimal hours. I will let you do the math on seven clients because at $600 per month and a small $950 per month rent or mortgage payment.

Now you must also remember that a “group home” is simply a generic name. Within the “group home” industry are literally hundreds of difference “sub-niches”.  Also, consider that “group homes” are simply a sub-niche of the real estate sector. That said, each “sub-niche” will have its different problems and solutions as well as differing amounts of work required to make the operation run. Student “group-home” living is going to be relatively passive, as will be elderly group home housing in the 50 – 65 age range; while housing violent ex-offenders in a group home would potentially be more lucrative but would require more staff and therefore management time. These are all things to take into consideration when determining how much money can be made operating a group home!

If you are looking for additional information on how to start a group home, halfway home, transitional living home, sober home, foster home, ICF/MR home, DADS Home or other type of care home for people with disabilities; check out our free course on starting your very own income-generating group home by clicking here or going to www.grouphomeriches.com and clicking on the free wealth building course.

If you think this was helpful… check out our membership site! The information here has helped many to earn more than $10,000 per month. 

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