All right, so let’s start with the first question. And I will keep admitting them as you ask, then you do the same. All right, sounds like a plan. Okay, our first question is coming in from Avi. As you know, he is a new jv, North Carolina. His first question is a question he’s previously asked. It says they tore the atm. They took it, that building. Okay, continue. Huh? All right. It says if we plan to pursue a lease agreement, that we sublease out to a national tenant and we get an option to buy.

How do we structure the due diligence timeframe so that we don’t get stuck in the lease? If we cannot land a national tenant, is it the same as if we contract to buy, basically ask for a lease, 45 days for due diligence. Okay, good question. So you want a lease and then you want to sublease. Meaning, let’s say you’re going to pay 5,000amonth and you want to sublease to somebody, let’s say 7,000 or let’s say 6,500. So you’ll be receiving 6,500, paying the landlord 5,000. So you got to use the same due diligence period.

I don’t think they’ll give you more than 45 to 60 days for due diligence. And the idea is to line up the deal for an assignment first. Like, you’re going to actually get the property, line up a national tenant and then assign it. But once you have a national tenant interested and they’re going to pay you, let’s say, 6,500, you can always go back to the seller or the broker and say, listen, can I actually lease the property and pay you 5,000 and give me just a year, Then I exercise an option to buy it within a year. Why? Because this gives you the chance to come in, have the national tenant comes in. They do the changes, they improve the value of the property.

You’re paying 5, but you’re receiving 65. So you’re actually having the property valued more for you than it is for the landlord from whom you’re going to buy it. Because if you’re actually getting more than they are getting from you, the value will appraise higher and you’ll be able to buy the property. So, yeah, you don’t want to get stuck in this. So you ask for 45 days and 15 days to close. As soon as you line up a national tenant, you call and ask if you can lease. Very good. Thank you. Thank you. You’re welcome.

Any follow up, Avi? No, no. I appreciate it so much. Thank you for the explanation. I’m working through a couple of detailed examples right now. Very good. And you’re part of the jv. So when you line up a national tenant and you want to work these details, I’ll work it with you.

Because when you write your lease with the landlord, you, you need to have that option to purchase. And if, if you can get the option to purchase still. Okay. Because you’ll have positive cash flow. So. Okay, perfect. Very good. He has a next question that is, is it worth pursuing a lease agreement that we can sublease if there is not an option to buy? Yes, for sure. Because I mean why not if you have more positive cash flow than the negative payment out? It will be great. And and then I’ll add to your question.

What if you’re doing the lease of lease and like you say the landlord says I don’t want to sell the property, then you ask him, if you sell it down the road, can you just put in our lease agreement that you will give me the first right. So let me purchase it from you first. Because that first right tell him, you see, this will make me spend more money on the building, commit to the lease, keep it up to date, etc. Because I’ll have the first right to buy it from you whenever you want to sell. You will be amazed. I’ve had a lease and sublease and the guy told me I will never sell the building, it’s owned by my mother, etc. Etc. Etc. And then during COVID he sends an email, he says, listen, I talked to my mom, we don’t need all these hassles.

If you want to buy, let’s talk. So over time things change. So you ask for a first right of refusal. You may also ask that landlord for ti tenant improvement. Tell him, listen, if I don’t have the right to buy it, I can spend too much money. So would you kick in 50,000 tenant improvement? Also one more thing. When you lease and sublease, you’re now the tenant and you’re going to sublease to somebody else. Standard in the lease contracts there is a sublease clause. It’s not, it’s not a price, not something you’ll have to negotiate too hard. But you then ask for a kick out clause. So don’t obligate yourself for 10 years because you don’t want to get stuck. So you say, and if I cancel the contract, can we work out a 90 day penalty? Then he’s going to ask you for six months penalty.

It’s still a lot better than getting stuck in a lease that you have an obligation for 10 years or God knows how many years. This is very important, what I just shared with you, because as a tenant you want to negotiate things slightly different than as a landlord. Perfect. All right. And his last question. In a lease agreement that we plan to sublease to a national tenant, how do we manage the time frame and process for tenant improvements? Do we just wait for the national tenant to tell us what they want first and then rely on that landlord or master leaser? Yes master lessor, yes. The actual time frame has to work based on the national tenant coming in. So let’s say you got a property under contract, you’re part of the JV program, you have the tenant list. You start smiling and dialing. One tenant tells you we’re interested. We go on a call, you and me and them, and we negotiate the letter of intent and the details how much they’re going to pay. Now we have how much they want to pay and we negotiate with them that they want to get into the building and start doing some work. And they need from us 70,000 tenant improvement. And here’s what they’re going to improve. And then you can take this.

Either assign the deal to me and you get paid based on the formula we have, or you can go to the owner of the building and you say to them, can I lease from you? And if I lease, I’m willing to pay you X, which is less than what they’re going to pay you when the tenant we lined up is going to pay you 6,500. You offer 5,000 and you tell them, and I will buy the building, but give me six, seven months, give me a year and you’re going to make some cash flow, Mr. Landlord, Mrs. Landlord, and then I’ll exercise my option. But I need you to kick in so much. So now they’re going to give you some tenant improvement based on the need from this tenant and if not, you will put the money for the tenant improvement and then the new tenant comes in paying you more, which will make the property value higher than what you’re paying because the building value is based on income. The seller is receiving 60,000 a year from you. But you’re receiving, let’s say 70,000 a year from them.

So that difference makes the building higher value for you. So even if you kick in some tenant improvement money, once that national tenant signs with you, you can go to the bank and say, I have this sublease and I’m paying to this owner X per month. Would you give me a loan? They’ll give you the loan to cash out this guy. And now you have a building at higher value that you can either flip or keep for positive cash flow. So yes, manage everything based on what that tenant wants and let them tell us first what they want. And then we go to the landlord and ask for terms.

Can you give me the opportunity to have some money for the tenant improvement? Can you give me an option to buy? Can you do this with me? And you’ll be amazed. I mean a lot of sellers want to sell because they don’t have cash flow. Then you offer the cash flow, I’ll give it to you for a couple of years. And then the person says, okay, well I want all the lease payments, but I’m not going to put any of the lease payments toward the purchase price. You’re still winning because you’re getting lease income. So it’s very hard to lose on something like this. But you can lose if that tenant that told you they’re coming, they don’t sign and now you’re stuck with the lease payment. So you got to have an out so you can control how much you can lose. Or another time you have time to line up another tenant. This is a very good question, Avi, and it’s an advanced strategy after you assign one or two deals. But if you got the money, by all means do it and I’ll help you get it done. Great. And Cherif, on the chat, Steve had a follow up question.

He first of all said happy New Year. And then he said, following up on the right of first refusal, how do you set the price upfront for what might happen in the future? I always like when I’m going to do a lease sublease. I say, look, I want to be fair to you. So we’re going to do a first flight of refusal. Whatever you go and you get an offer out there just give me time to get an appraisal or we can hire an appraiser and then whatever the appraisal will be is what we’re going to negotiate. We negotiate either the price within couple points here and there or the terms because it will always, and I hate to be so absolute. It will always appraise for the seller less than it will appraise for me.

You know why? Because I’m paying the seller landlord 60,000 a year, 5000amonth but I’m collecting 6500 so I’m collecting 1500 more at least. You know I have these where I collect 7000 more per month but 1500 times 12, I’m collecting 18,000 a year for that building. It’s going to appraise at least at 6% cap, 300,000 more. There’s no way he’s getting less than me. I go to the bank as I’m buying and I’m collecting so much from this tenant on a sublease. Obviously he’s going to appraise on a higher income higher than the landlord who is collecting less from me.

So I tell them I want to be fair to you. Let’s do it based on appraiser and. It’S very fair, very good. Another follow up way is saying if there’s construction required to turn an example. Existing building to match the new tenants brand. When does the national tenant start paying rent? Is it upon completion of construction or immediately? It’s all negotiable but usually it’s either by certain dates I give them, let’s say three months free rent, four months free rent or by certain date I will give you you know, let’s say you’re going to need six months rent free, that’s fine. But on the seventh month I need to start rent whether you open or not. Some other it’s going to be at commencement of business the day the business commence.

Let’s say you start three months from now in the middle of the month. We’re going to start the proration that month. You’re going to pay me 15 days. So the day you open for business we’re gonna know. You’re going to tell us or somebody’s going to tell us, hey, they open for business from that day you start collecting the first penny, you start paying me the rent. It all depends on the negotiation. And I like them when they spend money on the building because now I know they’re not leaving, they’re not going anywhere and if they go they automatically have the lease obligation with the corporate guarantee, etc.

So it’s negotiable. I have a deal right now. I’ll give you an example where I gave this New York restaurant the opportunity to have one year free rent. But starting the first month, which is next year is going to be May 1st. The rent is 12,000 and every year it goes up by a thousand a month. 12,000amonth, 12,000 for 12 months, then 13,000. So it’s a great lease with 10 year lease plus 5 year option to renew. 5 year option to.

This is a phenomenal lease. So I give them one year free. Why they have to reduce so much in that building? It used to be a bank, they’re making it a restaurant and I’m putting nothing zero in their space. I’m putting some expenses on the building itself from that side because it’s mixed use. Upstairs I have hotel, etc. But I figured if I don’t put any money, let them put all and I give them free rent. So you can negotiate that based on the opportunity itself.

Perfect. And ways. Last question and follow up. Do we negotiate mortgage payment in the same way with the bank? Can we get a three month deferment? Okay Commercial loans, unlike residential could be negotiated but usually during the time you’re getting the loan. So you’re Buying the property. You’re going to tell the bank, like I had a bank. Tell me, how would you like interest only for the first two years. You have time to fix the building, get a tenant and all this. You know, it’s really very small differences. What I like to negotiate with the bank is the interest rate. Give me the best possible interest rate. And I don’t want prepayment penalties on the loans. That’s what I like to negotiate. There’s always a prepayment penalty. I said, okay, give it to me for year one. If you’re going to carry it over to year two, then let’s say year one, it’s two points. Year two should be like one point. Year three, it’s finished. No more prepayment penalty. Something like this you know, banks want payments, and the sooner they get the payments, the more relaxed they are. If they’re going to tell you no payments for three months, they’re going to ask you for cash reserves and they’re gonna change the term of the lease.

It’s all managing the risk. You could and you will never know until you ask. What surprises me is how many people in the business don’t ask, don’t talk. Like they say, how much do you want? And you say, 1.8 million. And the person’s like this morning I had a call from this guy. He wanted to talk to me about buying a building at 2. We negotiated 2 million, 6:50. He said, okay, I have 700,000 cash. Can I give you 650 cash? How about the 2 million? Can you make me make payments? So I said, listen, I know it’s busy. He’s a jeweler. He wants to buy one of my buildings. And I said, let’s just finish the busy season until January 7th and we’ll talk. So he texted me this morning and he said, can we talk? I’m very interested still in buying the building. So I go on the call with him. He said, Mr. Cherif he said, I am not familiar with real estate, but I am the best at jewelry. You’ve seen my stores. I said, let me make you an expert in five minutes. And he laughed. I said, just listen to me. And then I texted him, actually, I’ll show you the text. I said, I’m gonna text you what the payments will be on $2 million. And then here is the text. I said, go to this website. You see, he sent me the may I call you thing. I said, may I call you? So return his call and I gave him calculatestuff.com and you go to calculatestuff.com, you see the actual website.

I said, just click right here on mortgage calculator. A mortgage calculator will open up, put on top $2 million. That’s got to be what your payment is. Put 6.5% interest. The bank will only give him 25 years, not 30 if you get a loan. So you don’t need me to carry financing, just cash me out. But I don’t have 2 million. And the bank you’re buying at 2 million 650, you’re going to give me 650. 2 million is the balance. Plug in the numbers. It’s going to show you for 25 years what your monthly payment will be, which is about 13,000. From the 13,000, 3,000 goes to the principal. You’re paying down the loan and 10,000 is interest. But the building, you’re paying me downstairs, 6,500. And there is a second floor and there is a third floor. Upstairs alone is rented for 3,500. And if you make it, Airbnb will bring you 5,000 net. And the second floor is office. So you’re going to have actually positive cash flow. And you’ll be able to lease from yourself because you’re leasing from me downstairs. And you know the rent is going up. As a matter of fact, in 6500, when I was calculating, I said, how much do you pay me? 7,500. He goes, no, no, 6,500. Now, that’s why I want to buy. I don’t want to go up. It’s the name of the game. So with that, he understood how to buy. So you need to work the numbers and let the numbers speak for themselves. But he didn’t know how to negotiate things. And he asked, what can we do? This is a world, I’m not in it. And maybe he’s playing dumb, maybe he’s negotiating to show less than he know. But it’s okay. We work it. And I showed him what’s good for him, what’s good for me. A win win will make magic happen.

And that’s how you do deals. All right so that was my question. These are some great questions. Today, you guys. Like 2025 is rocking and rolling. What else? All right, we’re gonna start with Cody. He is a new jv from Shane’s group. As some of you guys know in December, Cherif did presentation in Atlanta for a student of ours who has been so successful that he’s now doing events and raising capital. He has two real estate funds that Cherif set up with him and he’s a joint venture partner. It was very exciting to see Cherif out there at a student who’s now just crushing it. So congratulations to Shane. But it just is a reminder. I want to let all the JV partners on this call know that Cherif will be doing his live joint venture partner training January 31st in old San Juan this time. So if you are interested in that, shoot me an email, let me know on chat. For the JV partners you’ll be see receiving registration emails that will come out for you guys to register for that event. So I just wanted everybody to know that and welcome Cody. His first question is when a broker talks about the tenant having renewal options in their lease every five years or something like that, does that mean that even though it’s a 10 year lease, they have the option to cancel in 5 years or are the options for rent just increases? No. What? They sign for a 10 year lease.

That means they’re committed to 10 years with a corporate guarantee. Now if there are some terms I want to add here, when they sign for a 10 year lease, it says this year is for 10 years, 120 months commitment. There is a corporate guarantee for the 10 years. Now if there is a kick out clause. A kick out clause is a paragraph that says, for example, if on year three our gross sales do not reach at least $2 million in revenue, we have the right to kick ourselves out. We’ll pay a penalty of let’s say six months rent.

We’ll give you a notice of 90 days. That’s called the kick out clause. But other than that, the 10 year is commitment and I never give them a kick out clause. Why? Because when I go to the bank and tell the bank I have a 10 year lease, they’re going to look at it, they’re going to say, Cherif, you don’t have a 10 year lease. You have a 10 year lease. But they have the right to cancel after year three if they don’t reach certain number. That’s not going to be a big loan for you. We’re going to give you just only 50%, not 70% or 80%. Another term to know is the renewal option means after 10 years. If they say with an option to renew for another five plus five, that means now after 10 years they can renew for five more years and then renew another five years after that. And at that time they can say at market price, or they can say at no more than 10% increase in the base rent with all the increases by that date. So you can pre negotiate it or not. You know, the options are valuable because it makes them commit to the location, spend the money, maintain the building, etc. But it also hinders you from gaining advantage from the inflation in the market. Inflation was rampant a couple years ago, as you remember, Cody. I mean, we’re at 9% a couple years ago.

So imagine a rent getting you 100,000 a year, and you can now jack it up by 10%, 20%. And they’re going to say, yeah, I prefer to stay with you. I already am running here. So they’ll pay 120,000 on the renewal versus just like $105,000 or whatever. So it’s a win, win. It’s a balance. You have to see what’s in it for them and the commitment. But it’s all good. I usually give them 10 to 15 years. If they’re going to spend a lot of money on the building, then I know this is great. It’s going to be a longer term. They’re committed to even longer. I work with them. There is another term I want to share with everybody here. It’s called holdover. There is a section says if there is a holdover, the tenant shall pay 150% of the rent. What’s a holdover? It’s like the 10 year finished. They don’t have an option to renew and they’re not leaving. We’re calling them. Hey, you’re staying. We need to talk about the renewal of the lease and they’re not responding, so they’re holding over the space. Usually there is a penalty of 50% increase on the rent base. And we just put it to make sure that they contact us six months. Because we say tenant must contact landlord within six months prior to the expiration date. Like no, no, like prior to six months from expiration date. Because it gives us time to line up another tenant, see how they’re going to leave, what’s going to be left in the space, etc. But if they hold over, there is a holdover penalty. And you know, if I’ll switch that around for a second since we had some people here saying I’d like to be the tenant and lease and then I sublease for more money. If you’re the tenant, you want to commit to a space but have the kick out clause. You see the difference now, so you don’t get stuck as a tenant. If you’re leasing and you’re going to sublease, you want to be able to leave if you want to leave. And if they don’t want to give you an option to buy, you want to have a first right of refusal. So you understand the difference between you being the owner, landlord versus the tenant, lessee or renter. And those are small nuances. But when you get there, your JV partner, I’ll work with you and help you in the paperwork because there’s a lot of power and control in the paperwork. Okay, Other questions from Cody His Last question was what are some potential options for a standalone vacant bank building? The building is 3,000 square foot and has great neighboring tenants for QSR tenants.

Can we still find a national QSR for something like this? Yes. I will preface this by saying to you, usually when it’s a bank location, with the drive through and the layout for the tellers, etcetera, it’s ideal for another credit union, another bank wants to expand, etc. But usually if you said, like you say, can we still find a national tenant because there are other great neighboring quick service restaurants. QS Rs are quick service restaurants for those who are not familiar with, familiar with the terms. So yes, that building can be converted, retrofitted, reconstructed, redone to accommodate a quick service restaurant. We’ll probably have to give them a lot of tenant improvement money because they’re going to have to put a kitchen, a grease trap, some piping, a walk in freezer, all the stuff that a restaurant, fast food restaurant will need. 

But the good news is they have a drive through, so it’s approved. Drive through is very important in today’s market since COVID time, you know, drive throughs, pick up orders, etc. Very powerful. So the formula will have to be based on what are they willing to pay as income. So if we’re going to buy the building for a million and we’re going to kick in $200,000 in tenant improvement money, that’s a lot of money because they’re going to install a whole kitchen that will kick in another 300 probably. Then we need to adjust the rent accordingly if they like the location. And like you said, there are great neighboring tenants. You’ll be amazed what these big tenants will pay. I mean they look for location, they want the traffic. They’re going to say, you’re going to kick in so much. We’re going to commit to the 10, 15 years, we’re going to do the rest.

So it’s all based on numbers. But I like banks to be converted. I just brace myself for how much they can ask for tenant improvement. Great question, Cody. Do you want to go live? I think you might have a couple other questions related to this. Yeah, I appreciate you. Yeah, that makes, that makes sense. Cherif. I just didn’t know if because there’s a great, there’s a great empty bank in a good location in Chattanooga, Tennessee. But I didn’t know if it’d be better to try to land, to leave it as a bank or, or still try to find a QSR, since most of its neighbors are QSRs, it’s right across street from Home Depot, stuff like that. So I guess my follow up question is, are there a corporate guarantee banks or credit unions? Yes I mean credit unions will, will love these because already set up for that. But to answer your question, what would be best would be same type of business in the location you see. So banks, sometimes they decide, hey we already got enough business in here or there isn’t enough business. So for bank of America, let’s say, so we need to leave. But the credit union says we need to infiltrate this local market and offer incentives.

Want to come in and just think like a credit union. You’re thinking to yourself, I’d like to get a building where we can lease from an existing bank that left. So the layout is there. We’re willing to even pay more for the lease from an existing. And what better corporate guarantee than a bank? They literally deal with the federal government. So it’s beautiful. But simultaneously we call the other tenants who are the quick service restaurants because it’s kind of first come, first serve. Time is always of the essence in real estate deals. I can’t stress that enough in today’s market. I have an offer right now, by the way, general point here. Since January 2nd to today, I have never in my life had so many offers on the properties I have on the market. It has been dormant for two months, I can tell you. November, December, the country had gone to a coma. No offers, no activities. The brokers were calling me, asking me, do you know what’s going on? I don’t know what’s happening. All of a sudden, January, Trump coming in and all this stuff.

Everybody’s hopeful and they’re just a lot of calls. So I had two calls on the same. It’s a small property I have in the Rainforest. I have two in the Rainforest, one very expensive, one very affordable. I put it 550,000. Sotheby’s send me an offer, full price, but we need two months for the buyer to get a loan. Next day I got an offer from the other broker who says, I have an offer, all cash, 450,000. I said, would they go up to 500,000? And she said 15 days, they’ll go to 475. I said, I will take it as a priority with a backup offer of the full price. So my point is I prefer to close faster today at a discount than wait longer because time is of the essence. You get your money, you can jump on good deals. There will be good deals coming. We’re going to talk about that from the follow up questions, but I think I’ve answered this and we’re we’re good to go for the next one. 

All right. And a follow up question from way on Cody’s bank deal that he’s looking at. We said is there a ballpark figure to convert an old bank to a QSR or is it cheaper to convert a QSR to a bank? Oh, cheaper to convert the QSR to a bank because they’re going to say leave the grease trap or just remove the kitchen. Removing stuff and painting is a lot easier than installing stuff with new piping and ovens and extractor hood extractor that goes out. And the ballpark will be from 200,000 to 500,000 that they will spend. So they’re going to ask us for a kick in of money. And I am a kind of guy that works this out. Its my biggest tool in negotiating the letter of intent. And the biggest tool is if I give you more, you pay me more, I’m going to advance you to open. You’re going to make your money from the cash flow. And what do I want? I want the maximum rent because there is a multiplier. Building making 100,000 net is worth so much. Building making 150,000 net is worth time and a half on the multiplier.

So yeah, I’ll give you so much advance, but I’ll make so much more. I’ll make 16 times more on every dollar I spend. And that’s a formula that JV partners will know very well on January 31st. But enough to say getting high rent is a huge value add for a building that will come in with a corporate guarantee. That’s how you create so much wealth for yourself and your family faster than you’ve ever dreamed legally, ethically. And there are few guarantees in life. Guarantee you’re gonna die, guarantee you have to pay some taxes. And the third guarantee is the corporate guarantee for these buildings from publicly traded companies. I love that guarantee. I seem to be immortal with it because I can pass on the buildings to my kids and grandkids, etc. All right, all right just to keep answering questions here on the chat, Avi had a follow up question about new building costs for ground up development on vacant land on a commercial highway. I can imagine costs will be very drastic, will vary drastically for market to market and type of structure. But for example, if we are dealing with a flat parcel of raw land.

 Approximately how much should we expect a tenant to need for construction of a brand new 2500 square foot drive through building? Trying to back into numbers on possible build to suits. Okay, 2500. I mean, I calculate about $70 a square foot to build 70 to 100. Depends how elaborate they’re going to make the building. I mean, we had a deal where it was What’s the company? The coffee company Foxtail Dutch Coffee. And they said to me, you can build it. It’s going to cost you a million one to a million two, we’ll pay you higher. Lease or advance us 800,000 and we’ll do. The work. I said, you know what, I’ll advance you 800,000 now. Advance. It’s not like I’m going to give them the 800,000.

We’re going to actually get an invoice and pay, get an invoice as they do the, you know, the, all the stages, clean up the ground, like demolish, get the whole thing framed. So stage one, stage two, stage three. And it’s very easy. Once they sign that they’re going to do the build out, they’re going to lease this. I go to the bank and get a construction loan and I tell the bank this national company is going to build it. So when they do the build out, because when it’s a build to suit, when they do the build out they usually want to commit to 15 to 20 year lease plus some options and it’s a brand new building and it’s beautiful. 

They actually, if I’m going to advance the money, they’re going to pay me a higher lease payments because I’m paying more than doing the work, which is the best thing in the world. Anytime somebody else is going to do the work, you’re a winner. Especially if there is a guarantee they will do the work and they’re going to benefit to their benefit or to their detriment. It’s a corporate guarantee versus somebody else. You rely on them, then they screw you up. You don’t want that. Okay. It’s a shift of risk. So they can do the build up with my money and then they can pay me hard lease. 

There is another formula. They spend the money on erecting the building at 800,000 for their 2,000 square foot building, which is pretty good price for them. They do it pretty fast, it’s a cookie cutter. But then because they paid for the building, they just pay me a land lease and I get a land lease. The numbers make sense. I paid for the land with some building that they demolished and they built another one. They pay me a land lease. I’m a happy man. I just bought the land, got a loan and they’re paying me so I have good cash flow and I can flip that lens a land lease. And usually with land leases, 25 years later, the tenant who built that building makes me own the building. 

So after 25 years the building becomes mine. It’s a beautiful way to do business. The third way is I bought the land, they want to demolish the build to suit, I get the construction loan, I do the build out and I charge them the maximum possible that they will commit to. Because they will commit to it before I go get the loan for the construction. So it will be a corporate guarantee.

They can’t walk away. It will be damages worth hundreds of thousands if not millions for them. So those are the three scenarios for build. Did I answer your question? Yes, I back on the price per square foot though. 70 to $100 per square foot for a drive thru building is sort of in the range. Yes. But you know I, I can tell you this. When they are going to do they’re going to ask us for a bill to suit. They tell us the formula. Their broker representatives tell us like sometimes we’re doing one for Starbucks and they send us all the graphic, the designs and they said in the Dallas area these are the three contractors you can deal with because we know they’re going to charge you less and they know what they’re doing. 

It’s not like they’re going to start trying to figure it out. So they tell us so they want us to win with them. So sometimes it costs less and sometimes they say all we need is this, this and that. So it costs us a lot less per square foot. Some other tenants, we want it fully turnkey. You pay for everything, we’ll pay you more monthly. Like we’re doing a deal with the Dutch coffee. The example we were presenting another location. They said we’re so over one because we’re growing so quickly. We need three months to catch our breath. Then we’re going to start again in February of 2025. So there was no negotiation at that point in 2025 they’re going to tell us what formula they want and what the cost will be. Maybe they don’t want everything done. You see. Okay, perfect. No, it’s just a little bit lower.

I was expecting it to be a higher price but that’s that’s good to know. Yeah. Because we don’t usually have to do everything for them. They want to come in, put their own equipment, their own stuff and, and they want the speed. Good. Okay. Thank you. You’re welcome. Very good. And then Cherif, one more follow up from Sujin. Sujin. 

She obviously you know, is working with Way. She said to follow up on Way’s question. We are working with a former sonic of 1,470 square ft. This area lacks banks. Will banks be willing to come in with the burden of construction to add more square footage? Yes, they do. To reach banks you know, on the tenant list we don’t have many banks because the way it works, you go to the bank’s websites and I’ll talk about that in January 31st meeting and I’ll tell you how to follow it. Its going to be in the meeting on January 31st. Suffice it to say right now you go to their website and you look for the real estate department and then try to communicate you. Usually they have you reach the regional brokerage firm they deal with in that region. 

Very good. All right, next questions are coming from Ishon. He said, what are your numbers for a buy? For buying a franchise and the property? I have a checker site that can be acquired for $1.15 million. Fox Hill Coffee with give us a franchise to convert it and manage it themselves. Their total Franchise costs range from 350, 000 to 800,000. I assume you can pay yourself rent of whatever you like to make it worth more or do you stick with the market rents? Okay, so this is one of the best questions I’ve had. So listen to me guys. So what if you get the building, the single tenant building and get the franchisor to operate and give you the right to the franchise so you become a franchisee. Now what’s the problem with that? The problem is I don’t want to be making sandwiches, I don’t want to be selling ice cream. I don’t want to work in any business.

I don’t want to be in a business. I want to be working on the business of real estate. I have a building, I lease it, A tenant pays me rent, they have to go buy equipment, they have to hire staff, they have to deal with problems to marketing operation, human resources. Somebody’s complaining, somebody says, you’re not dealing fairly with me. All that crap that comes with the business, day to day operations. Excuse my language here, but it’s 20, 25, so we are speaking openly. So but if the franchisor tells me we would like to come in, we’ll give you the franchise, right? And we’ll operate it for you at a fee. Oh, now you’re talking. I’m going to own the business and the building and I don’t have to do much. I can be passive. 

I can wear my sandals, go to the beach. I can talk to people on the phone and on zoom and go over to something else. Look at me here. Here I am in Cancun. I’m sitting right here. And here’s the beach. The beach. You see, the beach is better than Bora Bora, right? Here in the hotel zone. Can you imagine? I have to go make sandwiches to people right now in Orlando. Whatever it is, I’m gonna tell them I don’t make sandwiches for myself. I’m gonna make it for you. Okay. Anyway, I got too excited. But let’s just talk. Let’s talk for a second here. I want to work your numbers, Aishan, because I like if they are going to give me the franchise and they are actually going to operate it, so I’m going to make more. So I want you guys to write these numbers down, because you figure out this formula, it’s going to change your life. So write this down. Aishaan just said checkers site that can be acquired for 1 million 150. So write down building, 1 million 150. The franchise you said is from 357. So I don’t know, like 800.

So let’s say 500,000, because you can negotiate that with them. And you say, listen, I’ll kick in 500,000 on the franchise. So we’re going to say the building, 1,000,150. The franchise ownership for the business, 500,000. So, right. So the building and the franchise will cost me a million 650. The building you asked me for the formula on that million, 150,000. The building should make me about 10%. So we’re gonna say 120,000. Write that down. Because by the time I pay the million 150 and closing and all that good stuff, 120,000 is the least income I expect from the building. And the business should make me about 30%. 

What’s 30% on 500,000. 500,000. 10% of 500,000 is 50,000. If I said 30%, that’s 50 plus 50 plus 50, that’s 150,000. So the building should make me lease 120. The business should make me 150. Everybody with me so far? That means I’m making between the building and the business $270,000. Are you with me? Good. If I sell the building, that’s making 120,000 and I sell it at 6% cap. 6% cap. This is the most important calculations. For those who don’t know, that means capitalization rate is 6% for a capital of 1 million. If I make 6% capital return, the cap rate is 6%. What’s 6% of a million is 60,000. So if the building makes 120,000, I can sell the building at 60,000 plus 60,000 is 120 so it will be worth $2 million. Everybody with me. The building will sell at $2 million. Because it’s making 120,000 net. Now, the business is making one hundred fifty thousand. 

Now, that business at $150,000. I’ll show you something at 150,000 net. You should be able to sell that at 750,000 because the building will sell at 750. If it makes 150, why, it’s 30%. That’s what you should expect from a business. And by the way, some businesses pay a little bit more on the net. But so what happens here is the building will make me 2 million on the sale and the business will make me 750 on the sale. So write down 2 million 750.

So if you put a million 6 50, which is a million 150 for the building and 500,000 for the business. And they came in, Fox Coffee came in to run it. I can turn around and sell it as a package at 2 million 750 to somebody who wants to get the franchise of Fox Coffee and on the building. So they’re happy, they own a building and the business, and they’re sitting and you make it. You made almost a million dollars. But I’ll tell you what’s better. Now, see, this is good. 

But I’ll tell you what’s better. What’s better is I would rather get the whole 270,000 as a lease payment. Now, Ayshan asked the question would you rather stay within market trend? So let’s say I just tell fox company, hey, listen, I’ll kick in 500,000 for you guys to open, but you pay me higher lease. I don’t need the franchise. You just pay me higher lease. And don’t pay me 270. Pay me 240,000 net base rent. Are you with me so far? How did I come up with the 270? Remember, we said 120 from the building rent and 150 from the business. The 30% you should expect on business investment, you give them 500,000 to give you the franchisee. To the franchise rights. I say, listen, listen. I will give you the 500,000 for the business, but I don’t want to own it. You keep it. Just pay me more rent. Now, I’m helping you open for yourself. So your company grows and I grow. And I’m not going to even charge you 270, which is what I expect based on this formula, I’ll charge you 240,000 with the corporate guarantee at 240.

Listen to me carefully. 240,000. If it’s a 6% cap for every 60,000, the building is worth a million. 240,000 is 60,000. 4 times 4 times 6,000 is 240,000. That building will sell at $4 million. Not 2 million 750, that’s another million 250. You want to ask somebody where their money is? It’s in their knowledge and their ability to structure the deal. Right? 4 million. And because it’s a building, when I sell it, I do a 1031 exchange. Don’t pay a penny in taxes, roll the whole thing forward and rinse and repeat and repeat. One building can change your life. 

One right structure. And the second deal, you should set up your own real estate fund, because you raise the money from other people and do these deals, pay them like I do debt funds, pay them, set, return, and make millions upon millions upon millions. And come join me here in Cancun. We need people to play volleyball. Yesterday we’re missing two people. Very frustrating. People want to sit and drink tequila when you want to exercise and make it happen. So again, if I can get higher rent by giving them tenant improvement, helping them grow, that’s what I call a win win for the greater good.

Community wants to drink coffee, I want to drink healthy juices. Good for them, good for me. I help them grow, they pay me higher lease, I increase the whole area. And guess what? Now the rent in the area is going up because I went up. Hence the reason I controlled on Old San Juan. Coming to old San Juan January 31, you will see the streets. I own streets because I started doing this with tenants. I’ll give you more, you pay me more. 

I took rents that are 8,000 today. Of course, 20 years later, they’re paying me 30,000amonth. You know what the value is today on these buildings. And and the comparable buildings are my buildings. I bought them, put options, controlled them and fixed them, brought bigger tenants. And one deal will make a huge difference in your life. Why do I continue doing these? Because I’m there already. What do you want me to do? I mean, it’s not like you have to go make the coffee, because if you’re going to have the franchise, go make the coffee. You’re stuck, unstuck yourself, do a couple good deals. Maybe the first one, assign it. The second one, you can get the franchisee, you can get the franchise agreement. Or you can give them more Internet improvement as you make more money. You can get partner, you can create a fund so you don’t have partners. You just have people that you pay them out.

And you making the big money because you’re putting the deeds together. You’re spending time on calls on Saturdays instead of just playing. And that’s how A great deal will be done from a million 150 and 500, 600 franchise. Whatever the formula is, it multiplies on itself and you make an absolute killing. And the tax in this country works for you being an entrepreneur, to do 1031 exchange and keep growing and then pass it on to your kids or loved ones at a step up in basis. Nobody will pay taxes. Those who complain are paying taxes because they don’t know. 

They don’t want to know. Most people don’t even make the effort to know. All right, thank you. All right, very good, very good. Next questions are coming in from Micah. He is in New Jersey. First question. As commercial real estate, mainly office and apartment building loans from low interest rates are coming due on these assets. Will we get hit? Will they get hit on their pricing? How will this affect QSR valuations? Okay, so I want you to think of commercial real estate as two types of properties. Those who are called multi units, so they sell based on a per unit rental income. And those who actually are per square foot, how much you’re gonna get per square foot rental. So the multi unit, like multi family apartment buildings, office buildings, storage facilities, flex space, assisted living facilities, those are units.

The more the interest rate go up, the more they get hit. People who bought them can’t refinance because now the payments to the bank cost them more. They kick out tenants, they want to bring new tenants, but now they can’t afford the place to be vacant so they get caught with their pens down. They now discount the rent. It just becomes problematic. So the more these types of properties get hit, the more the attractive long term corporate, national tenants that qsr, strip malls, shopping malls, industrial buildings that rent per square foot become attractive with the corporate guarantees because it’s peace of mind. You work the formula. When the interest rate is high, it works out. As the interest rate decrease, the building becomes more valuable. Even though it’s the same rent, it’s just people are willing to pay more for it. So the difference is QSRs, do they get affected with interest rate going up? Yes. They were selling at 5 and 6% cap rate. Now they’re selling at 6 and 7% cap rate. But there’s still what they call an escape to safety, a run to safety.

You get a good national tenant like a McDonald’s Starbucks these big companies that keep growing and they’ve done well even during COVID There is demand for them and stability now. So how do you do the multi tenants I don’t want you to think I’m saying, oh, don’t do apartment buildings and storage facilities. They’re very good. But the idea is to buy them in the current market based on the current cap rates that are a bit higher based on that lower occupancy. So one that’s running 70% occupancy for 100 unit, multi unit hotel or whatever running at the lower occupancy, you can come in and look at the potential rehab, how you can increase really the rent realistically and how you can add value. 

So can I rehab and increase the rent? Can I improve the financing? Can I actually add services to the local tenants? Can I add what’s called ancillary income? Add services like we do dog walking, we do trash pickup, we can do certain services for you add ancillary income. Can I put antennas on the roof, can I put advertisement on the side of the building, Can I charge for parking for outside because we have extra parking needed, we can maybe lease a space for outside tenants etc. So this is how you take a building based on certain occupancy and number, you buy it so it can sustain payments to the bank and then you bring in more tenants, you bring in improvement, you build something on the back area, you separate the units, sell them as condos and keep the downstairs. And all of a sudden one deal changes your life. In residential, you’re trying to always find something below comparable sales, you’re trying to find somebody desperate, distressed situation to get a good deal.

In commercial, I can pay full market value and add value. One you find a good deal, the other you make a good deal. And I like the creativity. I like to make good deals. I don’t, I’m not looking for distressed sellers. We actually, you will see in the joint venture program, we’re talking to brokers, we’re not talking to somebody dying or whatever, we’re just talking to brokers and we bring the big tenants and that adds huge value on a multiplier like I explained earlier. So good question there maika and good luck to you with focusing on these opportunities. Perfect. His next question, since the Fed has been slowly decreasing rate rates, will cap caps drop as a flight to safety for QSR assets once Feds pause or pivot, since history shows when they do, this signals a potential recession. Yes. So QSRs represent stability. If you have the right long term tenant with a corporate guarantee. So what I mean 10 year leases, minimum, right corporate guarantee and great location. 

So one if. And when that tenant leaves, you have a great location to attract the next best tenant. What’s a great right location? You want the traffic, you know, over 25,000 cars and neighboring tenants, all the good stuff. Now stop worrying about the overall economic pictures because you have the merchant of chaos. Those people who come on the news, the world is coming to an end. This is all a conspiracy scheme. Everybody’s stealing, the government are bad. This United States is over. This is not a good country. Forget all these guys. Merchants of chaos. Use them. When you’re buying, tell the sellers, look, this is worst possible time ever. You’re going to die without selling. I’m the only buyer. Use that horrible news to your advantage when you’re buying to scare the seller. But the reality is, if you focus on your backyard, you understand the values of a specific building intrinsically, what that building will make and what it’s going to make in that market. You can make absolute killings. Because it’s all based on comparable sales, comparable cap rates, which is the income, comparable replacement cost, and most importantly, the potential.

With each of these opportunities. Can I fix it better or more creatively? Can I add a floor? Can I add space in the back? Can I split the space? How are you thinking about it? Are you looking at a problem or an opportunity? Right, so when you do this, remember an appraiser will just give you comparable sales and replacement cost and the comparable rents. But they will not tell you. But here is the opportunity. I mean, some of them do, I must admit, but they are very conservative. So you need to understand how to bring that value to these commercial buildings where the opportunities are endless. To your point, they are signaling recession. But you can make a lot of money in recessions because you can be creative with your offers and ease your way in. 

Can I have a lease with an option to buy? How about if I option it now and do this later? And then all of a sudden they’re talking back to you because there is no more multiple offers, There is no more low interest rates. The market has changed. And you drive that through with the negative news. Look, look what they said. They said, it’s coming to an end. We’re all gonna die. The whole place is burning. And then when you sell, what do you do? You get the real estate association. It’s always telling you, this is, this is wonderful news. People have died. That means new people are coming. The immigrants are great. I’m not gonna do this. This, everything is spun off positively. An 11 year old purchased his first home he’s really a whiz kid. 

And there will be more of that coming because of artificial intelligence. You present that to the buyers when you’re selling positive news, negative news. They don’t know anything. You know the numbers. You work the numbers and the opportunity. And when I sell, I sell value, I sell the potential, I sell the opportunity, I sell the stability. And whatever I have when I’m buying, I’m selling them on the negativity. There is no value. The price, the comparable sales. There is no potential. The disaster, not the opportunity and the lack of stability. And look at Biden. And we don’t know Trump.

Do you like Trump? Okay, I hate Trump. Or do you hate Biden? I love Biden. I mean, be flexible to understand. It’s a game. If you don’t understand the game, you will be played by the bank, by the insurance company who will tell you, I don’t want to give you the insurance. Then they come back, quote, you hire, they tell you things. You don’t even understand the wording, Understand the game. And if you have a problem with anything, it’s because of lack of understanding. And understanding begins by defining the nomenclatures, the words that come with what you’re doing. Insurance has its own words. I tell the guy, define what you mean. Limited liability, Define what you mean. Replacement cost versus value. 

Define what you mean. We don’t cover this and we cover that. What do you mean? A minimum of this and that, and you’re able to put these deals together. And whatever is recession is for other people, looking at the general views, but you are very specific. This is the market, this is the building. Let me see the potential, let me see the opportunity, let me see how to present it. Build rapport with people. This guy buying from me, a building right during the holidays. He said, I’d like to make you an offer, but we need to get on a call. And I said, okay, call me anytime. It’s the holidays, I’m free. He said, no, we need to get on a Zoom call or FaceTime. So I go on FaceTime. He’s dressed nice. He’s very pleasant. The way he greeted me. 

He set the tone for making me a low offer. So I mean, he’s just a great master of building relations. And I did not want to talk about the business. I started to talk about him, his background, what other things he owns and why is he in that area and how, what he does in New York, etc. Etc. Etc. We build such rapport. I sent him a couple other buildings Said, if you’re interested with your offer, you can look at these other buildings.

Whatever happened, good in that area is good for me. It’s good for you. He came back and made me a very good offer. He said, I’m very comfortable to make you a higher offer. Would you consider it? And people, you build rapport with them. You’re able to understand how to find the ways to structure a deal in a way that makes sense. 

So, yes, decreasing interest rate will help you if you can get something. Now, as the rates decrease, the value of the building will go up. The value will go up. Let me plug in the computer here. One sec. Yeah, continue, Ashley, continue. All right, his next question. My next question is kind of a follow up to all that I have been noticing as rates not been changing, the cap rates have been high for properties that are occupied or vacant, they’re not dropping their prices. And sellers and brokers are asking for high prices, not even justifying the triple net rents. How should I combat this situation and make deals in this environment? Yes, very good question. Keep making the low offers that based on our formulas for the joint venture. 

I’m not going to share it with everybody here. It’s our secret sauce for the joint venture because you assign to me, we work the deals, etc. But you just make the offers that make sense for us. And, and you tell them, we are a real estate fund. We are very interested, we’re very serious. But we have guidelines. But make it very positive. Not like argumentative or aggressive or adversarial. Be positive, be friendly, Say, we are ready, we will be ready. But please consider what we give you and call us back. But time is of the essence. Always create a sense of urgency. Time is of the essence. And I will follow up with you later if it’s okay with you, and be pleasantly persistent. Sooner or later the broker is going to say, okay, I need to sell this building. It’s going to stay stale on the market because properties that sit on the market start getting lowball offers from everybody.

And that’s how the good deal comes. Sometimes good deals come. Sometimes the deals are pursued, and the best balance is to talk to them, explain to them what we want, plant the seed, and follow up pleasantly, even if it’s a voicemail message. Hey, Suzy, I was calling you back regarding the 123Camino real property. We’re still interested. I am the one talking with the fund, and we want to move forward. Would love to know if we can talk again and see if the owners have come of some sort that makes financial sense. Sooner or later these people will come to the. 

We’ve had people that talk to us four months late, we’re in another deal totally. And then we got a call back, we’re willing to work with you. What was your offer again? Can you do it this way, that way, and then we make it happen? But yeah, some are still unrealistic. Agreed. Okay next question. Going back to my previous two questions. Is it better to invest in CDs with 5 1/2% return for 12 months and keep the money liquid to deploy once prices drop? Or invest in a high cap rate triple net QSR occupied with a corporate guarantee tenant since they will become flight to safety assets once again once recession hits or feds continue to drop their rates. And we can make equity just be the cap rates dropping just by the cap rates dropping.

Thank you. It’s not the best idea to have the money stuck in a CD at 5% or so. But if you do, if you do because I want to explain to you why liquid money as evidenced by the people, we help them set up real estate funds. We help you set up a fund, you raise capital, opportunities come up, you can literally money creates opportunities. 

You talk to the bank, I have money, I have proof of funds. They tell you the non performing assets, they tell you, let us talk to this person who is not, who’s in default. We need to get their approval. We’ll send them to you, we’ll work it out. This happened to me several times in my life. What I attracted to these, I just had money. Okay? So it’s not the best idea to not keep the money liquid. But if you want to keep the money, I’d call it stock for one year, as you said in a cd. Then when you deposit with the bank, ask the bank would you give me a loan on that CD? Now most banks will give you 100%, some banks will give you 80%. 

So if you deposit, let’s say a million dollars, they’ll give you 800,000 or the whole million available because it’s backed by the deposit and they are paying you 5, but they’re charging you 7. So they usually have spread on the money and they’re going to charge you a point or something and that’s what you would do. Remember, if you buy a CD for a year and you find a great opportunity, I speak from experience. I thought, hey, I’m building credit with the bank, I put the cd, I got a credit line. And then it was a great opportunity. I wanted all the CD money out. They charged me $23,000 penalty and there were three months left on the one year $23,000 penalty.

And at that time the CD was paying three and a half percent. I was just helping the bank build rapport with the bank because I met with the VP and he was just being so jovial. And I’ll give you credit lines and all this, but deposit a million with us. You’ll be in the client services division. You’ll have this direct. I got suckered into a BS thing that they presented to me. I’m not saying the banks are bad. They’re doing their job and I respect people doing their sales pitch. And it was a win win. I built good rapport with them and had very good loans. But to cancel the loan, to cancel the cd, I paid a penalty. So just make sure at least you have access to most of the money. And if you’re going to stick the money somewhere. I wouldn’t stick it anywhere for less than 6 to 8%. That’s just a normal formula that you need to know. So. Yes. Just make sure you can borrow against that. 

Now, buying today, because the cap rates are a bit higher. Buying Today, today at 70, at 7% cap, you can resell that same building later at 6% as soon as interest rate come down. So let’s work the numbers. Please write this down because a lot of people don’t know how to calculate it. A 7% cap means if the building makes $70,000, you’re gonna pay a million dollars for it because that’s 7% net return, capital return cap rate on the million. Now, if that’s 70,000, you bought it today and you’re making 70,000 nets, triple net building. Like you said, making 70,000. And it goes up like we do. We do escalation 3% per year. So after a year, market changes, interest rate drops, and now they pay you 3% more. So write this down. 3% more on 70,000 becomes 72,100 a year later. 

Now the 72,100, because the interest rate went down. That building, you can sell it at 6% because people now will pay more and get less. So how do you calculate 6%? Take the 72,000 100 and divide it by 0.06. For the percent, people will pay you a million, 200, 1500,000. You bought it at a million because the actual 70,000 was 6% capital rate of return. That means if I put one, if I put 70,000 divided by 0.06, you’ll pay a million. Now it went up a little bit, and now people are willing to pay more because the interest is lower. They get loans, it cost them less. So they’re willing to pay more for these buildings because they are safe and steady returns.

So they will pay you 6%. So you take the whatever net divided by 0.06, they’ll pay you 200,000 more. How would you like to buy thousand for a hunt? Something for $1 million $70,000. And then a year later, sell it at $200,000 more. Let’s say it cost you a commission of 6 per 60,000. So all the rental income you made, you just have to pay to a commission to somebody. And now you have 200,000 profit. And you can do a 10 through your own exchange and go buy another building and do it again. 

And then you can compound this at a huge, huge rate. And that’s, I’m just giving you a 1% cap rate difference so you could see you’re on the right track. If you do buy A building with an existing tenant and you make it happen. But you will be better off getting the building vacant and then putting that tenant. Because now you’re going to be making not 200,000, but most likely 800,000 to a million. And that’s how you become a millionaire with one transaction. Commercial real estate. There is nothing like it. Very good. Micah’s last question. What is the best way to implement a sublease? And what are the dangers and the benefits? Okay, so let’s work it this way. Here is the way to implement a sublease. You have a building under contract. Step one, building under contract.

 Just like the JV Partnership. Number two, you line up a national tenant. How do you do that? Get the tenant list, learn the script that we talk about. You start smiling and dialing. All you need is one tenant to call you back and then you can call me and we negotiate a lease with that national tenant. Okay? And after you negotiate the lease, I have no problem if you tell me, Cherif, that tenant is going to pay us is going to pay me, I don’t know, 6,500amonth. So write this down. The tenant will pay you 6,500 per month. The tenant coming in, please write it down. Put times 12, it will equal 78,000 a year. So the tenant is going to pay you 6,500 78,000. You say, Cherif, I don’t want to assign it to you. You call the actual seller or the broker and say, listen guys, I know I got the deal under contract. I’m supposed to buy it from you, but can I lease it for just one year and then purchase it on the 13th month? Just give me a lease with an option to buy. I’m willing to pay you 5,000amonth.

So it’s fair for you, fair for me. And let’s say they say, you know what? Okay, we’ll give you a year for 5,000 months. That 5,000 we’re keeping. So the seller says, I’m keeping an extra 60k and you buy next year from me. Say, okay, so now do 5,000 times 12. 60,000. You’re going to be paying 60,000 and you’re going to be receiving how much? 78,000. Yes, you’re going to be receiving 70,000. You’re subleasing at 6,500, by the way, in your lease. There is a paragraph standard in commercial leases. 

Say tenant lessee, which is you, has the right to sublease so long as the tenant, current tenant, stays financially obligated to the lease commitment and the landlord shall approve of the sub tenant without such approval being delayed or withheld unreasonably. So no landlord want to mess with you because there is a clause that says they’re being unreasonable. So they’re going to say, I don’t care. I’m getting my 5,000. I agree with you. You’re going to buy next year. You want to sublease, sublease. I don’t care. So now let’s say write these two numbers down. If the building is making 60,000, and I’m going to give you the simplest calculation first. If it’s you’re paying the guy $5,000, the owner of the building or the lady, 5,000amonth, that’s 60,000 a year. 

Write down 6% cap. Please write it down. That means that building, you’re going to buy it at 6, at $1 million. Let’s say that’s your deal. $1 million 78,000. they Now, you have subleased the building at That building is the same market. So the 78,000, 6% cap, that building will be worth $1.3 million. How did I come up with that, Cherif? How do you calculate that again? Because I was eating something last night and I still have not recovered. Okay, look at me. Look at me.

78,000 is what you’re collecting. You’re paying 60, but 78,000, what you collected divided by 0.06, because it said it’s 6% market, equals a million three. It’s so beautiful. Brings tears to my eyes. I get very emotional about this. You have the right to buy building at a million. And now you made it worth a million three. 300,000 for signing two pieces of paper. All right, all right. Let’s calculate something else to make sure you understand the cap rate. Go with 7% cap rate. If you are paying the landlord $60,000, what is the value of the building at 7%? 60,000. For the landlord if he goes, divided by 0.07, the building is worth. Write it down. 857, 142. If it’s calculated at 7% cap, means you’re paying less to get more. But now you’re subleasing at 78,000. And again, if that’s the 7% market, let’s calculate 78,000 divided by 0.07 for you when you go get the loan, it’s a million one, 14. So if you’re going to buy at 857 and it’s worth a million 114. 

The difference is over a quarter of a million dollars. So no matter what the cap rate is, like I said earlier, you will always, and I hate to be so absolute, make money because you’re paying them less than you’re receiving. And I even neglected to calculate something. You and me are just individuals. When I sublease, I’m subleasing to a national company with corporate guarantee. I made so much money with lease subleases, I have a building I control for 8,000amonth. I subleased it to Burberry at 20,000amonth. I was making 12,000amonth for 15 years lease. And what happened is I never ever stepped a foot in the bank. I just signed the documents. But I had Burberry lined up and the seller wanted cash flow right away. So what’s the risk? What if the tenant doesn’t sign? Oh my gosh, I’m stuck. I got payments. How do you mitigate the risk? How to reduce the risk? You say, I have six months cancellation. I’ll pay penalty of 90 days or six months, whatever.

You can cancel if it doesn’t work. But if you’re like me and you have cash flow and you have cash, you can take the little risk because you’re going to make more money. So as you build wealth and cash flow, you can take slightly more manageable risk that doesn’t wipe you out. And the formula of risk is, what’s the worst case scenario for me? Can I afford to lose that money? It’s not just risk, reward, probability, but affordability. Can I afford it or not? If you loan your friend $10,000. Well, what’s the risk? He’s a friend. What’s the reward? He’s going to pay me 12 back on the 10. What’s the probability? I don’t know. 50. 50. The guy, I don’t know, he’s got too many problems in his life. Can I afford what’s affordability? Can I afford to lose it? You know what? 10,000. 

This guy’s been a friend of mine, he helped me before. I’m okay with losing it, or my God, 10,000 will wipe me out. So people don’t even know how to calculate risk, let alone manage it. The calculation of risk is what insurance companies are good for through actuaries. Who manages risk? The best banks, they ask you for collateral. So how do you manage it, my friend? You want 10,000, I need a security of a second lien on your house. I need the pink slip of your car. So you manage by getting a collateral cross. Collateral, extra credit, insurance. I’m going to shift the risk. I’m going to have another person CO sign. I’m going to have co. You see? And that’s how you calculate risk and you manage risk. And you can sleep at night, relax, and make it happen. So how do you implement a sublease? You have a building under contract. You line up a national tenant, you decide not to assign to me. You talk to the seller and ask if they can lease to you with an option to buy and tell them I just need one year. You sign a lease with your car and your contract will have a sublease clause. Your lease payments got to be lower than your sublease. You’re making 5,000 payment. You, you’re getting let’s say 6,500.

It’s a small difference, but it makes a huge multiplier difference on the value of the building based on 6%, 7% cap rate. The danger is you get stuck with the lease without being able to get out. You have to have a cancellation clause with a small penalty to be fair. But then you actually don’t commit until you have this. The benefit is obvious. You have benefit of cash flow, you have benefit of upside. You can exercise your option or you can keep it. You can assign, you don’t even have to exercise an option. You can just assign the deal and that has a 200,000 profit and walk away with 100,000. If it has 300,000 profit, you walk away with 150,200. Make it a win. Win every time. And not only will you make money once, the same parties will like dealing with you will come back and you build long term relationships and you can actually get more allies in life. You need more people on your side and less enemies. You will have enemies no matter how good you are. People would like to fight other people. One of my students became very successful doing assignments. And some of you, even on the drone venture, saw his program. 

And just the other day he got sued. Why? He started bragging about doing this, this, this, and one of the people wanted to sue him. He’s going to handle the lawsuit. It’s a frivolous lawsuit, but you got to learn also to be quiet, not to broadcast everything. I broadcast everything because I just feel that it’s a big pie out there and I’m willing and able to deal with the negativity that comes as I share and continue to grow. Good. What else we got going on? All right the next question we have is coming from Morgan. She is in Florida. Question is, you have given a list of seller finance technique techniques in the previous calls. Can you please review your top five? Oh my God, I got so many. But I’ll give you the top Five. So the easiest one is the seller carry back. So, Mr. Buyer, Mrs. Buyer, I am selling, I’m willing to carry so much.

You give me 20% up front, 10% up front, we’re going to close and I carry the financing. So let’s say it’s million dollar deal. You’re going to give me 200,000, I’ll carry the 800,000. Now what I do in such a case is let’s say I bought it at 600, selling it at a million, I get 200 and I carry the difference. Let’s say my loan balance was 200, so I just get enough to pay off the loan. I bought it a while back, paid it down through the years, so now I’m going to sell it at the maximum value. I usually don’t even need brokers for something like this because I’m offering a great deal. They come in, they, they don’t need appraisal, they just want the building. Usually it’s residential. They fall in love with the property, they want to keep some money, they can make payments, etc. So I make the interest rate pretty nice very similar to the bank, close to the bank, slightly higher because I’m not a banker. I said, you know, the bank is offering 6.5%, 7%, I’ll offer you 8 and see what they say. Let’s say they say, okay, and then they do the calculation and say, my God, 8% on on. 8% on 800,000 is too high because I send them to calculatestuff.com. i plug with them, I do a zoom call, I plug the mortgage. If you have a mortgage up 800,000 and we amortize it for 30 years, no bank is going to give you 30. I can amortize it even for 40 years. It doesn’t matter. I’m the owner. I’m going to collect the load so I can amortize it at whatever I want. And I will amortize it at that period of time. And I’m going to tell them that the loan is due, the loan is due in X number of years. So I’m going to say I’m going to amortize it for 40 years, due in five or 40 years, due in two. So what I’m doing is having them build some momentum in making payments.

And then I say, then refinance, show the bank you’ve been paying me. Any bank will give you the loan. Like I’ve done it with people that had bad credit and Two years later, I showed the payments they made help them get their credit improved. They got a loan, and there was a balance. I then carried the balance, but I cashed out the most. So seller carryback is very good, and it also is very good for tax reasons, because if my profits are 400,000 or 500,000 and I carry the financing, IRS says, oh, this is unrealized gains. Unrealized gains mean you haven’t cashed out that profit. It goes under what’s called installment sale. So the title company and escrow will give you a form that says it’s installment sale. The note is such and such, and they submit it to the irs. And the IRS says, okay, if you have interest payments, you’re going to pay us taxes on the interest payments. You’ll pay the taxes once you get paid off later. So seller carry back is one of the simplest and easiest and cleanest. What can go wrong with it? Because there’s always the good, and the bad is they default. And now I have to hire an attorney to start the foreclosure procedures. I usually don’t want to hire an attorney right away. So I call the people who default and I say, listen, can we modify your loan a little bit? Can we work it out? What if you just let me sell the properties and I don’t foreclose on you ruin your credit. And usually we come to an amicable agreement. Even if they cuss me out. I’ve had people cuss me out. I remember he was doing a program. We sell, buy these properties dilapidated, from the bank in 2009, 2008, 2009, and we sell them and carry financing.

And every now and then I’d have a crazy person say, I’m not paying you. And, you know, my wife left me, and, you know, you’re the reason for this. This would never happen if I didn’t buy this house. And, like, they go crazy, okay? And people, you know, have glitches in their heads, and you just have to deal with this. You become a psychologist, a psychiatric. You become a police officer. You become so many things on your way to your financial freedom. So I remember telling this guy, listen, relax, just. I’m trying to call to see what we can work out. I don’t want to upset you. I don’t want to ruin your life. Just how much to leave? How much to leave? How much? I kept repeating, until he finally listened. How much? What do you mean? Would you consider that I give you back so much money and you just leave this Coming end of month, you know, we have two weeks to the end of the month. He said, if you pay me that a little bit more, I’m going to leave this weekend, but I don’t want to clean anything. So you come to an agreement and then you do the paperwork so you can get the property back. You have the law on your side when you do a seller carry back because you’re a creditor. And the law of the land of the United States of America is to benefit banks because the United States prints money distributed through the banking system with the Federal Reserve. And that’s why the banks can borrow from the banks at 1 2%.

At at few years ago they were borrowing at zero and loaning us at 3%, 2%, 2 and a half. So they always want that spread. And the power is for the banks to foreclose. If the banks lose the power to foreclose, the country will collapse, guaranteed. It will become an impossible way to become wealthy. Might as well just move to a cheaper location because then it will be hard. All right, so seller carryback number two. One of the best way to acquire property is sometimes I tell a person, instead of you giving me the 200,000 or 100,000, whatever amount, to have to buy the property, I have a loan on the property. I have a loan for 500,000. You don’t have 500. I know you’re buying it at a million, But I need 500 to pay off the loan to carry the financing. So I’m going to give you something better. Just give me the hundred thousand you have and that will become an option to buy my building. And you can go in and live in it, or you can go in and operate it. And that will be a lease with an option to buy. So the option will be the 100,000 and you’re going to lease it for an extra 5,000amonth. And the 5,000 is your lease payments. You default on your lease payments, you lose your option to purchase the option consideration. 100,000 is non refundable.

The lease payments are lease payments. I can even make the payments, let’s say 8,000 and I say 3,000 of it will go toward the purchase price. You see my point? So at least with an option to buy is better for me because tax wise, when I get the option, money is not taxable. Let’s say the option is for three years. It’s not taxable. Option money is not taxable until the option either gets exercised or three years later they say, you know, What? I don’t want to buy it. I’m walking away. They lost the option money. You pay tax on it as income. So either way, the option money goes toward the purchase price. The lease payments are lease payments. And they come in, they take care of the building, they organize their affairs, they increase the value of the building, etc. And then they can do it. And the third way is I can give them creatively a lease to lease the building with the first right of refusal. So let’s say I take it the other way around. You want to buy from somebody, but you don’t have all the money. So you say, I’m going to give you a lease payment, but I want the first right of refusal. And when you do, you come in, you’re going to lease anyway.

You have an office. Like one of my students had an office in Seattle, Washington. He said, look, look what a great deal we made on the office space. This guy was desperate to lease it. And we have the whole floor in this great place, downtown Seattle. And I said, you know what, you need to go back and get an option to buy because you’re leasing. He said, they don’t want to give me the option to buy. I saw your videos, I saw your trainings. They didn’t. I said, then go back and tell him first right of refusal. So he’s leasing. Anyway, he improved the office space, got a first right of refusal. Three years later, what happens? Life changes. The guy got sick. The guy wants to sell, liquidate his money, cash out. And what happened is he came back, said, okay, you have the first right of refusal. I want to sell it. He made him an offer. The guy took it. The guy didn’t even understand what the first right of refusal is. The seller should be getting an offer and go to. To the existing tenant and say, I have an offer.

But you have the first right of refusal. You want to match it, or you want to go higher, or what do you want to do? So first right of refusal gives you the opportunity to also buy creatively and ease your way in. I’ll give you another one. I did this one called the wraparound mortgage. Wraparound is I had this guy, he had a first lien to the bank. First mortgage, it’s an apartment building, first mortgage to the bank. And I told him, I don’t want to give you the down payment. I’m just gonna give you so little money, but I will owe you the rest. So you have a first mortgage to chase back to. It was I forgot the name of the bank. But anyway, to bank. I can’t remember the name of the bank. But anyway, this is quite a few years ago. I’ll give you. I will make the payments to the bank, to the first lien, the first mortgage to the bank. And what I owe you with the little down payment I’m giving you here, that’s going to be a payment for the wraparound mortgage. So it’s a payment toward the purchase price. But I’m going to make you a payment here for the seller. Carry back on that difference. So it’s a wraparound mortgage. Because it is a first mortgage and a second mortgage. There were trustees. This was in California. So the beauty is I was making the whole payment, and he said to me, how will I know that you’re making the payment to the bank? And I said, no, I’m going to make the payment to an escrow account. So I make sure that you make the payment to the bank. Because what if I send you the payment and you don’t make it to the bank? So we set up an escrow, and I make the two payments, plus tax and insurance. I’m making the payment to escrow.

And escrow was paying his bank. They were paying him for the second lien. That’s called the wraparound mortgage. And they were Paying the property taxes and property insurance or accruing the property taxes by paying the property insurance monthly. So I had the wraparound mortgage, got into the property, improved it a little, got it rented for more and then sold it. So I didn’t even have to come up except with very little money and control the whole deal and made it happen. And he was so happy, walked away, had a lien and anytime I missed a payment, he was going to keep the original money I gave him plus whatever payments I’ve made. So he would have come out ahead anyway. This is how you structure a deal where it’s a win win. You want them to talk to the voice inside their head and say, this person is crazy. If they default, I’m going to keep everything. I’ll give you one last one. You can even do one where you say, I’ll give you just an option, just an option. I’m not going to give you a lease with an option. I’m going to give you this like 100,000. I went to these sellers and I said, I’ll just give you this payment.

This is 150,000 option to buy the building. And I know you rented the downstairs, keep the rental income from downstairs, upstairs. I want to go in and make changes. And there were two partners. And the guy said to me, what and when are you going to exercise that option money that you’re going to give us? 150,000. I said first of all, it’s non refundable and whatever money I spend on the second and third floor to make improvements is going to be at my cost and my liability. We’re going to add my name to the insurance that you have. So I will pay for that extra liability cost for the construction. And if I don’t exercise the option within 18 months, you get to keep all the improvement I made plus the one hundred fifty thousand. One of the two guys sitting looked at the other guy said, this is great. I hope you don’t exercise the option and you run out of time. Can you imagine? He spoke what he thought, there is nothing like truth. So I told him, great. So I just paid option money. 150 and I did not have to make payments. All I did is took the money and rehabbed the second and third floor which increased the value of the building. I went to the bank, I said, I have an option to buy. I’m not making payments, but I invested in the building. Here are all the receipts. They said, show this to the appraiser.

Appraiser came, wow, you have the building under contract for 2 million 80. You’ve done investments for over 500,000. This makes the property now worth 800,000 more. Went to the bank. 2 million 8. I got the 100% loan with some of my investment money I put in as actually cash out money. So my investment was less than 10%. You could never buy a commercial building 10%. I bought it, was ready for turnkey business. Made more money than them. And what was in it for them? I’ll tell you how I sold them on it. I told them you just closed on the building because you bought it from this guy who had a court order to liquidate assets because he and his wife were fighting. And the court came, the judge said, you have 45 days to liquidate the assets. I’m sick of both of you. That asset got to be sold or we’re going to sell it in an auction. And guess what? They sold it to these two guys who bought it for a song and came to me and said, no, we want a lot of money. I said, no, no, you’re going to pay a lot of taxes. Let me ease your way in. You get option money and let me go in and fix it. Then I’ll pay you more later. It will be a year that you held it. And when you hold it for a whole year, you pay lower capital gain. Instead of paying 35% ordinary gain, you’d pay 15. And guess what? There were hugs and kisses. This guy had a farmland. He came in with mangoes the second meeting, delicious mangoes. And he said to me, this is just for you because you’re a good man. And I said, thank you. Anyway, now I feel like eating some mangoes. I can give you more.

Like you can put it, you can do a subject to. I’m not crazy about subject to existing financing because when you do subject to. There are many things you got to pay attention to, such as you gotta run title. You gotta make sure that when you make the payments, you make them directly to the bank. The bank can always call the loan due in full because that’s an actual transfer. Because they add your name on the deed. There’s a lot of complications with that. But I know there are some people successful with it. So you gotta look into the nuances of it. I forgot the name of the guy I met in Pace something. That guy is very good at it. He actually finally did a video, I saw it that said, okay, what can go wrong? And he just said a lot of things that can go wrong. It’s pretty interesting. I think he wants people to sell him these deals. But subject two is pretty good. Ive seen. I have done a deal where I had them add me to the deed. Lets say, let’s say I’ll give you an example. I’m giving you extra bonus creative financing. I have 50 creative financing. I mean, I don’t run out of the opportunities in this. Let’s say you have a building, standalone building, and you’re calling the tenants and the tenant is lined up to come in. You can go to the seller and tell the seller, listen, I have the deal under contract with you to buy that says yes. You’re supposed to put more money in the. In earnest money and close within 30 days. You can say something like, what if I give you an extra hundred thousand? What if I give you 850,000? The seller is like, wait a minute. You have the right to buy from me through a contract at 750. You want to give me 100,000 more? What’s the catch, sir, ma’am, I’ll give you 850 if you put me on the deed with a condition that I will add value to the building and refinance and cash you out within six months. So you literally, you can go downtown.

Like, even if there is a loan on the property, you can go downtown to the registry office and you add your name on the deed with a condition that says your name is added to the deed because you were going to bring this national tenant, increase the value of the building and then refinance and cash them out. Because your name is on the deed, you can get the refinancing. So when you bring the national tenant, the property that’s worth 700,000 becomes worth a million two to a million three. And that’s when you actually pay them the extra hundred. So it’s a creative way to finance the deal through the existing seller, just like you can do. I mean, I just. You can have them. I sold the deal one time and I transferred the ownership of my property to an LLC. It was 250 tanka. I created 250 tanka LLC and I had the shares of the LLC. I said, I am the managing member. This person, Scott Goodman, is gonna buy it after he makes the payments of so much for five years and improve the property and maintain this and that. It will immediately. All the shares of the LLC will transfer to him and I’ll no longer be the managing member. He shall have all the rights to the LLC and become the managing member. Such a beautiful deal. That wasn’t even a closing cost. It was just a transfer of ownership for the llc. There are so many more, but anyway, you can bring payments up to date for somebody who’s in foreclosure and then spend the money fixing up the property and then having exercise the right to purchase by assigning it.

I can go on and on, but I gave you more than five. Hopefully that will be sufficient. All right. And you can play that back. That’s why we take these calls. And with a pen and a paper, you’re going to see the nuances of what I tell you. Just in case you mentally checked out because you haven’t had breakfast or lunch. Thank you. Cherif. Yes. Like to add one little thing? Yes, yes, please. One of the Cherif is talking about refinancing. Getting your name added to the deed. Because refinancing is a million times easier than purchase money. Just in case you’re not aware of that or you were wondering the difference of it anytime any hands down, refinancing is way easier to walk into than purchase money. Way less questions, it happens much faster, et cetera, et cetera. Just wanted to add that. Thank you. And Todd, while you’re on your. Everybody. Todd while you’re on there. Did you. I know you had a follow up question in the chat about the build to suits in the $5,000 per month. Oh yeah, yeah. Let’s wait for him to come back from. Getting his juice. It’s maybe it’s mango time. It’s mango time. It’s mango time. Oh, he’s getting water. Go ahead. Go ahead. Todd, did you have. Okay, Cherif, So when you were talking about, you know, you get, you get, you get the earnest money or you don’t get to put the earnest money down, you get the 45 days to do your due diligence. You get a tenant under contract, you are now going to buy the place. So now you’re. Or lease the place, either sublease or buy it. You have while they’re in the tenant improvement phase, the new tenant, you still have to make those lease payments to the sub tenant or you are the subtenant to the master tenant or the owner. I was going to ask you to elaborate on that. Okay, so that is, that is downtime money out of your pocket. No. Okay, so what’s happening is I work the time frame between me as the tenant and the landlord. Landlord, the owner of the property.

So let’s say in my numbers were 5,000amonth payment. But when the national tenant is going to come in is going to pay 6,500. So if the national tenant says we’re going to start the rent in 90. Days, if you’re lucky. Yeah, let’s say that’s what it is. I’m going to tell the owner, okay, I’m going to start the rent in 90 days. When they give me the deposit, I’m giving them the deposit. When they actually ask for tenant improvement, I ask for tenant improvement. You mean when the national tenant gives you the deposit? Yeah, when the national tenant gives you the deposit. Because usually you’re talking about the security deposit. I do. What? You’re talking about the national tenant giving you a security deposit. Yeah, they usually, usually they don’t want to. Don’t you, you, you get a security deposit. I always get security deposit and first month rent. Upon signing. Upon signing. But commencement. So it’s called. Okay, so we have two things in the contract. Rent commencement date, which is when they start operating, but actually which is accessibility. Accessing the building date. So to access the building, we need the deposit. First month rent. The rent commencement date will be the first day of operation or the days. 120 days exactly. And then at that time it starts with the tenant. So you’re pre loading it to the owner. Yes. The sublease is a whole sublease situation. Yes exactly. For example, I have a building.

But if you own the building, there’s not a Chance that you’re going to get the bank to wait for the mortgage, you’re going to have to pay that mortgage on that single tenant building until they start paying rent. Yes, exactly. I’m going to show you a building that I have leased and subleased, for example, here on my website, creepr.com, just to give you an example of what I’m talking about. So. So this building, if you go to crepr.com, you see the building, okay, so here is the building, for example. So this building, this building, you see it here? This used to be Foot Locker or something that was going out of business. I can’t even remember. And I tell the sign, going out of business. I reached the owner. How do you get the name of the owner? You know, you actually you go in, you can ask the staff, you can go into the registry, you can call attorneys, it all depends. And you can go to a title company and get it. So I got the owner and it was one big space. It was about 4,000 square feet, slightly more. There is an upstairs, but these are condos, so there is a tenant here, residential tenant here, residential, commercial, is owned by somebody else. So when I called the owner and I told him I’m interested in leasing the space, he said, look, this is It was Payless Shoes. I just looked at the note. The owner said, look, I’m an architect. This is owned by my mom. I don’t have time. You know, look, I already talked to somebody. We’re committing to another lease. I said, look, look, I just want to talk to you because I’m very interested in leasing the space. And he said, look, sir, I’m not going to go back in my word with this person.

We have integrity, we have honesty, we have ethics. I said, well, may I ask you how much you’re getting? He said, well, you tell me how much you want to pay. I said, whatever they’re paying you, I’ll pay a thousand more per month and I’ll commit to a longer period. He said, in that case, let’s talk bingo. Integrity out the window. That’s all out there. I mean, let’s talk money. All right, so he’s not gonna fall in love with me. He wants money for his mom. So what happened? We signed. Yeah, sure. We signed to get the lease for the space immediately. I lined up when we’re actually talking about the lease, as I had access to the space because he’s an architect and he’s busy, doesn’t want to deal with it. It’s for my mom, whatever. I said, can I have a lease with an option to buy? He said, I’ll give you the first right of refusal. Because we were talking about it. He said, because we can sell until my mom decides because she bought it when she married my dad. My dad just passed away and that now the tenants going out of business, we have problems. So we put it under contract. I showed it to jeweler, a jeweler said, I just need half the space and all I can pay is 7,000amonth. So half the space was rented for 7,000amonth. So I told him, if you want just half the space, which is what I had in mind anyway, you need to build the wall divider. So he built the wall divider for it, number one. Number two, he said to me, is it okay if I call a friend of mine to be the jeweler next door? Because we’re going to share one electric meter and I don’t want problems with others. I told him, I’m surprised, isn’t it that to have another jeweler next to you is going to be a competition for you? He said, no, we feed off each other. I focus on these type of gems, he focuses on these type of bracelets and whatever, we’re going to do well together. So he brought me another tenant and he made sure to tell the tenant, hey, I’m paying 7,000. If he charges you less, let me know. I’ll renegotiate with Cherif. Of course. I know what’s being said behind my back.

It’s pretty hard. I remember the story. I remember it. Yeah. 7,000 next door, so 14,000amonth. But I’m paying this owner, I’m paying the owner 7. Now, my increases in rent every five years, it increases once. And I got 15 year lease with a potential subject. I called him, I said, I know you got the 10 year lease, but I see that you’re busy, you’re unoccupied and you’re busy with your architecture thing. Let’s have a 15 year lease. I’ll make your life easy. He said, great, Sign right away. Win, win. So now we’re in year eight or years. Whatd you get the jewelers in at what term release? Two jewels. What term release? I’m sorry, you get them at 15? No, five plus five plus five. Why? Because they’re in control. But they’re not moving if they’re making money, they’re not, they’re not moving. They’re not going anywhere. So, and this is right next to where the cruise ships arrive. So you got 15 years, you just got them in five year increments. Exactly. So to the question, is it important for me they have a yearly increase, but I have a five years increase. So. So I’m making like close to 100,000 net a year from this deal. And I never had to see a bank. And whether I buy it or not, 100,000 is pretty nice. Some people can live off 100,000 a year. College right now is 100,000, if you send the kids to a private school, etc. So that’s a deal that speaks for itself. Okay, so let’s talk to next question. Let’s continue, please. Okay the next set of questions are coming from Clint in California. He said, how will the Department of Government Efficiency, known as doge, affect leases with government and federal real estate opportunities? How will triple net and be impacted in these lease opportunities? As a JV partner with you or. Not, Dodge Dodge are great cars and great trucks. No, I’m just kidding. So the Department of Government Efficiency, they are actually just so you understand what they’re doing, so they’re going to focus on cost reduction and efficiencies. So I was just looking at a statistic online the other day and it said that currently the federal government leases approximately 149 million square feet at an annual cost of $5.23 billion. Now this program is supposed to actually have a lot of disposition of what’s called underutilized properties. They are going to actually look at what areas they want to stay in.

It’s going to affect office spaces in Washington D.C. big time. A lot of challenges for older commercial buildings that have been released to government programs that don’t maintain the buildings that long. They actually do a lot of money, spend a lot of money when they take a building. Cousin of mine has a building like this in New Jersey. It’s rehabilitation center, some jail or something like this. So the government had built the jail and the buzzing doors and all this. And he said to me before buying it, he said, what do you think? Should I buy it? I said, I never buy buildings that have government leases. And he said, why? It’s the government. They print money. You always say they print money. I said, yeah, the problem is that leases, they sign, let’s say a 20 year lease, but they have the right to cancel with X number of months notice. It’s the federal government of the United States of America. So they say, this is what we want and if we don’t want it. Good luck. We’re out. So I don’t like it because it’s sometimes hard to get loans on these. So sure enough, he said to me, who is crazy enough to cancel a lease on a building like this, that they built all these gates for jail because they put people in jail until they see the judge and they got to go to this floor to see the judge, and it’s set up for a courtroom and all this. He’s going to. Cost them a lot of money. Who’s crazy enough to do that? Anybody want to guess who’s crazy enough to do that? A federal contract with federal government that prints money. And they say, you know what, we don’t like this building anymore. We need one closer to Joanne Johnson, who is the new elected whatever official for this and that. Well, this is what happens. It happens in many governments. So he lost the lease, and now he has to retrofit the whole building to make it reasonable. So he said, screw it. He sold it for pennies on the dollar, moves on with life. He has a lot of money.

He used to work for Boeing, making millions. So the thing is, there will be underutilized properties by the government that are going to be dumped. We’re talking about a few billions of dollars going to be dumped on these buildings. Now, you can look at this as a problem, potential challenges in commercial real estate and all the drama that will come up with all that. Print these or save them. So when you go buy a building, you use this to your advantage. Find out where they canceled and see what can be done to the building. For instance, you take an old office building by the government in an area that needs medical buildings, and you see how much it’s going to cost to convert it to a medical building. You set up a real estate fund, you convert it, you can make more money than you have ever dreamed. By the way, do I have a good Internet connection? You can hear me? Okay, everybody, it was a little rocky there for a second. Okay? So, yes, this is going to come up in the market. And you just adjust to it. I don’t deal with a lot of office spaces right now. We did a lot of retail and if you get an industrial building that was leased by the government, these could be taken. And then you split the spaces. You do the mixed use. You can do the flex space. 

Flex space is like these spaces. Like you can take a space rented to boat company, you can take a space rented to a tire company, you can take a space to a mechanic shop. So just flex space. And they can bring a lot of money. So it’s an opportunity. And triple net, how will it be impacted? You know, triple net is a whole world by itself for the shopping malls, strip malls, single tenants, because they have stability, get the right tenant that keep growing like usrs, you have a better chance to make it. These type of buildings are not competing with triple net. They’re actually making triple net even more attractive. Very good. And Cherif, I had talked with Clint Last week. And the follow up to question number one, because I see he jumped off, is that he was asking if these opportunities with the Doge Group would impact jv, because he was thinking about joining jv because he also heard that with Doge, they’re also sending government employees back to, to the office who have been working virtually since COVID So he was thinking, oh, there’s going to be all this great opportunity.

But do you want to talk through real quick on why working with government and federal doesn’t really work for your strategy? Because of the length of time? Yes, because the strategy we use for joint venture is with corporate guarantees which commit the tenant to a longer term lease. And usually these are publicly traded companies, so, so literally they print money. They print shares. They actually buy each other’s company by printing shares better than printing money. Because shares come with a value that changes over time based on whatever valuations based on revenue, et cetera. The government, when they leases, they have a lot of exits and ways that are what’s called out clauses. So it’s not what we do. It’s gonna keep our strategy intact. It’s an evergreen strategy. It’s a strategy that changed my life and I share it with you. Combine that with, when you’re up and running, with setting up a real estate fund, and you can see how you can escalate the game to another level completely in a safe, methodical way. Taking properties like this that our government released, and we don’t know how many they’re going to release in what areas is very risky. Unless you have a great building that’s very unique for some sort, and you’re going to do something very special with it and you got some money to actually ride the time with it, because you’re not going to tell the bank. The neither. Neither a bank nor the government will want to work creative financing like somebody going to an auction. It’s a cash deal. Somebody buying from the government. It’s a cash. You may get a good deal, but you have to have cash. That’s why if you have a real estate fund, you can do cash deals. But if you don’t start with the jv, where you use my money, my contacts, my lists, my ability to negotiate for you. Very good. Thank you, Clint. Second question out of three. What are your thoughts about the Los Angeles real estate market following these wild fires? Will there be opportunity that I should be reacting to in the next 30 days? What type of money should I have available? Well, first of all, I’d like to tell you that I have a home in Los Angeles. And it’s. It’s devastating. You know, my kids evacuated yesterday. Last night my sister who is four doors down with my ill mother, who is in bed with her husband.

Their doctors, they have practices, they had to relocate last night. It was just terrible night. I mean, the police was trying to chase arsonists in the area because expensive homes there, people trying to put fires to create fires in the area. I mean, what’s happening with these people, it’s crazy, it’s bad. So let’s talk about what can come out of this. What can come out of it is as less inventory happens, what we have today, opportunities, it’s going to come up. Opportunities to buy these homes in good locations and rebuild. The United States in general is a very resilient country. And markets like Los Angeles are going to come back very quickly. It’s just phenomenal what can happen in markets like la. But it’s so sad for anybody that had souvenirs in this area, places they used to go to and all this. They see rubbles, they see nothing but like war zone. It’s really sad. It started Tuesday, guys. Tuesday morning in Pacific Palisades. By Friday it was a com. I mean the area. We live in a gated community. At one point my son called me and he said that there is nobody here in the whole area. Everybody left. It’s just security guards running around with, you know, trying to make sure nobody comes in. The arsonist, the police department right there. It’s just, just, just crazy. Wait a second. Cherif, I know you’re in tz. TC was evacuated. Palos Verdes. No, Palos Verdes is fine. I am in Los Angeles. The Valley area next to Encino. Yeah, right, I know that. That’s, that’s been evacuated or your family is over there. Palace. No, no, they have been evacuated. They went to Palos Verdes, which is where my brother is. He has a big home. No way. I’m trying. Encino, Next to Encino. Got. Yes, evacuated. Yes, yes. The Valley, the southern part of Valley, near Ventura Boulevard is getting evacuated. Yeah. Where we are? Yes. I don’t want to give you the address, but. Yes. No, no, I’m not asking the address. Sherman Oaks too? Sherman Oaks? No, as far as I know, no. But there are some issues with Sherman Oaks. They caught a couple arsonists. I mean, you could see the news. With these people on it. What do you mean arsonists? Yes, I know, it’s all awesome. I Mean, you know, what a coincidence happens during the, you know, the Santa Ana wind seasonals, and they’re all, they start all at the same time, but yes. Oh, this guy knew some. Thank you. It’s upsetting. Sorry. Opportunities are going to be no problem. There will be opportunities with real estate to rebuild a lot of residential, a lot of retail. All this is gone. But also what’s going to happen immediately is the scarcity of supplies.

I just saw hotels. I mean, you can Google this and see hotels leasing, I mean renting rooms at $1500 a night, $1200 a night. I don’t know how this is they’re getting away with it, but anyway, there are some people taking advantage of it, but Airbnb company offered one week free in the Los Angeles area where there are spaces available for people that are being relocated. So there are opportunities always when there is a disaster. So try to understand first what’s happening, what you can do about it to bring value. And when you think of a win win for the greater good, you’ll always come out well. You will always come out well. As a matter of fact, the reason so many people succeeded in the billions is they had the greater good on a greater scale. 

So look at these opportunities in terms of scarcity of supplies. If you have rental, the rental prices are going to go up like crazy. If you have homes close by, the prices are going to go through the roof because there’s no place to go. And the challenges now are going to be what the insurance companies are going to do. We’re talking $50 billion in losses. Pretty sad, but we’re going to overcome this. And I’m very positive. Thank you, Cherif, for sharing all that. Clints last question is, is flex space still an asset class that is trending? Do we need to line up national tenants or are local personal backed leases safe? What’s the criter factors? Should I confirm with the tenant to decrease my risk? Okay. Flex space, as I mentioned before, is these spaces like an industrial building and then you get it into separate units where it trans per square foot. Very successful concept. A couple years ago it was great to get a land and build them because the cost of construction was really good. Right now. Cost of construction too high. There is a guy that I used to see on social media, Hamza something or another.

I forgot his name, but he even said now construction cost is too high. So it’s better to take some buildings that are not being used properly and convert them to flex space. Flex space is good, a lot of work. I much prefer to do the national tenant strategies because it’s put it under contract. I don’t do the due diligence. We call the national tenants. They come in and tell us, we want this, we want that. They do the due diligence. And these leases are backed by corporate guarantees. So it’s a lot better to focus on these right now. And as you make more money, you can venture into other things that need work and management and separation, et cetera, to make more money, so. So the criteria continue to be the criteria of the JV program. Single tenant, busy traffic, neighboring tenants, which all I go through with the training. 

And definitely the single tenant with national contracts with the corporate guarantees is the lowest risk you can do. Because even if you put the building under contract and you can get the national tenant lined up, you can walk away with no risk. You get your deposit, earnest money, deposit back. Nothing better than that. Huge upside, no downside. Very good, Cherif. Okay, let’s see. The next question is coming in from Fred. He is in Chicago. He said, how do we work it out if I have a property under contract with another broker, but keep getting calls from other listing brokers? My property has been under contract for five months with no offers. Can I pull it from the current broker? The property is in California. You know, I I. Well, if you had it for five months, I suspect your contract is for six months. So what you do is you just wait 30 more days. And let me tell you what a clever broker does. A clever broker, right before the lease, the listing expires. Clever broker will say something. Let me go ahead and send you just a change of price. We’re going to drop it.

Just 25,000, not a big deal. When they send you the docusign, there’ll be a change on the date that they extend the listing. This happened to somebody we know. And it was in California. You’re in Illinois. But what happened is there is a law in California. I don’t know if it’s nationwide. You can look into it where if there is what’s called material change in a listing or in any contract, it has to be highlighted between the parties, especially the one that initiated the actual contract and sent it. So they omitted to do that after he contacted our office. I do these conference calls. I do like calls for a fee for like half an hour, whatever. And he said, Cherif, I don’t know what to do. The broker said, well, I sent it to you. It was there. It was very clear. No, he did not. His email did not spell it out. And what can be done is you literally complain formally. Tell him, I’m going to complain. I’m going to complain to real estate association. I’m going to come after you. Or you adjust it. And you still have one more month. In your case, you have probably one month left. Be careful. So they don’t send you a docusign with extended term. Were going to change price, whatever.

When it expires, you tell them, I want to Renew with you. Good luck. And if you wait a little bit, an expired listing gets a lot of interested aggressive brokers that will call you. You, you can see who is the most enthusiastic, who’s got the most market market presence, who’s got the most information that can share with you and then list with that next party. And good luck to you in selling it. And maybe you want to change the price or the terms and to help them sell it. Actually the properties in California. Sorry, I did not notice. I just noticed that. Yep. So yeah, you need to, to wait till it expires listings. If the listing is for a whole year, you need to talk to the broker and say what can need some help. Maybe they tell you I need to change this or that. Okay. Remember that the market has been dormant for the last two months. So. So maybe time to talk to the broker and see what you can do. Thank you. He is then asking, do you recommend me doing a FSB for sale by owner? For sale by owner is good if there aren’t too many things to explain about the property. Let’s say you’re the property needs rehab. There are things to disclose about some liabilities and all this. It’s good to have a broker because they protect you through the disclosures. I like for sale by owner because it attracts brokers. And I tell them I’ll give you a higher commission than if you list it. But bring me a buyer and then I can work directly with buyers to do creative financing so I can get out. Remember, you can always sell the property, carry the financing. I gave you a bunch of creative financing strategies and if you want cash, you can discount that note and sell it in the open market. So for sale by owners.

Always a great strategy if you’re willing to take the calls and talk to people and converse with them to make it happen. So I like for sale by owners for sure. And then his follow up to that is Cherif. What incentives do I have to give buyers? So if this property is a commercial property, it’s all residential. You can do the creative financing in reverse. You offer seller carry back. You offer lease for an option to buy. You offer easy terms for them to come in. You offer them an option to control the property until they line up financing, they can come in and rehab the property, etc. So offer the creative stuff in reverse and see who is going to come in. You can advertise motivated seller must sell very soon for personal reasons. But you know what your parameters are. I mean you can say I’m desperate. But you don’t have to lower the price completely. 

So give them incentives through creative financing. The deal has to make sense for the buyers. So the best buyer is usually what I call owner, user. Somebody’s going to take the space and live in it, rent it, conduct business in IT, etc. Thank you. The next questions are coming from Brian in Colorado. He has four questions. First one, I am on a list somewhere for owning commercial. I have been getting calls from wholesalers with hotel deals. What are the key factors I need to consider when analyzing these deals for hotel deals? I love hotel deals because you’re going to buy the property with an existing marketing, existing numbers, existing management team. So what you need to get is understand what financing you can get so the numbers work themselves out. So if the banks, I usually ask the owner, the seller, who are you dealing with? Then I go deal with that bank. I said, can we go meet with that bank or can we do a conference call? You’ll be amazed how the banker will be so open. The banker will say something like, this property we can finance more than 60% because they’ve not been performing so well. Or wait a minute, they were telling you on the phone and say cash cow.

But the banker is saying has not been performing so well. They get the deposits, they have the financing. Or sometimes they would say, this property, we’re going to give you 70%. We’re very comfortable with the numbers. We’ve been financing it for the last seven years for this owner and would love to just do this. You pay an extra point to carry over this refinance that. So I like to understand first the financing. Now the beauty about hotels and motels is usually they do creative financing. The sellers, the owners are sophisticated type of owners that can do wraparound mortgage lease with option to buy for the hotel seller, carry back, et cetera. And they present to you, here’s the insurance company that we only pay so much, here is the bank, let’s go and meet them, et cetera, so they can get out. And I think it’s worth looking into it. And if there is a management company, they’re usually professional management companies for hospitalities and they will provide you the numbers and they will have an incentive to keep running the property. So you can do it semi, passively or totally passively.

I really, really like hospitality properties, especially if it’s well located next to a hospital, next to the airport, destination location and understand the market mix. And you can always get Purchase something called the Star. Its the Smith Travel Research report where you buy for that region and it tells you this hotel is doing so well in this market or so badly in this. You’ll understand from that report the potential and you can meet with the staff and discuss it. It’s not so difficult. I’m an expert in hotels. But that’s, but it’s not so difficult because you’re not going to run the day to day, you’re going to run the asset. And remember you’re now buying a real estate and a business, but the business run with a team already. So it’s not so difficult. And good luck. And you remember you also have more distribution channels than we’ve ever had. Well, booking.com, hotels.com expedia.com you can create your own website, you can do videos. There is so much to promote and create more distribution channels to make it, to make an absolute killing in a hotel. Very good. You kind of touched on his second question. He had said, can I do creative financing with these hotel deals coming through wholesale? Second question is can I do creative financing with these hotel deals coming through wholesalers? What type of creative financing should I consider? Always ask the seller if you can carry the, if they can carry the finance.

Always, always a good idea. If they carry the finance. What is the smallest can everybody hear me okay? Yeah. Can you hear me? You stopped but I continued the question. No worries. What is the smallest company revenue wise, that can sign a corporate guarantee. We need a company with at least valuation on the balance sheet of $100 million. Most of the companies we deal with are publicly traded company but at 100 million is pretty good. Have I done smaller? I’ve done a 50 million dollar, but they were on such a high growth. They already had so many deals under contract. We knew they’re going to get to the 100m million. What is a reverse 1031 and how does that work? Reverse 1031 exchange is when you, before you sell your property and get the money into the accommodator, the one in the middle that holds the money until you identify the properties to roll the money forward, you identify a property, you buy it and then you do the tentryone exchange. The best way to get the answer for this is you talk to a title company and ask them for who is that? If they can give you two or three numbers of accommodators for 1031 exchange and then you interview them based on what you want to do, and they will tell you title companies have the connections and escrow companies have the connections, and that’s how you can do the reverse. You acquire another property, then relinquish the ones you have and do it legally for the IRS to defer the gain and roll it forward and. All right, perfect. Can you hear me? Just before I start reading the next question. Okay, perfect. Peter in Washington State has one question. He said, how do you handle an employee who is depressed and having a real negative effect on our other staff? Well, if, if he’s, or if he’s depressed because he has some chemical imbalance or he needs to take some medicine, that’s one thing that you need to do what is by law required as reasonable accommodations.

It’s a medical case, so you need to have them to ask them. You need to sit down with them and ask them what’s going on. If what’s happening is a temporary situation, they got a divorce, they got separated, they lost their house. Something dramatic. You can see how you can help them and accommodate them. This goes a long way in terms of loyalty and connection with somebody. But if they are depressed because they don’t like where they are in life, they don’t like the way they’re being treated, they’re creating problems with the group, you identify the person right away who is suppressive, who is low on the tone, scale of emotions, and you get that person out of your life. Remember, if somebody’s not performing the way you want, there are only four reasons you can write them down. It’s going to help you in your relations with others. And if you manage people, only four reasons. I dare you to find a fifth. Number one, they’re unaware of your expected performance. They’re unaware. So your job as the owner or the manager is to make them aware. Do you realize I need you to come here on time? I need you to do this, I need you to do that. You say it in a friendly, open, respectful way. You put it in writing first. They’re unaware. Number two, they are unable.

They don’t have the tools, they don’t have the team, they don’t have the training, they don’t have the technique. If they’re unable, give them the tools, give them the training, make it clear, clarify and assign, and then motivate and enforce. So, number one, they’re untrained. Number two, they’re unable. Number three, they are. Number two is they’re unable. So number three is they’re untrained. Untrained. The guy wants to do it, he’s able to do it, but he’s not trained. He does not know exactly how to do this. The machine is doing this and that, or the staff does not meet this. So if they’re untrained, train them. Unaware, unable, untrained. And then finally they’re unwilling, why are they unwilling? Is the desired performance not rewarding for them? Can I make it more rewarding? Is the desired performance not rewarding enough? Have they been doing it right? And I never gave them positive feedback because if somebody does something right and you don’t give them positive feedback periodically, the performance will start waning, will start dropping. Even with your spouse, with your friend. Your spouse greets you in a nice way and he or she is very friendly and you don’t tell them, I just love your attitude. You write them a little note or something like this, guess what’s gonna happen? They’re gonna do less and less of what you loved from them.

So maybe you didn’t give them enough feedback. That’s why they’re unwilling to continue working hard. Maybe it’s not rewarding. They have not been acknowledged, they have not been respected, they have not been rewarded, they’ve not been recognized. Remember, people want responsibility, recognition, reward and responsibility and an ability to actually being heard right? So listen to them and tell them, why aren’t you doing this? Is there something I can do to help you? Okay, then this is what I’ll do. This is what you’ll do. I’ll follow up with you at this date. But if they’re unwilling because they think this is the meaning of, or this is not gonna be the way I do it because I’m not gonna do it this way and whatever, then you need to have a come to Jesus talk with them and say, okay, so this is not gonna work. And I’m gonna give you a chance to change the behavior because you’re a good person. So separate what they do from who they are. You start positive, you tell them about the negative behavior and you finish in a positive way. I’m sure you can do it. We’re gonna work together and I’m gonna follow up next week, Next week. They’re not doing. You start positive again. I know you can do it. And this is still not happening.

This is the final warning. I still have confidence in you. Third one is going to be his determination. You’ve been warned. You’ve gotten all the training, the tools, the support. I made you aware and you’re still not doing it. You’re being defiant. Good luck to you and good luck even in a labor court, you will win. And I hope you’re able to motivate the guy and not get rid of him because that costs a lot of money to change people. But some people, in my experience, because I have high powered people like CPAs and in house attorneys and all this when somebody’s morale is down. I’ve noticed always something happening at home. And I’ve gone to the point where I went and I said to somebody, okay, you need to go home, fix your problem, get two days paid time off, then the weekend is coming, you’ll have two extra days and then come back and tell him what’s going to happen. And he confessed. I have problems with my wife. She’s not pleased with anything. She’s this, she’s that. He complained about her, of course I listened. And when somebody comes to tell you problems don’t start, sorry to use the word bitching with them about that person or about another employee. Instead you try to reinstate their power and listen to them and re motivate them about life. Listen, you know, maybe there is a reason your spouse doing this. Maybe there is a reason Joanne, who works at the front area is not doing this and that.

I know you can talk to her. There’s nothing like communication, it will solve anything in life, etc. Etc. But to what degree do you take responsibility for what’s happening? And if the person says 50%, tell them it doesn’t work like this. If you take 100% responsibility and the other person, I can talk to them. You know, if it’s your spouse, maybe go talk on the side, take her out, listen to her and listen and respond to her. Don’t bring the kitchen saying everything and you know, two years ago and work it out and then come back and tell me how I can help you. And guess what? That same person that I had to give him off because his spouse problems came back on a Monday and said to me, oh my God, we just talked and everything is great. I’ve had the director of sale want to fire a salesperson. And I said, have you talked to her? Her reality is she’s so great. And my reality is she’s horrible, I need to fire her. And I said, just talk and start by listening to her and see what her reality is and what your reality is and to what degree you have an agreement on reality. Same afternoon she comes back, oh, she’s great, she’s great. That was a little misunderstanding. As I told you earlier today, if there is a problem somewhere, you have lack of understanding. Go back and understand what’s going on. And once you understand the person or the situation, it dissolves.

It’s a universal concept in physics. It dissolves because you understand it, you know how to maneuver with it, how to negotiate with it, and you’ll find that agreement on reality. You build affinity, and you can move forward with better communication. Good luck to you. Very good. Thank you so much, Sheree. On these four topics, you kind of mixed up number two and number three, where number two, unable to do the job because they don’t have the tools, don’t have the training. But then three was. Don’t have the training. Yes. Unable because they don’t have the tools or the team members to support them. Or team members. The condition of work. Yes, I’m sorry. And then the third one is pure training because they’re able, they have the tools. But then you. You know what? They can’t use them. It’s like when you. Like I had people with work and then. And then finally I said, you know, what’s going on? You’re able to do this. You’re coming in on time. You are fully aware of what you have to do. Why aren’t you doing it? And Bruce said, I don’t have any training on how to enter this software to get me these numbers that you want me to report to you. I don’t have any training on this. A whole new system. I said, oh, my God. Simple. There was another one where the person was unable. So they had the training, but she was unable to do the work because her English wasn’t her first language.

She was getting confused between debt and debit, money owed and what we own, like, simple words. And I sat her down in the office and did just a simple definition of words. Made her more able. And her training then paid off. Yes, thank you for helping clarify. All right moving on. We have two more people with questions left. The first one is TK north Carolina. He said, as we go into 2025, the past where unusually low interest rates help propel growth, asset appreciation, and easy leverage seems to have faded, replaced by a more challenging higher interest rate environment that requires an increasingly strategic approach. What should we expect in the coming months? And what three asset classes should I focus on, in your opinion? Okay, so remember this. Low interest rate make the property prices higher. High interest rate make the property prices lower. The problem is, when low interest rates is gone and there is higher interest rate, there is a lag in the market. There are some people who still are unaware of the changes, and they fell in love with their properties, so they keep asking higher prices. You bring them to reality by saying, based on the interest rate today, this property performs like this. This is the best I can pay you, but don’t do it as a take it or leave it. Do it through the three steps. I call it the people, the property, and then the price. So first I built rapport with the people.

Like the guy that told me, let’s get on a zoom. So we got to meet each other. He told me about his background. I told him about my background. He said, I saw your videos. I said, wonderful. I didn’t know about you. I didn’t know you bought in that area. This is what happened. Told me long stories. So we build rapport as people. Then we talked about the property he wanted. I talked about the property. I talked about the tenant. I talked about this. And then he gave me the price, which was not what I expected, but I didn’t flip out because it wasn’t like, hello, yeah, you know, for that property, all I can offer is 4.8 million. I know you want 5.5, but 4.8 is the best I can do because he had done it through the people, the property, and then the price. So once you understand that the higher interest rate are a great environment to get good deals, you will not only lock in a good deal, that cash flows based on the interest rate. As soon as the interest come down, because it’s cyclical, your property, even with the same income will have better value even though it’s the same net price you’re getting. So in any asset, but I like the retail because the retail single tenant has an immediate increase in value. I like hotels because they sell at the higher cap rate and you can do something to them to increase the income. I like storage facilities because now you can automate them. I’ve done a whole training one time on these calls about what software to use and all this. An old one, you can search it in the. It was last year or maybe year before. But you can see you can automate a lot on the storage facilities.

And of course multifamily, you could do so much with them. And every now and then you find somebody desperate to sell them because they bought them and got financing at 3, 3.5% interest and now they can even refinance. So they want to sell and they’re willing to just walk away from under the loan. And then you can make a lot of money with these, provided you understand that you tell them what you’re asking is not commensurate with the interest rate that exist in the market. I can pay you this and we can make it happen. Once you create that people relationship and talk about the property, what I mean by the property is you don’t go and bring up all the problems in it. You tour the property and you talk or you look at the numbers and you talk very positively. And when you come to the price, if you build good rapport, they will work on the terms. And then if not, you can then bring some problems on the property and they will take it, they will accept it because you build rapport with them. You can say things like, you know, that back area has got to be completely redone, the front got to be repainted. The chair, the stairs, all for each section of the building here got to be redone. These are at least 15,000 each. And you know, so we’re, you know, away from each other at 400,000. Let’s just go, I’ll give you 100,000 more is the best I can do. But you’ll have to carry this finances and you start talking terms. And the more you strategize before you make a call, the better the structure of the deal will Be and if you already have a structure of a real estate fund or something, you’ll be able to talk with a lot of confidence and they will take you very seriously. Very good, Cherif. Our next questions are the last questions coming up from Vera and Tony in New York. They have three questions. One, how can I buy real estate in a debt fund structure and then move the property out of the structure into my personal portfolio as you have discussed in the past? Okay, so Vera and Tony, when you buy it in the fund, you don’t need to move it under the fund because the debt structure, the way I structure it for you is the actual fund and LLC have no expiration date. This is approved by the sec meaning as you pay the investors the steady return that we promised them, 6 or 8% or whatever class C shares, we have a hybrid structure. We pay them a little bit more. It’s extremely powerful. What happens is at any time you can refinance that property and pay the investors off.

That property sits in the fund LLC and it’s yours forever. And you built a legacy for your family. If you would like to transfer it out, you can literally just transfer the ownership. As long as it doesn’t affect your payments as scheduled to the investors. That asset is no longer needed in your fund. And but you don’t need to transfer it out. You could very easily do that, but you don’t need to just keep it in because it’s yours as long as you keep paying the payments. So if you have remember in the debt fund, it’s a fund because you have different assets. So let’s say you have four properties and you realize, geez, if I sell this one, I can pay off the investors and keep those three for me. You can do that? Just pay off the investors? That’s it. It’s a fund and it’s an llc, but it has no investors. It’s yours and you pass on the LLC through a living trust to your kids, grandkids, loved ones, etc. Very good. Theres next question is what are the pros and cons of Act 60 in Puerto Rico? We are located in Nevada and may make the move to in 2025. Well we can help you with that move because now my in house attorney has been doing it for some students. The pros is when you take residence. Act 60 is a tax incentive through Congress approved for people to move to take residence in Puerto Rico, which is the United States territory. It’s an independent island that is owned by the United States, over 100 years owned by the U.S. the pros are when you take Act 60 and personally move, you have to personally relocate to Puerto Rico and take residence there.

That means you relinquish your residence in the United States, whatever state you’re in. Nevada, you’re in New York. No no, we are located in Nevada. Okay, so you’re in Nevada. You’re going to relinquish your residence in Nevada and take residence in Puerto Rico. That means there are three tests by the irs. You have to have what’s called closer connection. That means your social life and everybody you know and whatever activities socially you do are in Puerto Rico. Then you’re going to do voting in Puerto Rico. You’re going to also have, you’re going to file taxes in Puerto Rico and you’re going to have a primary residence in Puerto Rico. So if you have a home in Nevada that you want to keep, you should rent it or you can leave it as second home. I have a second home, a third home, but my real residence is Puerto Rico. I’ve been filing taxes and been resident of Puerto Rico for many, many years. So what happens is when you get any income coming into Puerto Rico as a Puerto Rico resident, under the tax incentive, the income is tax free. Now, if you apply for Act 60 22, that’s personal residence, the income comes to you tax free. That is derived from Puerto Rico. If you want to do business in the U.S. and bring the income to Puerto Rico, that’s called exporting services. Because you’re now in Puerto Rico and you’re going to service the US Money will come to you in Puerto Rico and you’re going to receive it. That is imported services. So you have exported consulting, let’s say, made the money, brought it to Puerto Rico, and now it comes to you, you pay only 4% tax. Yes, yes. I used to pay 40 and 50% tax flipping properties in California to residents in Puerto Rico. And I dropped my taxes from 40 to 50% down to about 16%. Why not four only? Because the four comes with certain conditions. You got to have an office, got to employ a couple people. You got to do certain things. And the total cost will be 15, 16. Let me just explain to you something. If you are netting a million dollars in a place like Nevada and paying 35% taxes, okay? Because you flip properties so ordinary gain, so on the million you net, you pay 350,000 to the government because you have the settlement statement, you can’t escape that. And you’re going to net 650.

Imagine you move to Puerto Rico, you flip properties in Nevada and you invoice yourself for doing the services from Puerto Rico to the Nevada. Flips for an LLC in Nevada and you move the money to Puerto Rico. Under the watchful eyes of the irs, Nevada has no state taxes. So I’m calculating with no state taxes, Congress has approved this. Money comes to Puerto Rico. Puerto Rico is happy because now they have money they never would have gotten the actual million dollars. Come to Puerto Rico, you’re gonna pay in total 15, 16%. So let’s say 150,000. So you’re netting instead of 650, you’re netting 850,000. So instead of 650, you’re neting 200,000 more. If I do 200,000 divided by 650, you just netted an extra 30.7%. Just same time, same effort, same transaction, you got an extra 31%. I get an extra 42% because I have state taxes in California. So obviously the number speaks for themselves. Now why would the Congress allow people from New York, California, Florida and all Nevada go take residence in Puerto Rico and legally move the money? Because for the federal government, it’s from one pocket to another. It’s from us to us. So the government says we don’t care, we don’t mind at all. As a matter of fact, it makes them send less aid money to Puerto Rico. So what are the cons? The problems is you’re on an island, so you’re not going to have the same services. Things are slow. Maybe great beaches, that’s a plus, but trying to find parking is a minus. Wonderful area, but there are some areas you have to be careful for security reasons. Wonderful beach, U.S. location, but a lot of Spanish speaking where you have to understand exactly what you’re doing. But overall the pluses because the people are nice. It’s a wonderful island. I’ve been in it and in and out of it for the last 20 plus years now. And I can tell you every time I land back. But I’m in Old San Juan. Of course, I am happy to walk the streets of Old San Juan, which is the oldest historic zone under US flag.

I am happy that this is part of the United States. The banks are not as flexible, the appraisers are not as good as in the US and despite all the challenges, the benefits of taxes outweigh everything. What is required is that you spend 183 days in Puerto Rico. The rest of the year in the U.S. and if you need help, you can set up an appointment with me. We’ll set you up with my in house attorney and that attorney works exclusively for me but will be happy to do it. We’ve done it for a couple students, We’ve done it for people that set up a real estate fund in Florida, move to Puerto Rico. We set them up so they do the transaction, pay the investor and move the money to Puerto Rico. They have the best of. All worlds. We had a couple that set up like this. It even increased, increased their romance. So hopefully Vera and Tony, we can take you to another level personally and professionally. Just play with. Okay. Okay. And their last question. What is the worst thing an investor can do in today’s market? The worst thing you can do in any market is over. Leveraging is believing the pro forma, the future numbers expected on a property without the full due diligence and a margin of safety. Remember everything, all investing starts with the assessment of risk.

How much for how long, what if and what’s the backup plans that actually can help me survive? Plan A, plan B, plan C. So I’ll give you the formula in general. Even when you set up a fund, one day you will, you’ll find that this is the formula. Number one, I look for safety. You may want to write it down. You’ll find this is the best safety. First, the capital is going to go in here. Is this a safe location? Is this a safe asset? Is this going to be good asset? So safety number two, cash flow. Am I going to get cash flow? How soon will I get the cash flow? Will the cash flow increase, Will the cash flow be steady, etc. So cash flow safety is one, cash flow is two. Liquidity. If I want to sell it, if I want to borrow against it, can I get liquidity? Number four, cash reserves. Can I keep some money as cash reserve? Can I pay it down, get a credit line for reserves in case I need to access it. And number five, am I diversified? Do I have this? Maybe mixed use, upstairs, residential, downstairs, commercial. So I have long term leases, short term leases, I can have some airbnb, long term, etc. So the diversification number six is do I have a plan B and a plan C? Because if it’s not performing like this, can I split the condos and sell them upstairs? Can I pay down the debt? Can I get a credit line over here? Can I actually split the building and rent two spaces instead of one? Can I change all the downstairs and use it as storage instead of retail? If the market changes, etc. So you look at these six ways to actually manage the risk and reduce it.

You’ll make a killing in any market, not just today’s market. So we are done. So I would like to finish by telling you a couple things about power. I want you to have to consider the following powers that you have and you must use. The first power is the power of studying the market for timing and trends. One of the most powerful things you can do is timing the market. The market, any time is good timing. If you know and understand what’s the trend. The trend people think is what it’s going to go in the future. But the trend, believe it or not, is based on the past. Oh, it’s going in this direction. So what’s the trend? And then you extrapolate the numbers, you look at the future from that trend. So once you see what’s going on, you can get ahead of the market and your timing will be perfect. That, that is extreme power. It’s not luck. Every now and then luck will come your way. But if you can time the market, it’s going to help you with time in the market. Because then if it’s you’re good on year one, it just keeps getting better as the debt keeps getting paid down and you increase it. That’s why I like single tenant buildings. Putting a tenant hotel that’s already performing and the market seems to grow and there is demand in hotels right now. So guess what? Timing is good. Number two, the power of having the right strategy structure. So strategic intelligence is very important because you’re going to structure in a way to tackle the market.

This one I will do it as an assignment to this other person. This one I’ll do as a partnership structure LLC with somebody partner. This one I’m going to set up a fund. I’m going to have the most powerful structure, get the investors in, take it to another level. So the strategy you want to do, got to have a structure. So strategy is important. What is the plan and how can I execute it with the right structure to be protected and to grow. Get the loans, get partners, get investors. Number three, the power of hard work. A lot of people talk about smart work and the 8020 rule tells you 80% of your effort brings 20% of the result. Well, okay, so what is the of the effort I do that brings that 20%? So I want the 80% of the 80% so that 64% will bring 20% of the 20%. That will bring 4%. Oh, what’s the 80% of the 64%? Are you with me? So you keep getting it down to a point where you’re going to find out 50% of the effort. 50% of the actual effort you have to do is the results are going to change your life with 1% effort. 1% bring you 50%. You can see it, you can work the numbers down. But the key thing is hard work is essential because it gives you a superior advantage. Whoever has A relentless power, an overwhelming force which is directed effort will win.

Idea to be relentless. But you got to be with the right strategy in the right market at the right timing, so your efforts start paying off. And then number four, in terms of power is the power of choosing the right people around you. Because having the right allies with whom you can exchange value for the greater good will change your life and their life. Having the wrong people will drain the living life out of you. If you’re waking up in the morning worried about one of your team members or the person you’re dealing with, or you’re trusting the broker, not trusting him or her, or your investor is bothering you, you need to make some changes. Before you make the changes. Talk to the people, understand them. If you have problems with them, understand them. What is it that you’re trying to tell me? Is there something you haven’t told me? Have I not paid attention to this and that? And if they insult you, listen more carefully. Don’t get defensive. Your ego is the enemy. Their ego is the enemy. I bring a new person in the team, the whole team gets unraveled. Well, who is she and how come she’s going to do this? So you form a team. They start fighting and then they adjust when they see that they have clear roles.

And then they connect, they bond. And you start outperforming, forming and fighting constant battle. As soon as you add a person, take a person out, there is a change in the team. That person feels like an outsider. So the best way to do it, make it happen, is you give them directions, you assign and make sure that the people understand the responsibilities and have their roles. Because the people is power for you. The right people become powerful with you or they become powerful against you. So if you think of war, you win a war with the exact same strategy, the right timing, with the right strategy, intelligence, strategies, the intelligence you’re getting, strategic intelligence. Number three, the overwhelming force against an enemy, and number four, the powerful allies. That’s how you win wars. That’s how you win the game of life and you win the game of business. Because the most important power is the power of balance between the money challenges in your business, the business life of investing, making a team to perform the right place in the right way through all the obstacles, challenges and problems that drain the life out of you, to approach it like it’s a game. So you step out of the problem and you look at it. You look at it as if you’re advising a friend of yours. Don’t be inside the problem, get outside and look at it and observe it and think of it creatively so you don’t lose your priorities and understand how to approach the problem like a game, with the same level of enthusiasm that you play a game, which is whether I win or lose, I’m going to play the game the best way possible. And no matter the outcome, I’m going to do the best I can and I’m going to accept it, correct and adjust. Because if you make that balance with the life game of money and business and challenges of investing, you’ll be able to then balance the game of life, of love, of having relationships, not losing the priorities of why you’re doing all this for your loved ones, the relationships you have which give you happiness, extension of life. This, the final power I want to give you is the power to be quiet. Because when you’re not quiet and you start telling people about your strategies, I’m looking for buildings that do this, this, you’re telling it to the wrong. Why? Why? They ask you the right questions, they will have power over you. They either have a negative intention, counter intention in the spiritual world against what you’re trying to accomplish.

So they take some of the power you have because you’re telling them all your details. You have to be you guard the game close to your chest, know who to share with and how to exchange the value. If you’re giving them something and you expect something, make it clear to them and don’t share everything. Be quiet about your strategy and about your moves because there are a lot of negative forces out there, including your own negativity among yourself with your own negative obstacles that you create for yourself. Eliminate all this. Stay focused. Think of the game of chess. You do not announce your reasons for a certain move. You do not explain the plans, why. You move this over here and that over there, and the player who stays alert, trained, focused and adjust to all what happens will be the one who speak once and what they say is checkmate. And hopefully you’re the one saying it and it’s not being said to you. That’s going to be your theme for 2025. Let’s make the most of it. Be quiet, be smart, get all these powers of timing, strategic intelligence, overwhelming force and hard work to actually get the right people around you and get the results. I got to go to the beach. May you have a beautiful 2025 with positive thoughts and energy. Thank you guys. Thank you.