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Seeds For Thought
Computers can ease your work load. Learn to type. Used equipment can still be very serviceable. A newsletter can serve as an excellent promotional tool. Move the decimal point in your mind. Computerizing Your Business
Today, it would be difficult to think of any business that would not benefit from computerization. And this trend toward computerization, digitization and reliance on technology can only be expected to increase over your coming entrepreneurial career. And, more and more people will have access to these tools.You should immediately put into your business plan, a commitment to learn how to work with technology and become familiar with the power of the Internet. If you are still in school, you should take one year and preferably two years of typing so that your fingers will fly over the keyboard as you work. If you are out of school, purchase an inexpensive typing tutoring program and practice, practice, practice. Typing is a valuable skill, which will prove to have a high communications dividend payback. Learn to type and use your computer. Since research is essential to the success of any business, to receive the full benefit of the web, you must have high speed Internet access. If you can order broadband cable access or DSL access, this is not an option. Get it. Look to your industry leaders. You see them at meetings and conventions. Do they all have wireless cellphone headsets and laptops and PDAs and Blackberrys? Follow the leaders. For most businesses, industry specific (vertical) software is available. Again, your research will tell you how important vertical software is to your industry. If you're a travel agent, a powerful computer system and vertical software are mandatory, since up to the minute information is your business. However, if you're a florist, it might be just a nice luxury to have software that was developed specifically for florists. You don't want to spend $5,000 for a vertical software program if you can do the same tasks with a more flexible non-industry specific software program that costs a few hundred dollars. Research. Ask. Most businesses can be managed with off-the-shelf, user friendly, inexpensive software programs such as Quicken. You can track your inventory. You can handle your scheduling. You can do all your bookkeeping. You can project yourself to richness. If you devote an hour a day to your new programs, in most cases, you can expect to be sailing through tasks like a pro in two to three weeks. Today, most programs come with tutorial programs. As an alternative, both computer superstores and public adult education classes offer inexpensive how-to classes for the most popular software programs. Most small businesses are people centered businesses and a computer and e-mail are an excellent communication tools. Today, every business needs a website. This website is your communication base. Information must be updated regularly. Recognizing the technological advances, most top website now offer videostreaming. You can. Many industry leaders now offer audio or audio/visual podcasts. You can. Don't be left behind. Stay out front. Yes, you're a promoter and it's all right to blow your own horn. Collect all the e-mail addresses that you can from customers and prospects and then get their permission to send them your newsletters, promotions, announcements, etc. Get permission. Never spam.
Andy Martin, InvestorAndy asked Mr. Taylor what was up with Don. Mr. Taylor's answer was again to impact on Andy's back-on-track real estate career. Mr. Taylor's news wasn't that good. Mr. Taylor hesitated a moment and then decided that Andy had matured enough to show empathy to someone else's situation, "Andy, I don't know how much you know about Don's personal situation. Don isn't one to bring his troubles to the office. But, let me tell you this much. Don has three children: two grown sons who are out of the house and an eighteen-year-old daughter, Susan. Susan is severely handicapped. When she was four, she was hit by a car and suffered head and back injuries. She is very lucky to be alive. "Anyway, Susan can't use her arms or legs, is confined to a wheelchair and, let's also say, that her mental capabilities were severely impaired by the accident. Years ago, the doctors recommended that Susan be institutionalized but Don and Jane, his wife, wouldn't hear of it. They've been taking care of Susan at home for all these years. Now Jane is very sick and Don has been at home taking care of both of them. That's it." Andy felt physically weakened by the news. "Gee, this is terrible. I knew Don had a handicapped daughter at home but I really had no idea things were this serious. Is there anything that I can do?" Mr. Taylor felt proud of Andy for asking, "Well, Andy, we both know Don and Don isn't about to ask for our help but we can both do something, if you like. Don has four deals on the table now. I suggest that you and I tell Don not to worry and that we're going to follow through on these deals for him." Andy was sincerely interested in helping. "Certainly, Mr. Taylor, we can do that. I'll keep the clients that he has on FISP happy also. And, if any of his clients have new business to do, Don can count on me to handle that also." Mr. Taylor, remembering the old Andy for a minute, commented, "Now, Andy, don't be volunteering for any of this work if you expect a commission split. These deals are Don's, and I know that Don needs the money." Being a salesman, Andy wasn't insulted easily, "Mr. Taylor, I assure you that my scheming days are behind me. I owe Don. I owe Don a lot. I'm glad I can do something for him." 
Mr. Taylor and Andy did help Don a lot. Two of Don's deals went according to plan but one got very complicated and time consuming and another fell through and was revived twice. But, for the eight weeks it took for Don's personal situation to stabilize, he was able to stay at home and relay instructions to Andy at the office. Upon his return to office work, Don seemed genuinely grateful to Mr. Taylor and Andy. "I can't thank you guys enough for your help" Don said. "Jane is much better. We've decided that, for now anyway, Susan really needs nursing home care and I'm satisfied that we've found a good full time care facility for her. It's in Edgerton so it's close enough for her mother to visit everyday. I hated doing this but, hey, thanks again." Don changed the tough subject, "Andy, while I was away, I had some time to think and I might have some ideas for you and me. We can work on them together if you'd be interested." Don lays out the tentative outline of his plan with Andy. "Andy, your idea of doing the Annual Portfolio Review for investors as a spin-off to the newsletters may be about to pay off big. Let me fill you in. Last week, I did a Portfolio Review for Mark Stevens, one of my developers. I introduced you to Joe at one of the Roundtable meetings. Anyway, in talking to Joe, he mentioned that he might be willing to sell the Riverdale Shopping Center." Riverdale was a beautiful center, which many investors would covet. Andy narrowed his eyes in concentration and nodded approval. "Gee, that would be a great listing, Don. Have you got a buyer in mind?" Don looked right into Andy's eyes and firmly said, "Yes, I have. I think that you should buy it, Andy." Andy really thought that Don was joking. Don made a playful motion as if to hit Andy on the head for having to tell him something that he should have well known, "Listen, Andy, listen. How many times have Jim and I told you to listen? The center is 20,000 square feet and, as you know, is anchored by King Brothers' Supermarket. The second anchor is Walgreen Drug. The annual gross operating income is $340,000 but I think you could boost this up quite a bit. I think we could put the deal together for about $2.8 million." 
Andy liked the numbers but these were numbers for other people's deals, not his. "$2.8 million. You flatter me, Don, but where am I going to get that kind of money? I've never done a deal of this size before."Don had a good strategic plan in mind, "Well, Andy, I wouldn't be wasting my time or yours if I didn't think that this was a good deal and that you could handle it. Andy, in every investor's life there will be times when he or she is faced with challenging opportunities. Do you stick with the small safe investments, the status quo, or do you accept the challenge, the risks and rewards, of moving ahead?" Andy interrupted, "$2.8 million is some challenging leap from what I've been doing, Don." Don tried to continue, "It is, but think. What is the difference between buying a three-family house for $300,000 or a shopping center for $2.8 million. It's..." Andy answered for him, "It's $2,500,000, Don." Don stated a philosophical concept known and used by many wealthy investors. "Andy, what it is, is being able to move the decimal point in your mind. That's what it is. Move the decimal point in your mind from $300,000 to $2.8 million. You can make a good or a bad investment at $300,000. You can make a good or a bad investment at $2.8 million. The mechanics of the deal are basically the same. Working the numbers is the same. Getting the financing is the same. Managing the property is the same. The difference is the decimal point in the price and in the profits. Are you ready to do it?" Andy still figured that what he wanted and what he could afford were far apart. "How, Don? How? Yes, I'd love to be involved in a deal like this but how could I ever do it? Maybe in a couple of years but..." Now, it was Don's turn to interrupt Andy. "Andy, I repeat, are you ready to do it? The opportunity is here now. With the right management, with the right tenant mix, with the rents raised to market level, the Riverdale Center can be worth $3.5 million inside of two years. Somebody is going to buy Riverdale. Are you ready to be that somebody, Andy?" Andy was ready to bow to the advice of Don. "Yes, all right, I'm ready, Don. Now, just tell me how." Don outlined the strategy, "A limited partnership syndication with you as both a limited partner and also the general partner. In a limited partnership syndication, usually the limited partners provide the downpayment capital and the general partner contributes the organizational expertise. The cash flow, amortization and eventually sale proceeds are split in an agreed manner between the limited and general partners. "I propose," Don said continuing, "that you raise $800,000 through an offering of 40 shares at $20,000 each which would give you $600,000 as your downpayment and $200,000 to cover transaction costs and for a modest initial operating fund. I would go for a $2 million mortgage and a $200,000 construction loan to upgrade the center. The center could use a new facade and new signage and re-lining the parking lot. It needs some landscaping, etc." Andy wanted to know, "Can you and I find these limited partners?" Don didn't seem to feel that selling the partnership interests would be that big a deal. "Andy, that will be the easy part. Remember, this is an excellent deal we're talking about. How many investors do you know who want to invest in real estate but are afraid of the management and liability?" "Plenty." "That's right, Andy. We both have an index box full of them. Well, here's an opportunity for them. In a limited partnership syndication, you, as the general partner, supply the management and the limited partners' liability is limited to their cash investment - a good deal for everybody. Listen, all the big stock brokerage firms, Paine Webber, Merrill Lynch, all of them, have been doing real estate limited partnership syndications for years. And, for years, these big stock brokerage firms have been taking huge upfront fees for organizing them. Our limited partners won't have to pay most of these fees. Really, Andy, here is your challenge to move that decimal point in your mind. This Riverside deal is small time in comparison to the stock brokerage deals. And, as further proof to the limited partners that this deal is solid, I think that you should buy the first ten limited partnership shares." "Ten shares, that's $200,000, Don." "You've got more than that in equity, Andy." "Yes, Don, but not all in cash." "Well, Andy, then, we'll make cash. How about refinancing or taking a line of credit on your three-family?" "Geez, Don. I guess I'd have the money then but I'd really be leveraged out." Don felt that Andy was ready for the push to go from average to exceptional. "Andy, where were you two years ago? Are you ready for this, Andy? Yes, you'd be leveraged out but you'd have the three-family and a significant interest in one of the best shopping centers in the area. Or, as I've heard you say so often, 'You can just sit there and do Sudoku puzzles.' Have you got it, Andy?" "You'll help me, Don?" Don wasn't blinking, "Of course. I'll help you do the prospectus for the limited partners and the bank. And, I'll get you started managing the center." After showing him a whole new world of potential profit, Andy wanted to make sure that Don was fairly compensated, "Don, you don't want in on this deal?" But, Don had already arranged fair financial settlement for the various components of the deals. "Andy, I think that you're aware of my home situation. I'm setting up a trust fund for the care of my daughter and I need cash more than equity. I've already gone over the deal with Jim Taylor. He's agreed to a $75,000 commission on the center." With a determined look, Andy held out his hand to shake hands in agreement, "OK, Don, let's put it together." Over the course of the next year, Taylor Realty Partners One purchased the Riverdale Shopping Center from Mark Stevens. Andy and Don are currently raising $2.5 million in operating capital to fund Taylor Realty Partners Two, to make additional limited partnership syndication purchases of larger investment properties in the Newton area. With most of Andy's time devoted to management and acquisition of the limited partnerships, two new investment property brokers have been hired at Taylor Realty. The investment brokers and the rental/FISP staff work under the supervision of Andy and Don. Could you be Andy? 
Go to Lesson Twenty Seven21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 Index
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