"Cash Flow Kings" weekly post

Aug 16 2009

* Pardon our delay in posting this week(s) blog. Please don’t forget to click on our sponsors ads throughout this blog, so that we can continue to provide you this free information weekly.

So far from last weeks reading you should’ve…
Thought/or are thinking of the type of investor you are…

**You’ve probably decided that you are the type that just wants to make money.
Cash flow is fine, but you want to make money now!
You want to buy today and sell tomorrow for 1000% (one thousand percent profit)!

Sorry…but that’s very rare…Notice… I didn’t say impossible, but it is rare.

Some of you bought residential properties at the height of the market in 2005 and can’t sell it anywhere near what you paid, now you’re forced to hold the property (tune into future blogs for ideas and options, to hopefully remedy your situation & don’t forget to click on our sponsors Google Ads throughout this blog, so that we can continue to provide you this free information weekly).

A few of my commercial clients are in that same boat; however, because they bought commercial properties, the corporation that has the lease on those properties continues to pay the rent. They are receiving their money from that corporation by bank wire, on the 1st of the month, for the next 15+ years (after debt service) = $$$ Cash Flow!

Now let’s look at an actual deal that just came across my desk that is actually for sale:
Pep Boys
Austin, TX
$3,137,260
7.25% Cap
Actual Deal
New 15 Year Absolute NNN Lease(1)

Annual 1.5% Increase(2)

Pep Boys Guarantee(3a)

NYSE: PBY(3b)

Zero Landlord Obligations(4)

Irreplaceable Hard Corner Location(5)

Financing Available(6)

70% of the State’s Population within 2 Hour Drive of Austin, TX.(7)

Additional Locations Also Available Individually or as Portfolio

PEP BOYS (NYSE: PBY) PERFORMANCE NEWS
Pep Boys - Manny, Moe & Jack (NYSE: PBY) beat the average analyst estimate by 89 percent, according to Bloomberg data .

Pep Boys - Manny, Moe & Jack (NYSE: PBY) reported a first-quarter profit of $10.9 million, or 21 cents per share, compared with $4.7 million, or 9 cents a share, in the year-ago quarter .

Pep Boys - Manny, Moe & Jack (NYSE: PBY) posted a first-quarter profit that more than doubled from a year ago.

Now lets look at the price $3,137,260
**If you can get financing at 30% down then

Price $3,137,260- 941,178 Down payment = $2,196,082 to be financed.

Cap 7.25% [the cap rate is the Net Operating Income (NOI) divided by the sale price]
So, the NOI on this property is $227,451.00 or $18,955.00 per month paid to the owner by the corporation.

New 15 year Absolute NNN Lease (1) - Means not a dime out of your pocket for the next fifteen years of the lease.

Annual 1.5% Increase (2) – means the rent goes up 1.5% annually

Pep Boys Guarantee (3a) – Means that this is a Pep Boy corporation guaranteed lease for the next 15 years,

NYSE (3b) means that this is a public traded company on the New York Stock Exchange.
PBY (3b) – stock symbol for Pep Boys

Stock information below provided by Bloomberg.


PBY:US PEP Boys-Manny Moe & JackIndustry: Retail-Auto Parts
08/14 New York Currency: USD

Price - 9.110
Change - 0.820
% Change - 8.258
Bid - N.A.
Ask - N.A.
Open - 9.930
Volume - N.A.
High - 9.940
Low - 9.020
52-Week High - (07/01/09) 10.83
52-Week Low - (01/22/09) 2.62
1-Yr Return - 4.421%

EARNINGS

Earnings Past 12 Months-0.240
Quarter Est. EPS (07/09) 0.15
Quarter Est. EPS (10/09) 0.03
Year Est. EPS (01/10) 0.18
Price/Earnings (Trailing) N.A.
Relative P/EN.A.
Earnings Growth Rate 155.400
Estimated P/E 55.500

FUNDAMENTALS

Shares (Millions) 52.302
Market Cap (Millions) 476.475
Float (Millions) 47.415
Return on Equity - 6.808
Short Interest 3,966,943.000
Last Dividend Reported 0.030 Regular Cash
Dividend Yield (ttm)2.140
Relative Dividend Yield0.813

SECTOR COMPARATIVE RETURNSCOMPANY PROFILE

The Pep Boys - Manny, Moe & Jack retails automotive parts and accessories, provides automotive maintenance and service, and installs parts. The Company operates PEP BOYS stores in the United States and Puerto Rico.

Zero Landlord Obligations (4) - means just that.

Irreplaceable Hard Corner Location (5) - means corner lot at four way traffic intersection.

Financing Available (6) - means the listing company has a bank ready and able to provide financing to anyone qualified to do the deal.

70% of the states population within 2 hours drive of Austin TX (7) – means just that.

Additional Location(s) also available, individually or as portfolio - means that this property is being sold as a single property; however, others are available from the same seller.

Let’s look @ Cap Rates for a moment…

Cap rates 7.25% are negotiable, As cap rates go up, sale prices come down, so you would negotiate for the highest cap rate possible, as “the buyer” and the lowest cap rate possible, as “the seller”. The agreed upon cap rate between buyer and seller divided by the NOI $227,451.00 will determine the sale price.

Now… let’s take a look at the Memorandum (click link below)

:http://bootheinvestmentgroup.com/Commercial_20_Properties_20_For_20_Sale.html

Now let’s look at this deal again:

Calculate the NOI with Cap Rate
$227,451 divide 7.25% equal price $3,137,260.00
Loan in memorandum is based on 50% down $1,568,630
6% interest only, Loan payment of $94,118 pre tax cash flow $133,333.00
Cash on cash return 8.50% first year. Buyer to submit terms,
Pro Forma Assumes 50% Loan to Value 6% interest only financing.

Now if 30% down is $941,178 out of pocket then you will get a {“cash on cash”} return of 24% or you will see a 24% return on your $941,178.00 down payment.
That’s more than what a bank pays. Agreed? So far so good.
Finance $2,196,082
Term 20 years
Interest Rate 6.5% (If you can get this type of interest rate)
Payments would be $16,374 monthly or $196,481 Annually (Debt Service)
NOI $227,451 minus Debt Service 196,481= $30,970 Annual Cash Flow.
Plus rent bumps of 1.5% annually for the next fifteen years.
And four/five year options to stay.
Personally, on this deal I would negotiate a higher cap rate, but over all this could be a pretty good deal. Right?

Please call or email me with questions. Don’t forget to click on our sponsors ads throughout this blog, so that we can continue to provide you this free information weekly.

To keep more FREE detail information coming weekly, please click on some of the Google ads located on this page. Take a look at what our advertisers are marketing, this will allow us to continue to supply weekly step by step instruction(s) blogs teaching you how to become a “Cash Flow King” through the purchasing and sale of shopping centers and Single Tenant Net Lease Commercial Investment Properties.


** The Author/publisher makes no representation or warranties with respect to the accuracy of completeness of the content(s) of this work. The advise and strategies contained herein may not be suitable for everyone or situation.

Cash Flow Kings weekly post

Last week I received a few requests on Twitter and Face Book from you with questions like: How do I make this work for me? How do I get into the business?

Well, there are many areas of commercial real estate where you can do very well. From land, apartments, office building(s), shopping centers, single tenant, the list goes on and on. It all depend on how much you can afford to and willing to invest, but especially location, location, location!
The area that I will be speaking on is single tenant properties and shopping centers.
Before choosing to make an investment in anything, you should consider a few things:
Why am I doing this, how much will it cost in the short term, how much will it cost in the long run, is my timing right, what type of value will it add to my portfolio or my net worth in the next few months or years?
Let’s begin with figuring out what type of investor are you. Do you like to buy and hold? Do you like to buy and sell? Are you looking for long term cash flow?


Most of my clients look for long term cash flow, they look for properties with established businesses in place and long term corporate leases, companies that are doing well in bad economies, like fast food restaurant chains with one dollar menus, dollar stores, auto supply stores (more people are fixing their own cars today) discount telecommunication stores, quality shoe or clothing chain stores that sell their products at discount prices. Etc.
Overall, you’re looking for stores that can handle the type of economy we are working with now. As well as, properties that have the ability to increase in value by increasing your cash flow.
Before making a decision on a property you must first make sure that the deal makes sense for you.
It is so simple, that it can get complicated, but normally after looking at a few deals most new investors get the hang of the analyst.
You will quickly learn that income producing properties can be analyzed by splitting up the deal into three parts: Income, Expenses and Debt.
Income is the amount of cash that is sent to you each month.
Expense is the amount it cost you to maintain the property
Debt is the amount you pay the bank monthly for the funds that you borrowed to buy the property.

Example:
Monthly Income 8,500 – expenses $500- monthly debt service $3,500= cash flow per month $4,500
Or $8,500-$500-$3,500=$4,500

Is commercial real estate investing risky, yes it is and it’s not for everyone.
If you are looking to build wealth, don’t mind learning to crunch numbers and taking some risk… then this just may be the investment for you. Next week, we will look at reducing the risk through due diligence and the professional approach to valuing the property.

To keep more FREE detail information coming weekly, please click on some of the Google ads located on this page. Take a look at what our advertisers are marketing, this will allow us to continue to supply weekly step by step instruction(s) blogs teaching you how to become a “Cash Flow King” through the purchasing and sale of shopping centers and Single Tenant Net Lease Commercial Investment Properties.

Also, send us an email to http://www.blogger.com/db@bootheinvestmentgroup.com20%

so we can send you the latest Single Tenant or shopping center listing that hit the market.

You can also catch us at http://www.bootheinvestmentgroup.com/.
Missed a lesson? Checkout our Archives
Be sure to bookmark this page for upcoming information regarding:

Evaluating a Property
Due Diligence
SBA Financing
Analyzing Cash Flow
Cap Rates
Cash Flow
Zoning
And much, much more.

Cash Flow Kings II

In my last writing, I attempted to paint a picture in your mind of being a landlord of a single family house offering residential property for rent with yearly leases (maybe you own a duplex or triplex). This time I will attempt to paint another picture in your mind on a commercial property.

Imagine that you just drove up to a Burger King (Wendy’s, McDonalds, KFC, etc.) and ordered food in the drive thru… while looking at the property you noticed that it has been totally remodeled inside and out with all the latest flat television screens, computer monitors and professional landscape, when you went inside you observed new floor tiles and beautiful framed pictures, etc. Let’s say in all you quickly calculate around $250,000 worth of remodeling done on the property. [BTW- this building could very well be a Payless Shoe Store, Jiffy Lube or a bank].

Oh… and did I mention, the building is yours! Burger King is merely renting the building from you for the next twenty or so years, with options of two or more five year periods. (let’s say approximately 30 years).

DYK? (did you know) - You don’t have to worry about running a Burger King! Nor do you have to worry about managing the employees, scheduling their vacation(s), payroll or anything related to running that business. If the plumbing fails, you don’t have to fix it, but they (the tenant) do, if the windows or doors break you don’t have to fix it, but (they) do! That’s right you’re not responsible for paying nada! They pay to fix everything themselves, including the $250,000 worth of improvement(s) done on your property!! All paid for on their (Burger King, Jiffy Lube , Payless, etc)’s dime and guess what? Not a penny out of your pocket!

Starting to get the picture yet? That’s right, you have a major lease guaranteed by a major corporation that pays you monthly, on the first of every month, by bank wire, on time, all the time, for the next twenty to thirty years (and sometimes even longer). You are responsible for nothing, they are responsible for EVERYTHING!

I have even seen some of my client’s contracts nationwide declaring in the lease, if the property is destroyed by fire or natural causes, the tenant must continue to pay the lease before, during and after the property has been rebuilt. BTW - guess who’s responsible for rebuilding it? That’s right the tenant… Again you are totally hands off! Let me see just one of your residential tenants in a single family home do that!

In fact, the only thing that you have to do is collect the rent every month (average rent about $7000 to $14,000 a month for the average fast food restaurant). FYI- (for your information) these tenants payments come to you, by way of bank wire, directly to your bank account (smile) and your tenant also pays the sales and property tax, that you will forward to the State.

Deduct the mortgage usually around $2500 to $6000 a month to pay your bank. The rest is all yours! The average NOI (Net Operating Income) is usually between $84,000 to $168,000 annually… now subtract approximately $30,000 to $72,000 for the mortgage (or DS aka Debt Service) to be paid to the bank giving you an average cash flow of $54,000 to $96,000 annually, on one property! Average Debt Service (monthly mortgage payment) will depend on the deal you made with your mortgage professional or banker.
Did I mention rent bumps = Increases in rent over the next 30 years?

If you can afford to buy a $500,000 or above house then you can afford one or more of these types of commercial triple net lease properties.

To keep more FREE detail information coming weekly, please click on some of the Google ads located on this page. Take a look at what our advertisers are marketing, this will allow us to continue to supply weekly step by step instruction(s) blogs teaching you how to become a “Cash Flow King” through the purchasing and sale of Single Tenant Net Lease Commercial Investment Properties.

Also, send us an email to dave.boothe@yahoo.com so we can send you the latest Single Tenant Listing that hit the market.

You can also catch us at http://www.bootheinvestmentgroup.com/.
Be sure to bookmark this page for upcoming information regarding:

Due Diligence
SBA Financing
Analyzing Cash Flow
Cap Rates
Cash Flow
Zoning
Evaluating a Property
and much, much more.