Real Deal REInvestor Network

Most of you, don’t know it, but I gave up a lot to go to this event in Orlando. As you know my birthday was July 6th. But what most of you don’t know is that it was my 50th birthday this year. As a result, my Husband (Russ) was planning a surprise party the same weekend as the Orlando event, for me. Russ had flown in my son from Vegas, and my grandson from NYC to come celebrate with us. He also coordinated the party with his brother and wife, flying in for their summer vacation, coming from Alaska. When I told Russ, that I was going to Orlando for a real estate seminar this past weekend, he was not at all supportive about it. He made several attempts at getting me to cancel my plans and stay at home for my surprise party, without giving away the secret, but failed. Finally, with all other options exhausted, he told me what he had planned for me. At that point, we had open discussions, and I had to make a choice. It was a difficult decision. I made the decision to cancel the party, and go. I figured, I could still visit with my out of town guests, when I got home; and I could always have a party next summer to celebrate my 50th outgoing year, or my 51st birthday, or heck – I could even wait 5 years and throw myself an AARP party. This was too important to my development to miss. After changing all our party plans, I found out the Directors were not going to be there. “Did I make the wrong decision?” I started to ask myself. Should we get the party back on? I could wait until August, and go to California, when all the directors will be there. I finally decided, I could no longer live with one leg over each side of the fence. It was time to DECIDE. Am I going to commit to this investing, or am I going to make excuses about not going? I decided, it was now or never - and I was going to be all in! I still had a few moments of concern and regret, but for the most part, I reconciled within myself, and I moved forward. Did I regret it? HELL NO!! Let me say that again – HELL NO!!!!! It was the one of the best things that ever happened to me. This weekend affected me so deeply, in ALL levels of my life. What happened this weekend? I fell in love this weekend!! I fell in love and had a life changing event this weekend! I fell in love with a Semi Good-Looking Guy, and a Freakin’ Puerto Rican! I fell in love with these two guys, their business, and what they stand for. Prior to this weekend, I had hopes that Rick & Danny were the “Real Deal”. . . . . But if you have any concerns like I did initially; Let me tell you - rest assured your weary minds!! There is absolutely NO need for your concerns. These guys are the “Real Deal”. They stand for integrity, hard work, joy, prosperity, and sharing their wealth and talents with others. In fact, they stand for these things so much, it just Oozes out of them! Never have I connected with mentors, teachers, or gurus in the way that I did, over this weekend. The seminar that was taught was AWESOME! The first day of the seminar, our syllabus, was a high level vision, about everything we have been working on, in our menternship. Rick & Danny taught us how essential our marketing projects are, and how it is all inter-connected. They taught us other ways to market, (things we have not done yet). But most importantly, they gave us a very clear picture of the marketing component of their business, how critical it is to all businesses, and how we can implement it in our own businesses. All the dots, were truly connected! On Sunday, we got into their commercial and financial strategies. This information was new to me, and it was very well explained to us. Now their entire business model, makes complete sense to me. I can’t wait to start investing with them, and bringing other investors to the table. Being with Rick and Danny brings out the best in you. You want to be a better marketer and investor. You want to be a better person. When you are with them, you can tell they enjoy life, and they are infectious. They have given me an incredible gift through this menternship, and this weekend’s live event. They moved me out of potential and into “Action”. They moved me out of “Wanting” and into “Doing”. If you did not get a chance to attend this weekend’s live event, then book your flight and hotel now for the next event. IF you put it off, the rates will only go up. Commit to yourself now, and ask “How can I go?” instead of “Should I go?” You owe it to yourself to experience this business, and these relationships. It is time to COMMIT to YOURSELF, and DECIDE to go NOW. You WON”T regret it!! WHAT ARE YOU WILLING TO GIVE UP, TO EXPERIENCE SUCCESS? To Rick & Danny - I love you , man!!!

Taking Action
10. Learn something new. There is plenty of training out there. Take advantage of what’s available.
11. As you drive your trade area, give yourself a pep talk. Keep yourself pumped up.
12. There will be days when you think that no opportunities are available in your neighborhood. If that’s true, you need to build some.
13. Phone a friend. Perhaps they’ll laugh at you or give you some negative feedback - but phone them anyway.
14. Make yourself accountable for your actions by writing an activity report at the end of every day. It will make a huge difference for you. It takes 21 days to create helpful habits and mould them into your daily activity. Before you go to bed, sit down for five minutes, and write what you did today that shows how you progressed toward your goal.
Journaling is a good motivator. If you have nothing to write down for a couple days, pretty soon you’ll start kicking yourself. You’ll be determined not to have another day of nothing, and vow to make something happen that very next day.
15. Talk to ten businesses that are not currently listed for sale, about buying their building. That represents ten opportunities!
A Matter of Perspective
This shoe company wants to expand into Africa. They hire a salesman and send him over to Africa to sell shoes.
When he gets there, he calls back to his head office and says, “Hey, Boss. You’ve got to bring me home, now.”
Then he says, “You can’t sell shoes here. Nobody wears shoes. This is never going to work.” So they bring him home.
However, they are not convinced that Africa isn’t a workable opportunity. So, they hire another shoe salesman and send him over to Africa.
The very next day, they get a Voice Mail message from him. “Hello, Boss. This is Harry.  Send me all the shoes you got, man. Nobody wears shoes here. We’re going to make a fortune!”
The difference between these two salesmen is perspective.

Taking Action

Key Point
In life, many people know what to do, but very few of them actually follow through. Knowledge of what to do is not enough. You must be willing to take action and use that knowledge.
To make this training more personally effective, you need to develop an action list:
1. Set a 30-day do-able goal.
Take one minute, right now, and set one sunny day, do-able goal. It should be something that you can accomplish within 30 days, based on the information that you received in this Manual. Once you’ve set a goal to do one task, it empowers you to set more goals and accomplish even more.
2. Obtain a copy of your local city, town, or county planning department’s Comprehensive Development Plan.
3. Look for commercial properties as you drive by or walk around. Become familiar with your neighborhood. Take the time to go “driving for dollars.” Once you become aware of opportunities that you missed before, other things will start to open up. Talk to owners and make a couple of offers. Set up a comfortable, dedicated place for your office.
Pick one specific product and learn how to become very proficient using it.
4. Stake out your trade area, whether it is office warehouses or a couple of city blocks with Class B office buildings. Figure out the geographical area that you’re going to work.
5. Determine where your selected product is in the real estate cycle. Find commercial agents who specialize in these properties. Sit down and talk with them—take them to lunch.
Discuss last year’s market and where this year’s market is going. Let these agents know that you’re a real estate investor and that you want to start buying property. However, before you do so, you want to learn as much as you can about the business they represent.
6. Pick one “Hidden Market” prospecting technique. You will find more business in the “Hidden Market” than you will on the MLS.  However, going to the MLS is a good way to start because it will give you some good ideas. Some great commercial deals are actually listed on the MLS, but that’s not the rule.
7. Write the name of one prospective partner.
8. Make a bad offer. It will give you practice in making the real deals.
9. Call your consultant or speak with someone to get some new ideas. Every new idea is going to be valuable.

Valuation Issues
To prevent subjective evaluations, you need to hire professional appraisers. However, they are not without their prejudices, so they sometimes appraise in a very arbitrary way. If they place a value on your property for assessment or tax purposes that you don’t feel is correct, you have the right to appeal the assessed value. However, you may have to wait until the following year. If you can establish comparable sales or values that are less than these new assessments, you may be able to get these assessments lowered, to reflect more realistic values for the following tax period.
Although you can’t fight the millage rate, which is a vote at the county level, you can fight the assessed value. On some commercial buildings, particularly if you are buying run-down properties to fix up, you get a new assessed value based on the purchase price, because you bought a damaged property.
There are attorneys and other firms who can assist you in the appeal process. They specialize in this area of law, so they may not take your case unless they believe they can win for you.
It is possible to get assessed values changed and/or corrected and there are organizations available to help you, if you decide to fight an assessment. However, you must be ready to provide the comparables.

Owner’s Liability
As a property owner, you must take reasonable precautions to ensure the safety of anyone on your property. As the owner of a business that is open to the general public, you must take extra measures to maintain a safe environment, both inside and around any buildings. Therefore, parking lots and privately owned paths and walkways must also be inspected for any safety hazards.

American with Disabilities Act (ADA) of 1990
ADA guidelines are something that you need to consider on a regular basis. Your facility must have unobstructed access for handicapped individuals.
A use change could be space that was an office and now it’s going to be something entirely different—for example, a hair salon. If the use changes, many counties in this country today will demand that you bring the building up to ADA standards. This doesn’t just mean it is wheelchair accessible from the outside to the inside—it’s ingress and egress.
These standards also apply to the interior layout of a space as well. Bathroom doors must be wide enough to accommodate wheelchairs, with a specific clear span in which to circle.  ADA requirements could even make you move walls.  So, you need to be aware of what the ADA requirements are. You can look up this information online at www.ada.com.

Environmental Issues
The major environmental issue today is mold abatement. It’s such a huge issue. Remember lead-based paint in the late 70’s and, early 80’s—in which people were sickened?
Workmen came in, dressed in white hazard suits and masks, and sanded down all of the walls to abate the problem. Today, lead-based paint is not a big issue. Walls can be sanded, primed, and another coat of paint applied to seal it. Perhaps sometime in the future, you may be able to abate mold in a similar manner.
If you are considering buying a building that’s been vacant for a couple of years and has had any leakage or water damage inside, mold may still be a huge problem.
In that case, the first thing you ought to do in your due diligence period, is spend $300 to $500 to address the problem. Have a  mold abatement and inspection technician evaluate it and give you a professional opinion as to cost and procedures for abatement.
If you don’t properly treat a building for mold, and months or even years later, somebody gets sick from it, you may have a costly issue on your hands. If tenants can show that you knew the building had mold when you bought it, but you can’t prove that you paid for the proper abatement procedures, you may be liable.
Sick building syndrome is another extensive environmental issue that is usually related to mold issues in air conditioning ducts. In your due diligence period, you need to check all of these issues to make sure that you are not leaving yourself vulnerable for an expensive law suit. Also, be sure to look for hazardous materials, such as asbestos, when you’re performing your preliminary inspections.

Common Area Liability
 Liability is an insurance issue. You should carry solid insurance policies on your properties with reputable insurance companies and carry at least a $1,000,000 to $2,000,000 blanket policy to protect yourself. When you buy protection of this nature, you also buy some of the best attorneys in the world to be on your team.
Make sure that your leases include a clause stipulating that people must conduct business in your buildings, according to local building codes. Be especially wary of signage, since many of these may not be code compliant.

ADA Compliance
Go straight to the ADA website, www.ada.com for this information. You can download their extensive regulations for details.
 

This is another one of our Real Deal Commercial students that is TAKING MASSIVE ACTION. He is working with us through our Co-Sponsorship Program on a $2.5MM Commercial Project.

Managing Tenants
To manage tenants effectively, proper and prompt communication should be your first order of business. You also have a variety of primary tasks to handle:
• Tenant complaints
• Pre-emptive management
• Renewal programs

Tenant Complaints
Usually you have the responsibility for major equipment in your buildings, such as a working elevator. If your tenants keep reminding you that something isn’t working and you don’t fix it, you are responsible for any problems or injuries that occur.
When their lease comes up for renewal, they probably won’t move out. Businesses don’t move as often as people in residential situations because moving involves some major expenses, such as business cards, letterhead stationery, and telephone service. However, if they become dissatisfied enough, they will move.
Therefore, handling complaints becomes a critical issue. This is especially true when the market slows down, because happy tenants normally stay. Otherwise, they wouldn’t consider moving unless they are expanding and need more space, or perhaps they are extremely successful and profitable and they’d like a more prestigious base, perhaps from a Class B to a Class A building.

Tip: Handle complaints promptly and communicate effectively with your tenants to avert any troublesome situations.

Pre-emptive Management
If you buy a building that already has tenants be sure to determine when each lease expires. This will immediately show if there might be any vacancies occurring at about the same time. If you have only a few tenants and even if only two of them have leases expiring about the same time that could possibly represent a huge loss for you.
What you need to do in this type of situation is meet with each of these tenants separately and discuss the expiration date now, before it occurs. If a tenant in a commercial building is going to move, they usually decide that at least six or eight months before the lease expires, so they can create detailed planning and scheduling.
When you meet with them, be prepared to talk about renewing their lease immediately. If they are willing to renew this far ahead of schedule, you should consider granting them extra concessions. Offering three or more free months when the lease expires is usually a deal that most commercial tenants would certainly appreciate.
It’s also a good deal for you, because it could be significantly more than three months of vacant space if a tenant leaves. You might even have to include the cost of cleaning and re-renting and possibly remodeling the space, by moving walls or adding extra tenant improvements, like new carpeting. Those costs could be far beyond what you would be giving away with three months of free rent.
Sometimes the conversation with tenants turns up the fact that they would like some more space, perhaps a few thousand square feet. If your meeting with the second tenant helps you to determine they need more space, but it’s more than you can provide, they may need to move. This will allow you to offer some of their space to the first tenant.

If the first tenant signs the new lease that includes the extra square footage, you could have less of a tenant vacancy problem than you had earlier. Sometimes this solution will work easily because it’s contiguous space.
The whole point of this is to be proactive in your leasing. To ensure that you don’t have too much vacant space and reduced cash flow, pay particular attention to your tenants’ needs. Be careful to monitor your leases.
Preemptive management includes offering these renewal programs to balance your turnover, and make sure you’re on the top of your game.

Commercial Lease Clauses
You should include introductory clauses in your lease that do
the following:

• Describe the premises
• Specify the lease term
• Indicate the rental or lease payment amount

Many times, you will be dealing with a five-year lease. Therefore, you need to explain in the lease, how rental increments will happen every year over the period of the lease.
You could also include additional tenant conduct, indicating what tenants can or cannot do. This is where you would specify whether they could assign the lease, sublease it, or limit it to subleasing—subject to landlord’s approval.

Signage
 Signage becomes a problem in some places such as Florida, because of hurricanes. One of the most serious threats to life and limb in a hurricane is not the wind per Se, but the debris that the wind blows around.
If you have a sign that is not well anchored and a hurricane comes along and tears off chunks of glass or plastic, these can become deadly projectiles.
Hence, you get into a lot of code issues about how signage has to be constructed, type of materials, and other similar issues. So, in your lease, you must ensure that it includes a clause that specifies that no signs can be erected on the property without:

1. Landlord approval
2. Proper permitting through the local county officers or local city officers, so that signs
— Meet code
— Conform to local rules and regulations

Additional Tenant Expenses
Include language in the lease that itemizes the expenses for which the tenant will be responsible, such as taxes, utilities, and insurance. A prudent policy is to require that all your tenants carry a million dollar liability policy on anything that happens on the premises.
Otherwise, if something happens as a function of their business and they are not sufficiently covered, the problem rebounds to you, because it’s your building. Be sure that your tenants furnish proof of insurance before you allow them to occupy the premises.
Tenant rights, landlord services, common areas, and common area expenses that you are going to incur and pass on to the tenant, are all standard clauses. Other clauses may pertain to preserving the premises, making repairs, maintenance, and surrender of the property.

Tip: If your tenants want to change something in the building, they must come to you for approval. After all, it’s your building!

You should also consider the rules for alterations, surrender, damage destruction, and protecting the landlord’s subordination. Be sure to specify that you have the right to enter and inspect the premises.
Other clauses to consider are those for indemnification— being held harmless, evidence of default and remedies, security for performance, security deposits, and other similar rights. Obtain an experienced real estate attorney who specializes in commercial leases, and can review and revise your lease appropriately.

Building Owners and Managers Association (BOMA)
BOMA publishes standard methods for measuring floor area in industrial buildings. You may not think this subject is an important issue, but there are many ways to measure that can affect your rental income.
Landlords have been sued, sometimes after many years, for leases that were found to include inaccurate square footage descriptions. To protect yourself always use the BOMA method and include that description in one of your lease clauses.

This is a great testimonial from another one of our Real Deal Students that is TAKING MASSIVE ACTION!!! He is taking what he learned and using it already to work on several multi million dollar commercial properties.