There's a book I read years ago called “The magic of thinking big.”
After all this time I don't recall the details, but the gist was that when you think big, it forces you to think different questions, take different actions and ultimately… get bigger results.
Even if you don't get the exact BIG results you were shooting for you'll still get bigger results than if you think small, ask smaller questions and take smaller actions.
I'm telling you this because this morning I was reviewing a deal by one couple in my commercial property investment community.
It was their first deal.
And it took them over six months to land.
Now, I always like to warn people that buying commercial can take time. Much longer than the average residential purchase. But six months was a bit of a marathon, especially for first-timers.
But, they stuck with it and got it across the line in the end.
And this wasn't just any old deal that they jumped on… it was complex, big and in the $3m price range which required a lot more attention from them than just buying some negatively geared unit somewhere.
They thought big… is what I'm saying.
The property was a set of twelve shops and a couple of apartments. It was overall tenancies, not all of them tenanted.
Some people would be scared off by this, but these guys saw it as an opportunity.
They had to pull over $1m in equity from their Sydney home – which would have many people quaking in their boots at the size of the commitment they had to make to get this deal.
…And of course, they had to add to that a $2m loan for the property.
It's one of the things I teach and cover in my course… not to be afraid of debt. If you do it right it takes care of itself.
It's worth keeping in mind that a deal like this could pay you an income for the rest of your life. It's really a lifetime investment like no other.
In this case when all was said and done (factoring in all purchase costs and legals etc.) it was costing them $153k in loan repayments…
…That's covering the property loan and the equity loan – basically borrowing 100% of the money…
And it was paying them $237,000 from the day of settlement.
Leaving them a cool $83,300 cash in their pocket.
Practically replacing more than the average wage in one go.
Let me ask you a question… What would you have to do right now in your job to attract an 80k pay rise?
Probably not worth mentioning right?
There's more to this story though.
Because there were two apartments, they decide to use a short-term lease strategy on one of the apartments as a test.
It took the average rental from $900 a month to $2400 a month.
Test successful in my book. As soon as the lease is up on the other apartment, they'll be duplicating that strategy.
But here's the cool thing… Short term leases are generally not looked upon favourably when it comes time for a valuation. Valuers prefer a long-term lease. But after 18-24 months of this kind of income, you can get them to look at it like a business…
When you are self-employed, and you want to get a loan the bank will look at your tax bills for the last 24 months…
Same here… A valuer will look at the average for the time and will generally then be able to value the property based on that income (even though it's all short-term leases)
In this case, it works out to an extra $36,000 a year from using this strategy.
That's going to equate to a massive shift in value and available equity for the property…
I use and teach this same strategy myself, and it's a total winner.
That right there… is the magic of thinking big: Seeing weakness as an opportunity and being prepared to stick with it to get a deal like this across the line.
Well done guys!