The Trump Blog

As an investor, it’s easy to get blinded by the fancy window dressing that a particular agent or seller is putting on when presenting a property. I want to encourage you to evaluate each property on a standalone basis much like you would if you were buying a business...because you ARE. Whether you own one property or one hundred, the recipe for its success is virtually the same. You will need to create a business plan complete with earnings/expense pro-formas while projecting rates of return and contingencies for cost overruns. 

There are many different ways to approach this plan and Trump U offers courses and mini-courses on the subject. Fundamentally it all boils down to cash flow. After you have carefully diagrammed the expenses associated with owning the property such as maintenance, utilities, taxes, interest carry, advertising/signage to market, commissions to procuring brokers (if any), vacancy period etc., you will need to figure out the ongoing demand and projected hold time before either leasing out the property or selling it. These days, figuring out the projected hold time can be tricky  due to the cycle we are in, so always be conservative and make sure you have deep enough pockets to carry the debt service twice as long as you think you might need. If you succeed sooner, then that is just a bonus. Use your conservative cash flow estimates versus your total cash infusion to get a rate of return on your money. If you think you can make more on a 12 month CD at your local bank, then you should probably pass on the deal and wait for the next one to come along. Your time is too valuable to waste by just breaking even.

What was the best deal you have ever gotten done or heard of someone getting done in terms of cash flow?

Another politician, another scandal. Former presidential candidate John Edwards admitted he had an affair several years ago - a relationship he vehemently denied when he was campaigning. There are, of course, all sorts of issues here.

Some people question whether a candidate’s personal life really matters. They think what he does in his personal life doesn’t affect his ability to lead. Still others question whether the media pursued this story as diligently as they should have.

But you can also look at it from a business viewpoint. What happens when one of an organization’s most visible members is caught up in a situation that threatens the stability of the institution as a whole? How those circumstances are handled could signal the demise or the continued health of the organization.

In this case, we’re talking the Democratic Party. Even though John Edwards isn’t a presidential candidate, like it or not, the party will suffer by association. His name had been mentioned as a vice-presidential candidate. The American people are a forgiving lot, but a very remorseful Edwards would have to do a lot of public atoning very quickly for that to happen.

More importantly, the Democrats have to do damage control. Like any business in a tough spot, they’ll have to figure out a way to make the spotlight’s glare not so harsh. The party had some serious momentum and this was one quick slamming-on of the brakes.

Smart managers would find a way to diffuse the situation somehow and that’s what the Democrats have to do if they want to survive unscathed.

I grew up watching Ed McMahon on the Johnny Carson show and I watched him every night while I was at Wharton. I always thought he was terrific and that he brought a warm and very memorable quality to the Tonight Show. 

When I heard what was happening to him and his house, I couldn’t believe it because I didn’t want to believe it. That shouldn’t be happening to him--but it was--so my first instinct was just to help him out.

My primary motivation in this situation is not a real estate deal--it’s a way to help a great American icon and a very nice man.

Since then, someone else got interested in buying the house. The only reason anybody other than me would be interested in this house is because I showed an interest in it first. If somebody else should buy it, I wish them good luck but I hope they take good care of Ed McMahon because he deserves it. I just heard that the person negotiating doesn’t have financing and the deal would be subject to getting financing, something which I, obviously, don’t need.

Let’s just hope Ed McMahon is taken care of in the best way possible. It’s the least we can do after what he’s given to us.

I received a baseball type of cap when participating in a golf tournament about 10 years ago and I still wear it because it reminds me of an important principal: On the front of the cap it says “ Win-Win”. I equate that phrase to mean that you can be a winner at negotiating by seeing to it that the other party is still getting their needs met in the transaction. And, just because you win doesn’t mean someone has to lose.

My most successful negotiations have come from bridging the gap of misinformation and miscommunication between buyer and seller. Once I can get to the truth about what the parties are truly motivated by, I can then structure a deal that makes everyone happy.   It’s a universal principle that holds true in business, marriage, friendships etc.   If as a businessperson, we would shut our collective mouths for a moment and listen to the other side’s position, we will gain the understanding of what they are thinking and needing to be able to accept our proposal /offer (or whatever). We can then incorporate and address those needs in our offer and thereby eliminate any objections they are having. 

The hard part about invoking this strategy is that you have to know what questions to ask and be able to give the other party a comfortable way to express their side openly and honestly. This only works if you truly DO CARE about creating the WIN-WIN.  The moment the other party suspects you are using their information to manipulate them, prepare for the negotiations to go cold. 

Author Stephen Covey cites this principle as one of the 7 Habits of Highly Successful People...”Seek first to understand and then be understood”. Try applying this to all of your relational dealings and see how much more effective you are at getting what you want in life.

So much of the nation is so dependent on gas that there’s certainly been a collective sigh of relief over the past few weeks as the price at the pump has slowly started slipping. The last I read, the national average price for a gallon of gas was around $3.80. Less than a dozen states had prices hovering at more than $4 a gallon.

A year ago, those figures would’ve seemed astronomical, but today, we’re hopeful that this is a sign of good things. Reports are that worldwide demand for petroleum products is finally slowing down so, as you learned in economics class, it’s a lesson in supply and demand. Finally, in this case, the consumers are benefiting.

Of course, although this is good news, it’s just relative. Today’s gas prices are still more than $1 higher than they were this time last year. But take it for what it’s worth. At best, a sign of a slowly recovering economy. If not that extreme, at least it’s the sign that people have learned to conserve energy. They’re carpooling and telecommuting and driving more fuel-efficient cars so in the end because the demand’s not as high, the price is not as high.

All signs point to prices to keep slowly dropping, at least for the time being. I don’t think we’ll ever get back down to the gas prices we had enjoyed and expected for so long, but there’s no way we’re going to become accustomed to these ridiculous costs.

Let’s hope at least one little part of the economy is starting to recover.

Statistics show that at least one landlord in five are now doing so out of necessity rather than by planned and conscious choice. These people did not purchase their properties with the intent to lease them out...it just sort of happened. 

For instance, my friend Dave and wife, Delores in Dallas had a home built in the suburbs by a new home builder about two years ago and moved in. They added all the fancy upgrades such as a media room, hardwood floors, etc. The home turned out beautifully and almost simultaneously, Delores sought and attained a great job in the Houston area at the same time the mortgage/housing markets began to show major signs of trouble. With having minimal equity and being overly upgraded, they decided to wait on trying to sell as they would assuredly lose significant money in doing so. So Dave and Delores put the house up for lease and began reviewing the many applications they were getting. Although Dave is in the business of real estate sales, he is not only out of town, but he is unsure of how to manage a rental property as well.

Dave and Delores are now “accidental investors” and there are thousands of others just like them. These new landlords are being asked to understand how to analyze prospective tenants, prepare leases, know their’s and their tenants rights when it comes to repairs, collections, and unfortunately, evictions. If you or someone you know has become an accidental investor, it’s important to make sure you brush up on your contract law and tenant’s rights laws in your state so you can be prepared to operate efficiently should the need arise for you to take action. Taking a property management course like the one offered at Trump U can give you a broad base of knowledge from which to draw should you convert from happy homeowner to shrewd landlord. Proper asset insurance and marketing will be key to get new tenants in and keep them as long as you need them.

We have all heard the terms hard money and private equity... but do you know what those are and how to get your hands on capital when you need it? Although they get a high rate of return, they are sometimes the only way to get your prospective deal financed. They are in a risky business and are handsomely compensated as a reward.

For instance, if you wanted to buy an apartment complex or retail center and the bank wanted you to have 25% down as an equity position, you could seek out a private equity partner to come up with any cash you were lacking and in some cases, ALL of the cash if the deal is strong enough. The kind of return that these specialty type of lenders want can vary greatly so once you have secured the property with a contract, feel free to shop around. It can be a cut-throat business so be sure to have the property “tied-up” in contract before submitting your package to the lenders or else you may find that you mysteriously lose out to another buyer. Include in your package, among other things, an attorney prepared non-disclosure and non-circumvent agreement to give a little more professionalism and a small layer of protection.

When building your investor package you will need to have current financials on yourself, your credentials (resume), pro-forma on the subject property outlining current revenues and expenses (get this from seller), and a detailed vision of how you will improve upon the current concept in place. Do these things and let the hard-money and equity guys compete for your deal. If it’s truly a good deal, you’ll know it!

Anyone who has had experience with these types, please post your story!