This Issue: Two Reasons Why Real Estate Outperforms All Other Investments - Even Today

“If you’re going to be thinking, you might as well think big.” - Donald J. Trump

I like to reach for the stars, and I want my projects to do the same.

I'm currently constructing the two tallest residential towers in New Jersey. Not surprisingly, they will bear the Trump name. Trump Plaza Jersey City is a $415 million condominium project that will include two towers, over 50 stories high, with 862 luxury condominiums.

The towers' positioning and design will provide striking views of the Manhattan skyline from nearly every apartment. Each building has a rooftop swimming pool, a business center, an 8,000-square-foot fitness center, an enclosed basketball court, and a private film theater. The towers may not reach the stars, but their residents will think they're in heaven!

Although I'm the largest developer in Manhattan, I decided to go across the Hudson River to Jersey City because I saw incredible potential there. I am good at predicting trends, and I think Jersey City has a big future . . . or I wouldn't be there.

Don't limit yourself. Think in what I call Trump scale and make a big statement. Don't build a single-family house without first seeing how much more it would take to make it into a multiunit building or even a development.

Explore how to make everything you tackle bigger, better, bolder, and more exciting. Although you may not be in a position to realize your dreams now, you could be laying the groundwork for terrific future projects.

Thinking small when you could think big limits you in all aspects of your life. People are capable of great things, but not if they don’t envision themselves achieving greatness.

Start with your own mind-set.

Since the late 1990s, sharp increases in property prices, along with a corresponding relative decline in cash flows and rental yields, have led the major media to persistently babble about real estate “bubbles.”

Taking a cue from these misguided journalistic missives, many people now believe that real estate is no longer a good investment.

Nothing could be further from the truth. Let me shed some light on only two of the reasons why real estate is still the best investment out there - even if you buy a property that does not produce lavish cash flow, or which does not appreciate quickly.

Reason One: An Instant Boost in Equity

If you buy publicly traded stocks or bonds, you will pay the current market value for these investments. You may enjoy price increases over time, but you will not immediately advance your current wealth. Not true for real estate.

You can buy property for less than its market value. Common reasons that prompt sellers to discount their prices include:

• Financial distress

• Need for quick cash to pursue other opportunities

• Ignorance of the current market

• No eye for entrepreneurial transformation

• Unskilled sales/promotion efforts

• Desire for quick sale, minimum effort

• Desire to avoid paying a real estate commission

Recently, I bought a rental house for $150,000, but the mortgage loan appraiser placed this property’s market value at $180,000 to $200,000. The seller lived out of town and had relied on an incompetent real estate agent for advice.

Such deals don’t come along every day. Periodically, though, you will find (or negotiate) bargain prices that will increase your equity -- and net worth -- instantly.

That’s a possibility that simply does not exist if you are investing in stocks, mutual funds or bonds.

Reason Two: Income Tax Advantages

Although it seems odd to use the words “tax” and “advantage” within the same phrase, the Internal Revenue Services (IRS) offers property owners a unique set of benefits, including:

• Not all of your net rental income is subject to income taxes. The tax code permits you to offset income with a deduction for depreciation.

• You can grow your portfolio of properties through Section 1031 exchanges and never pay income tax on accumulated gains.

• You can sell your personal residence and escape income taxes on the first $250,000 of gain ($500,000 if you’re married).

• For some types of properties and property improvements, the IRS grants tax credits that reduce income taxes.

• If you pull gains out of a property via a cash-out refinance or equity credit line, that money comes to you tax free.

Admittedly, the IRS weaves each of these tax benefits within a web of rules and regulations that go beyond the space available here. But the fact remains that dollar-for-dollar, federal law permits property owners to pay less tax than investors who trade stocks or bonds.

So as an astute wealth-builder, always evaluate and compare the after-tax returns of alternative investments.

This article is adapted from the new bestselling book, Trump University Wealth Building 101: Your First 90 Days on the Path to Prosperity.

I have coached thousands of students of entrepreneurship over the years - from high-school students to PhDs to executives. And virtually all of them asked this question:

“Am I an entrepreneur?”

It might be a common question, but it is the wrong one to ask, because it leads to inaction. Entrepreneurship is not a “yes” or “no” phenomenon. It is not a question of either “Yes, I’m an entrepreneur” or, “No, I’m not an entrepreneur.”

Entrepreneurship is not genetic. It has nothing to do with your chromosomes or inherited traits. Entrepreneurs are not born; they make things happen because of their will to succeed and skills and knowledge. And you can learn and enhance the skills that make all entrepreneurs successful.

So start by asking yourself the right question:

“How can I learn what I need to know, and improve my entrepreneurial skills to maximize my chances of succeeding?”

That’s the right question because successful entrepreneurs learn to develop and strengthen their personal power skills. Don’t give up on yourself before realizing that you can develop these skills. Trust me, becoming a successful entrepreneur is within your grasp if you really want to make it happen.

Consider this list of what I call the Essential Entrepreneurial Power Skills. If you want to be a successful entrepreneur, you must learn to:

1. Assess the present situation. Hone your ability to observe, collect information, and understand the opportunities and threats that can impact you and your business-to-be. Factor in your own personal strengths, skills, experiences, challenges, and resource limitations. If you begin with the wrong assumptions, you will invariably get the wrong answers.

2. Go after bold visions. Having gone through a reasoned assessment, you are in a position to establish clear, measurable goals. Be bold! You can accomplish considerably more than you realize. And it takes about the same amount of effort to go for the gold.

3. Be unstoppable. Focus your attention on the timely execution of every milestone on the path to your goal. You and your team will face many obstacles along the way, but you will not let these stumbling blocks stop you. Just show up and get it done--period.

4. Negotiate firmly and “win-winly.” Every interaction between people can benefit from proficiency at win-win negotiation. You can accomplish what you want and still retain a productive relationship based on mutual understanding and accommodation. Here are the ground rules:

• Listen and understand, before seeking to be understood.

• Separate the people from the process.

• Focus on interests, not positions.

• Insist on objective criteria.

• Invent options for mutual gain.

5. Solve problems effectively. There is rarely a day in my business or personal life that a problem doesn’t crop up that needs to be solved. Problem solving is a skill that can be learned through study and practice. Start by identifying the problem meticulously, examine changes, test for causes, verify the solution. Your rate of success improves dramatically with your ability to solve problems.

6. Make good decisions. The ability to make good decisions is essential to success in business and personal life. Decision making can also be learned and enhanced. The process begins with clarifying the decision statement; then defining what the right decision must accomplish; developing and evaluating alternatives; examining future consequences; and finally, making a reasoned choice. This is a process you can learn and apply to systematically improve your decision-making ability, as well as become a better problem solver. You don’t have to wing it.

7. Brainstorm. Brainstorming harnesses the thinking, experiences, and imagination of a group to generate creative ideas and solve problems. The collective knowledge of a group is vastly greater than that of any one individual; and therein lies the power of the brainstorming process.

 8. Mobilize resources. You can’t accomplish anything without understanding how to leverage resources, which, in the entrepreneurial vocabulary, are anything, absolutely anything, that moves your venture further and faster with the least risk possible. Categories of resources include: physical, financial, infrastructure, people, knowledge, and your own unbridled imagination.

9. Communicate. You’ve assessed the situation, put your bold vision in place, and established performance initiatives. Now what happens? Nothing - unless you communicate consistently and constantly to all stakeholders. Be clear with stakeholders about what you intend to accomplish and what you expect from them.

10. Act decisively. Entrepreneurship is a contact sport. It is not only about thinking, planning, coordinating, strategizing, and visioning--it is about doing. Figure out how to get the task done. Be unstoppable in its execution.

11. Behave with integrity. There are people for whom you would do anything, and others with whom you would not waste your time; the difference is the quality of the person’s character and behavior. Integrity, honesty, trustworthiness, reliability, knowledge, professionalism, maturity, punctuality, good negotiating and listening skills and, last but never least, humor, are the qualities of successful entrepreneurs. Stick to these, and never waver!

This story is adapted from the new book, Trump University Wealth Building 101: Your First 90 Days on the Path to Prosperity.